What is a CFA® Charterholder?
The Chartered Financial Analyst (CFA®) Program is designed to equip candidates with the knowledge and skills necessary to compete and excel in today’s complex and evolving investment industry. Chartered Financial Analysts are investment management experts in the global financial services industry. The CFA Institute (CFAI®) offers a recognized professional designation that measures and certifies the competence and integrity of financial analysts. It is one of the highest honors in the profession of investment management. One must complete the CFA® Program and meet the required job experience to earn the CFA designation.
The CFA® exams consist of 3 levels that increase in difficulty from one to the next. There are certain prerequisites to sitting for the exams. Candidates must pass all three levels to become a CFA charterholder. The CFA® Institute advises around 300 hours of study time for each exam to pass the CFA exam. Each CFA applicant completes the CFA Program entirely at all three levels.
What Does a CFA Charterholder Do?
Typically, charterholders work for financial institutions and businesses. They provide financial research and investment advice to high-net-worth individuals and institutional customers, such as endowments, pension funds, and asset managers. Professionals who have earned the designation of Chartered Financial Analyst use their training and experience in various capacities across the financial services industry.
Charterholders also provide internal risk management and analysis services to businesses. In addition to underwriting, mutual funds, hedge funds, fixed income, and derivatives, they operate on both the buy and sell sides of transactions.
History of the CFA Charter Professional
The predecessor of the CFA Institute, the Financial Analysts Federation (FAF), was founded in 1947 as a service organization for investment professionals. The Institute of Chartered Financial Analysts (ICA) was founded in 1962 and has its headquarters in Charlottesville, Virginia.
The CFA exam was conducted for the first time in 1963, one year after the inception of the CFA program in the United States and Canada, but has since then gone worldwide, with numerous charterholders in Europe, Asia, and Australia. 268 men and women were granted their charters in 1963. By 2003, less than half of the CFA program candidates were based in the United States and Canada, with most of the remaining candidates based in Asia or Europe. There was a 25% and 53% growth in charterholders in India and China, respectively, between 2005 and 2006. You can refer to the CFAI’s history timeline if you want to learn more.
Mission of the CFA Institute
The CFAI aspires to develop global financial markets that serve the public interest. The overall outcomes that they believe will contribute to this aspiration are a community of educated, ethical investment management professionals and financial markets that reflect CFA Institute beliefs.
The CFA Institute’s strategy is to:
- Shape the future of the industry and the profession
- Build a diverse portfolio of learning products
- Modernize and grow the CFA Program.
Why Become a CFA Charterholder?
The CFA program has become the "gold standard" of professionalism in the financial and investment communities. Generally, the CFA program offers the best opportunity for professional development and growth for candidates interested in a financial career.
CFA charterholders have access to a wider variety of career paths, which contributes significantly to the charter's overall value to the financial sector. A CFA charterholder's salary can range from $85,000 to $300,000 per year. 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:
|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 6% increase in the employment of financial analysts between 2018 and 2028. You can access more information on CFA Career Opportunities.
How to Earn the CFA Charter?
CFA certification is considered a gold standard in the financial and portfolio management verticals, and it's a three-step process (including passing three levels) followed by getting a membership to the prestigious CFA® charter.
It takes around 4 years to complete the CFA program. After passing Level 3, you must complete 4,000 hours of relevant work experience within three years, become a regular member of the CFA Institute, and join an approved CFA Society.
Here are some prerequisites that should be considered in the process:
- Before obtaining the CFA charter, you must pass all three levels of the CFA exam.
- Before, during, and after enrollment in the CFA program of the CFA Institute, you may begin accumulating the required amount of eligible job experience.
- Two to three letters of reference from individuals who can speak to your professional experience are required.
- Next, you need to apply for CFA charterholder status and become a member of the CFA Institute. The CFA charter will be yours after the CFA Institute confirms your application.
Learn more about how to become a CFA
What are the Benefits of Having a CFA Certification?
