Series 6 common mistakes
Series 6 · Understand the traps and how to avoid them.
Calculating a mutual fund public offering price as NAV times (1 + sales charge percentage) instead of NAV divided by (1 - sales charge percentage).
Candidates memorize 'add the load' and treat the sales charge as a markup on NAV rather than as a percentage of the offering price.
What to do instead
Write and use POP = NAV / (1 - maximum sales charge), then test it with a simple example such as 5% load: $95 NAV / 0.95 = $100 POP.
Calling a Class C mutual fund 'no-load' because it has no front-end sales charge, while ignoring its contingent deferred sales charge and higher 12b-1 fee.
Candidates equate 'no front-end load' with 'no cost' and do not compare the full share-class cost structure.
What to do instead
Before recommending a share class, compare front-end load, CDSC schedule, 12b-1 fee, expense ratio, and expected holding period on the same page of notes.
Treating a breakpoint as reached only by a single purchase and failing to ask about existing fund holdings or a stated intent to invest over the next 13 months.
Candidates confuse a one-time purchase threshold with Rights of Accumulation and Letters of Intent.
What to do instead
Before entering a fund order, check existing eligible holdings for ROA and ask whether the customer intends to invest enough over 13 months to qualify for a breakpoint via LOI.
Quoting the NAV shown on screen at the time of a mutual fund order as the execution price.
Candidates treat mutual fund orders like exchange-traded orders with an immediately locked price.
What to do instead
Explain forward pricing: a fund order is priced at the next NAV calculated after the order is received in good form, not at the NAV visible when the customer calls.
Telling a variable annuity customer that principal is guaranteed because the contract is issued by an insurance company, confusing the separate account with the insurer's general account.
Insurance terminology makes 'guaranteed' sound broader than it is, and candidates blur fixed annuity guarantees with variable account performance.
What to do instead
State clearly that variable annuity subaccount values fluctuate with the separate account investments; only specific contractual guarantees, such as a death benefit or minimum guarantee if applicable, provide protection.
Recording only 'growth' as the customer's objective and recommending a variable annuity without documenting time horizon, liquidity needs, risk tolerance, income needs, and existing insurance coverage.
Candidates reduce the suitability analysis to a single label and skip the full financial profile required before a recommendation.
What to do instead
Complete the account profile fields before recommending, especially for variable products, and write a short suitability note linking the recommendation to the documented horizon, risk tolerance, and liquidity needs.
Substituting a fact sheet, website link, or verbal summary for the statutory prospectus and failing to document prospectus delivery for a mutual fund or variable contract.
Candidates treat marketing material as legally equivalent to the prospectus and assume the customer can find it later.
What to do instead
Use the firm's prospectus-delivery workflow at the required time, provide the current statutory prospectus rather than only a summary, and record the delivery date and method in the customer file.
Describing a closed-end fund as redeemable at NAV on demand, as if it were an open-end mutual fund.
Candidates group all 'funds' together and do not distinguish the redemption mechanics of open-end funds, closed-end funds, and unit investment trusts.
What to do instead
Before describing liquidity, identify the product: open-end funds redeem at NAV, closed-end funds trade in the market at prices that may be above or below NAV, and UITs have their own redemption terms.
Entering a customer's purchase or sale instruction without recording whether it was solicited or unsolicited, the time received, the share class, and the dollar or share amount.
Candidates focus on 'what to buy' and treat the order ticket as clerical paperwork rather than the record used for confirmation and supervision.
What to do instead
Complete the order ticket fields before entry: solicitation status, time received, account authorization, product identifier, share class, amount, and price basis; then verify the confirmation against the ticket.
Using an unapproved social media post or email that highlights a variable annuity's hypothetical income or a fund's past performance to solicit new business.
Candidates think personal prospecting and social media are outside firm approval and fair-and-balanced communication rules.
What to do instead
Use only principal-approved retail communications, include required disclosures, avoid misleading performance or guarantee language, and retain the communication according to firm policy.