Understanding the CFA® Charterholder Designation
The Chartered Financial Analyst (CFA®) Program is a rigorous and highly respected professional credentialing program designed to equip individuals with the knowledge and skills necessary to succeed in the complex and ever-evolving investment industry. The program is offered by the CFA Institute (CFAI®), a global association of investment professionals dedicated to promoting the highest ethical and professional standards in the financial services industry.
Individuals who earn the CFA designation are recognized as experts in investment management, having completed a comprehensive course of study and demonstrated their mastery of the subject matter through a rigorous series of exams. The CFA Exam consists of three levels, each increasing in difficulty and depth of knowledge. After passing Level 3, one must complete 4,000 hours of relevant work experience within three years, become a regular member of the CFAI, and join an approved CFA Society.
The journey of pursuing the CFA program is no cakewalk, as it demands a considerable investment of time, energy, and dedication. The rigorous curriculum is specifically designed to push candidates beyond their limits and test their analytical and problem-solving skills. But that's precisely why the designation holds such high value in the industry. To fully appreciate the advantages that come with being a CFA charterholder, it's essential to delve into the What, Why, and How of the program.
What Does a CFA Charterholder Do?
While understanding how to become a CFA charterholder is important, knowing what they do is equally important. In the world of finance, investment firms and professionals serve as trusted stewards of capital, guiding clients in making sound investment decisions, managing their assets, and working to enhance financial markets. These services can encompass a wide range of functions, including trading, asset management, and regulatory oversight. Those who enroll in the CFA program and earn the coveted CFA charter position themselves for a multitude of career paths within the investment industry. Widely regarded as the pinnacle of professional development in investment management, the CFA designation is highly valued by employers across the globe for roles spanning every sector of the finance industry, including portfolio management, analysis, private wealth, and consulting.
But the benefits of the CFA charter extend far beyond these traditional roles. The program provides professionals with the skills, knowledge, and versatility to pivot their career paths in new and exciting directions. Whether it's pursuing leadership positions within their current organization, branching out into entrepreneurial ventures, or exploring entirely new industries, CFA charterholders are well-equipped to succeed in whatever direction they choose to take their careers.
Why Become a CFA Charterholder?
The CFA program has become the "gold standard" of professionalism in the financial and investment communities. Obtaining the CFA charter provides you with the honor of becoming part of a respected community of exceptional investment experts. This accomplishment can lead to career advancement opportunities.
While the benefits of a CFA charter are aplenty, much like in any other field of study or profession, it is only fair to also list the limitations. This can help you better understand your standing before registering for the CFA exam.
Here's a look at both aspects:
Benefits
- Acquiring a job in the finance industry can be made easier with the CFA program credential. Reputable international investment businesses are among those who recognize this credential.
- The CFA program aims to cover all aspects of the financial and investing industries, providing a solid foundation of financial knowledge and abilities to help you achieve your long-term professional goals.
- CFA charterholders typically receive higher pay for the same position than those without the CFA charter, including cash bonuses and equity or profit-sharing.
- The CFA credential is highly respected in the business and financial worlds and is recognized worldwide. With over 100,000 charterholders in 164 markets, the benefit of worldwide recognition is that a charterholder can be more easily transferred across the markets.
- Additionally, some nations have waived some or all criteria for other professional certificates, recognizing the CFA charter as internationally recognized. This waiver primarily covers investment and trade, making the value of a CFA charter unchanged whether you work in New York, London, or even Mumbai.
Limitations
The CFA program comes with several limitations that prospective candidates should be aware of before deciding to pursue it.
- First, the program requires a significant time commitment, taking up to four years to complete the exam and collect a minimum of 4,000 hours of work experience within 36 months.
- Additionally, passing the comprehensive and lengthy exam can be difficult, with an average pass rate of only 44% over the past decade.
- Furthermore, the cost of the program can be expensive, with a one-time enrollment fee, exam and registration costs, textbooks, and study programs, which can add up to thousands of dollars each time you take the exam.
- Finally, even if you pass all three levels, you must fulfill specific work requirements and submit references before being approved for the CFA charter, making the process cumbersome.