The CFA qualification is highly regarded by employers for positions and responsibilities in every area of global finance, including portfolio management, analysis, private wealth, and consultancy. It is often regarded as the pinnacle of professional development in the investment industry. Known for their dedication to upholding the highest standards of quality, charterholders are in high demand in the investing sector.
CFA charterholders have access to a global network of more than 180,000 regular CFA Institute members who can support them in their professional endeavors. According to the CFA Institute, the CFA credential confers significant benefits for applicants interested in pursuing a career in finance. The key benefits are:
Expansive Knowledge, Skills, and Commitment to Ethics
The CFA charter offers the most solid grounding in sophisticated investment analysis and practical portfolio management abilities for a competitive edge that can be applied at all career stages. It offers a solid foundation and demonstrates a dedication to ethics and professionalism while preparing one to enter the market of today.
Relevance in a Variety of Career Paths
CFA charterholders work in a variety of buy-side, sell-side, corporate, and consulting positions that involve making investment decisions. Many CFA charterholders work as brokers, manager-of-managers, equity research analysts, private wealth managers, hedge fund managers, and portfolio managers.
Value in an Evolving Industry
Earning the CFA charter, a widely respected credential in the investment sector, shows potential employers that a candidate possesses the knowledge and drive necessary to succeed in the complicated and rapidly changing investment landscape of today. Investment firms are aware that the CFA accreditation is a sign of distinction and that it denotes a higher level.
Who Should Get a CFA Charter?
Increasing your qualifications is one way to broaden your talents and increase your chances of finding your dream job in the financial services industry. The nonprofit CFA Institute awards the Chartered Financial Analyst (CFA) title, a specific investing and finance certificate. Investment analysis, portfolio management, and asset allocation abilities are the focus of the CFA curriculum. The CFA Institute states, "The CFA Program bridges industry practice, investment theory, and ethical and professional norms to deliver investment analysis and portfolio management abilities." While having a CFA designation confers prestige in the finance industry, it's not right for every professional.
In the financial sector, the CFA qualification is often regarded as the most significant way to enhance one's career. The CFA charter offers tremendous value to the careers of finance professionals by increasing their employment options. For instance, charterholders in investment analysis and portfolio management are equipped to handle a company's financial goals. Between studying for and taking the exams and logging the required 4,000 hours of experience over 36 months, becoming a CFA requires a significant time investment and various requirements.
Which Countries Accept 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.
Benefits and Limitations of Being a CFA Charterholder
Having a CFA charter comes with its benefits, much like any other field of study or profession. But CFA also comes with its limitations. Here's a look at both aspects:
Benefits of Becoming a CFA Charterholder
- Big Investment Firms
Acquiring employment with some of the most well-known names in finance will be easier with this credential. Reputable international investment businesses are among them.
- Finance Knowledge
The CFA Program aims to cover all aspects of the financial and investing industries. Examining the curriculum will help you build a solid foundation of financial knowledge and abilities to help you achieve your long-term professional goals in the financial sector.
Typically, CFA charterholders receive higher pay for the same position than those who do not have the CFA Charter. A CFA charterholder's salary can range from $85,000 to $300,000 per year, including cash bonuses and equity or profit-sharing.
- Expertise Credential
The CFA credential is the gold standard of finance and carries enormous weight in the business and financial worlds. Anyone who recruits portfolio managers, pension fund managers, hedge fund managers, or Fund of Funds (FOF) professionals is familiar with the CFAI and its charterholders.
In the financial niche (including asset managers and financial analysts), CFA is considered one of the most prestigious titles. Not only does the CFA certification allow you to stand out from the crowd, but it also opens doors to different career paths.
There are already over 100,000 charterholders in 164 markets throughout the globe. The benefit of worldwide recognition is that a charterholder can be more easily transferred across the markets.
