Becoming a chartered financial analyst (CFA) means over 1,000 hours of graduate-level study, successful completion of three rigorous examinations, four years of relevant work experience, and adherence to a well-honed code of ethics and standards of professional conduct.
Approximately one in five entrants into the CFA program sees it through to completion. But in a crowded job market, in a profession held in rather low esteem by the public of late, is all of the effort devoted to obtaining the CFA worth it?
Key Takeaways
- Getting a CFA means you have participated in the program's rigorous, graduate-level study and successfully passed three exams.
- You must have four years of relevant work experience to qualify as a CFA charterholder.
- CFAs work in many different areas of finance from a risk manager to a private wealth counselor.
- A CFA is a professional certification that can only be earned via the CFA Institute.
- It takes more than 1,000 hours of study to qualify for a CFA.
Is a CFA Worth It?
Financial service employers recognize the value that a charter holder brings to the workplace, as evidenced by many finance job advertisem*nts that either request or require that the applicant be a CFA charterholder or candidate. According to the CFA Institute, this credential "is the professional standard of choice for more than 31,000 investment firms worldwide." It can be especially helpful if you don't have an undergraduate degree in finance, economics, or accounting, and your goal is a job or career in the finance industry.
Unlike a masters in business administration (MBA), which can vary significantly in content, rigor, and reputation, the CFA is a professional certification conferred by one organization only—the CFA Institute. This non-profit association represents part ofthe asset management and research field. The CFA Institute creates, administers, and tests a curriculum that strives for perpetual relevance in a dizzyingly complex world. More important is the international remit of the Institute and its exam.
A CFA's knowledge and skills qualify them to work both nationally and internationally. The investment management sectors in which they are employed range from asset and private wealth management to commercial and investment banking and insurance. And they have a total self-reported income of $177,000, with a base salary of $126,000, according to a 2019 CFA Institute compensation study based on data from 15,000 members. The study also found that in that same year, average base salaries of CFAs increased at a greater rate, year over year, than those for the general market.
JPMorgan Chase, Morgan Stanley Wealth Management, Royal Bank of Canada, BlackRock, and TD Bank Financial Group are just a few of the financial institutions that employ CFAs.
The language of finance may be English, but the practice of finance is decidedly global and competitive.
What a CFA Does
There are a number ofoccupations available to a CFA and new uses for the tools developed in rigorous exams that experts and generalists are regularly updating to reflect the current financial environment. A long development period guards against quality degradation.
The candidate body of knowledge derives from the global financial body of investment knowledge and is grounded in changing professional practice. Examples of charterholder careers include portfolio manager, investment analyst, risk analyst, chief investment officer, performance measurement analyst, risk manager, and private wealth counselor.
Candidates learn along a continuum, beginning with knowledge and comprehension of critical areas and concepts, such as asset classes, economics, and financial accounting (Levels I and II), to application and analysis of what was learned (Levels I to III). This culminates in the synthesis and evaluation of key areas of practice (Levels II and III), such as wealth planning and portfolio management on an institutional and individual level.
The learning is not so much sequential as evolving, assuming greater depth as the examinations progress.
How Much Does a CFA Earn?
According to PayScale, the average base salary for a chartered financial analyst is $94,855, with a range of $61,000 to $192,000. With bonuses and profit sharing, the total pay can go as high as $221,000. According to a 2019 CFA Institute compensation study based on data from 15,000 members, total self-reported income was $177,000, with a base salary of $126,000.
What Are Typical Jobs for a CFA?
CFAs often are employed in investment decision-making roles, typically as a research analyst or portfolio manager. Other common positions include risk analyst, chief investment officer, performance measurement analyst, risk manager, and private wealth counselor.
Is a CFA Better Than an MBA?
The answer depends, in part, on your career goals. If you are looking for broad knowledge of business and its core concepts, with perhaps the goal of a management job at a large company, going to business school for an MBA might be your best option. Another advantage: While studying, you can connect with your peers and school faculty, helping build a network of contacts that can prove valuable when it comes time to land a job.
A CFA provides a more specialized skillset, such as investment analysis, asset allocation, financial reporting and analysis, and wealth planning. It is a self-study program—no classroom attendance is required. It may be more suited to someone who knows what type of finance career they're aiming for, such as investment management, corporate finance, or risk management.
The Bottom Line
Whether or not it makes sense to pursue a chartered financial analyst's certification depends on a number of factors, including your educational background, your career goals, and your time. There are three very difficult exams, each requiring a minimum of 300 hours of study. Pass rates, according to the CFA Institute, are about 39% and 52% for Levels I and II, and about 48% for Level III. Becoming a charterholder may help you break into finance—especially if your undergraduate degree is not in finance, accounting, or economics—or advance in an investment career, thanks to the knowledge you'll gain and access to a large network of other CFAs.