Membership to the CFAI is open to everyone, regardless of whether you are a CFA charterholder or enrolled in the CFA program. CFAI provides two types of membership, regular and affiliate, to accommodate the diverse experiences of investment professionals. Being a member of CFAI and a local chapter offers access to career-related resources, networking events, continuing education, and other advantages that complement the program's curriculum and assessments.
A study conducted by the CFAI in 2019 revealed that the average total compensation for portfolio managers was $177,000, with a base salary of $126,000.
It's important to note that this figure is just a generalization and does not reflect the full spectrum of compensation within the investment industry. The compensation of investment professionals can be influenced by a range of factors, including the size and type of firm, market conditions, and individual performance. Regardless of the specific compensation structure, one thing remains true - the investment industry remains a highly lucrative and competitive field that demands exceptional skills and knowledge from its professionals.
While a CFA charterholder has access to a variety of employment options, the following are the top five global CFA charterholder roles and practice types:
| Roles | Practice Types |
|---|---|
| Portfolio Manager | Equities |
| Sell-side Equity Research Analyst | Fixed Income |
| PrivateWealth Management | Private Equity |
| Corporate Finance, M&A | Derivatives |
| Private Equity General Partner | Real Estate |
The CFA charter's value continues to rise across the globe, particularly in nations with a dearth of charterholders. The Bureau of Labor Statistics projects a possible 6% increase in the employment of financial analysts up until 2028. As a result, individuals who have earned the CFA charter are highly sought after by financial institutions and employers, and this growth is expected to create many new career opportunities for CFA charterholders, particularly in areas such as investment research, portfolio management, and financial planning.
How to decide if the CFA Charter is for You?
The CFA charter is a prestigious qualification highly respected in finance. The CFA curriculum is designed to provide in-depth knowledge and skills in investment analysis, portfolio management, and asset allocation, making it ideal for professionals seeking to advance their careers in finance. However, the CFA program is not for everyone. The rigorous curriculum and requirements make it a challenging qualification, requiring significant time, effort, and resources. Candidates must have a strong foundation in finance, accounting, economics, and statistics and the ability to apply complex financial concepts to real-world situations.
Therefore, those who should pursue the CFA charter are finance professionals passionate about investment analysis and portfolio management and want to enhance their skills and knowledge in these areas. They must also be willing to invest the time and resources necessary to obtain the charter. In addition, becoming a CFA requires a significant time investment that is spread across various requirements. This includes shuffling between studying for and taking the exams, as well as logging the required 4,000 hours of relevant work experience over a period of 36 months.
If you are considering pursuing a career in investment analysis, portfolio management, or asset allocation, the CFA charter can provide you with the necessary skills and knowledge to succeed in these fields. However, if your career aspirations lie elsewhere in the finance industry, the CFA charter may not fit you best.
Countries Accepting the CFA Charter
While the CFA charter is recognized globally, specific countries identify it from a Global Regulatory and Legal standpoint. Think of this as a country's willingness by regulatory agencies and educational institutions to acknowledge a certain level of knowledge (similar to recognizing a high score on a college entry exam). And that recognition can excuse the charterholder or candidate from specific requirements, e.g., getting a degree in finance or passing another set of certification exams.
Twenty-eight nations and territories officially recognize the CFA programs.
You can find a detailed overview on the official CFAI website.
Frequently Asked Questions
Why is the CFA charter considered a valuable designation?
Is the CFA charter better than an MBA?
Not necessarily! The two most popular and effective credentials for career advancement in the financial world are the Chartered Financial Analyst (CFA) and the Master of Business Administration (MBA). The CFA charter is far less expensive and more specialized than an MBA, making it more appealing for financial professionals seeking professions in risk analysis, wealth/portfolio management, or fund management. The MBA, emphasizing marketing, management, and customer experience, may be ideal for people whose long-term objective is to manage businesses.
You can read more about Is the CFA or MBA Better for a Career in Finance?
Which jobs require a CFA charter?
Typically, a job title is not globally listed as requiring a CFA charter. Moreover, it’s up to the individual firm to make those hiring requirements a must-have for an offer or a requirement to pursue once an offer is accepted. In competitive practice types like private equity (PE), a trend suggests how desperate PE candidates are to differentiate themselves from the pack, considering the difficulty of landing a job in the industry. A CFA charter tends to be effective when added to a résumé. In contrast, a greater proportion of private equity employees have completed all three tests and received their charter.