- Licensing Permit
Some nations have eliminated some or all criteria for other professional certificates since the CFA charter is internationally recognized. Investment and trade are the primary areas covered by this waiver. If you work in New York, London, or even Mumbai, the value of your CFA qualification stays unchanged.
Limitations of Pursuing a CFA Charter
- Program Duration
The CFA Program requires a substantial amount of time to finish because of the several criteria involved in the certification. It will take 4 years to complete the exam and collect a minimum of 4,000 hours of work experience within 36 months. On top of that, even after investing so much effort, there is no assurance you will acquire the charter.
- Difficulty Level
The CFA exam is very tough to pass because of its comprehensive and lengthy content. Even if you comprehend something, it's frequently tough to remember the information and put it into practice. As per CFAI's historical data, spanning 10 years, the average pass rate was only 44%.
There is a one-time enrollment charge in addition to exam and registration costs, as well as the cost of textbooks and study programs. The cost of the three CFA exams, assuming three straight passes with no travel or lodging charges, is between $2,600 and $4,000. You should anticipate spending thousands of dollars each time you take the exam.
Even if you pass all three levels, you don't immediately get the charter. You need to fulfill your work requirements. Summer, part-time, and internship work do not qualify, nor does managing your assets. After that, you need to submit two to three letters of reference, and then you will be able to apply to become a member of the CFA Institute. You will earn the CFA charter only after the CFA Institute approves your application.
- No Job Guarantee
Obtaining the CFA designation is not a magic bullet for a failing career. If you enroll in the program to jump-start a stalled career, you may want to examine other potential causes before enrolling. As with any certification, the CFA charter doesn't ensure you get every job you apply for.
How is the CFA Exam Structured?
It is a self-study, three-level exam that tests the fundamentals of investment tools, company valuation, portfolio management, and wealth planning. The CFA Program's curriculum is created by the CFA Institute, which guarantees that it is always current and imparts practical investment analysis skills by engaging the best minds in the investing industry. The main structural differences between each level are the topic weightage and the types of questions. Each level is administered for approximately 4 hours and 45 minutes. To get the charter, applicants must do well on all computer-based examinations, which are split into three levels of increasing difficulty.
The CFA Level 1 exam evaluates a candidate's basic understanding of the subject topics and analytical skills. The examination assumes no previous knowledge of finance and teaches applicants various terminologies and concepts. It has 180 multiple-choice questions, divided into two 135-minute sessions.
The CFA Level 2 exam builds upon the CFA Level 1 exam by focusing on asset valuation and the correct use of investing methodologies. Candidates must read a case study and answer questions based on the research as part of the process. It has about 88 multiple-choice questions.
The CFA Level 3 exam tests the practical ability of applicants. The exam is also designed to evaluate the candidate's portfolio management and planning skills. It comprises 44 multiple-choice-questions, split into two 2-hour and 12-minute periods with an optional break in-between.
Who regulates the CFA program?
The CFA Exam is offered by the CFA Institute and allows applicants to become CFA charterholders. The CFA exam was conducted for the first time in 1963, one year after the inception of the CFA Program in the United States and Canada.
Why is the CFA chater considered a valuable designation?
The CFA charter offers tremendous value to the careers of finance professionals by increasing their employment options. For instance, charterholders are equipped to manage a company’s financial goals in investment analysis and portfolio management.
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, with its emphasis on 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. 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), there is a trend suggesting 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 those employed in private equity have completed all three tests and received their charter.
Is the CFA charter viewed differently by country?
The short answer is no; it’s very consistent across the globe. The CFA Institute is acknowledged globally as the most prestigious certification organization for investment managers. Multiple nations value the CFA designation. According to CFAI, twenty-eight countries/territories formally recognize the CFA program. The United States is the birthplace of the CFA Institute; hence, the CFA charter is widely recognized, and employment prospects are abundant. Countries such as Australia, the UAE, Hong Kong, and others in South East Asia highly emphasize the label. As a charterholder, you have access to the CFA Institute’s worldwide employment network and may actively seek a suitable position overseas.
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