The next exam to qualify for the Chartered Financial Analyst (CFA) designation is coming up (weekend of June 2-3) and financial professionals are cramming hard as they prepare to enter test centers around the world for what many admit is the hardest test of their careers.
One question nearly every potential CFA holder asks is whether it’s worth it—worth the cost, between $3,600 and $7,500, depending on how many times you have to take the exams or spend on study supplies, or worth the hours of study to take one of three exams, each at a level more difficult than the last over a three- to four-year period just to be able to put the CFA designation after your name.
More valuable than ever
Some would say in these challenging times, the CFA is more valuable than ever. Companies have their pick over whom to employ, and if they have two equally qualified candidates for a position, one with a CFA and the other without, who do you think they’ll choose?
Recruiters are nearly unanimous in this regard. It’s almost always easier to place a CFA than someone lacking it.
One in four CFAs are portfolio managers
It also depends on what role you intend to play within financial services. According to the CFA Institute, one in four (24 percent) charter-holders list their occupation as portfolio managers and nearly one in five (18 percent) say they are research analysts. The rest of over 50,000 CFAs in the U.S. range from c-suite executives to accountants, traders and wealth managers at such firms as Goldman Sachs, J.P. Morgan, Morgan Stanley, Citigroup and BlackRock.
“It’s still a very competitive market,” said Steve Saah, the director of permanent placement services at Robert Half International, adding “it absolutely can help an individual.”
Even those just beginning the process have a leg up on the competition. “Employers want to see lower-level employees taking steps to get the CFA,” said Saah. At higher-level jobs, it’s “almost a must-have.”
The CFA Institute is partnered with about 150 universities around the world. Although a finance degree isn’t needed to pass the test, taking an accounting or economics class might be useful “to help get you started,” according to Tom Robinson, the CFA Institute’s managing director of education.
CFA preferred/CFA required
“Not all positions require that you have the CFA,” Robinson added. “It’s not absolutely mandatory that you get the CFA. But there are situations where you will see job descriptions with ‘CFA preferred,’ or ‘CFA required.’” Some firms are more adamant about it than others.
It all depends on the company and the position. “In the finance industry,” says Robinson, having the CFA certification makes a lot of difference because “it really sets somebody apart.” And candidates are only allowed to call themselves a CFA if they pass all three levels of the test.
Stephen Laser, Ph.D., is a Chicago-based psychologist who is often hired by financial services companies to interview and test job candidates before they’re hired. Laser says that going for a certification can be very important, especially if you want to go into private practice.
“It’s tough if not impossible to go out on your own these days without having the right letters after your name,” said Laser. “If you’re interested in becoming someone who privately advises people on their investments, you will probably need that Chartered Financial Analyst certification.”
Last year, a record 144,900 candidates registered to take one of three CFA exams, according to the CFA Institute.
Each level of the CFA exam is designed to provide candidates the opportunity to demonstrate the degree to which they have mastered the concepts necessary to perform competently at a certain level in the investment profession. For example, passing Level I indicates you have attained the knowledge, skills and abilities to perform competently in positions such as Assistant Analyst. By passing level II, you have the knowledge, skills and abilities to be an Asset Valuation Assistant. And passing level III means you can fill the position of Assistant Portfolio Manager.
The market for CFA jobs is better than it used to be during the depths of the Great Recession but not as good as it was last year. Speaking of the job market, recruiter Tim Greive says, “It’s not on fire by any means. There are a fair number of jobs out there, but no one is in any hurry to pull the trigger.”
Then there’s the issue of compensation. Recent figures are being gathered, and the last time the CFA Institute monitored compensation levels for its members was back in 2007. At that time, median compensation for those with a CFA ranged from $121,000 for those with less than five years of experience to $437,000 for those with more than 10 years of experience. Also, equities tended to pay more than fixed income.
However, as the number of people taking the CFA exams rises and an increasingly broader range of jobs is associated with CFA qualifications, the associated level of pay may have also come down.
Marketing consultant and blogger Richard Wilson, author of several books on hedge funds including The Hedge Fund Book: A Training Manual For Capital Raising Executives, adds that while there is no perfect resume for every hedge fund executive, it doesn’t hurt to have a CFA designation.
Two case studies
If you still need a reason for taking the CFA exams, London’s free daily business newspaper, City A.M., recently carried two case studies showing why CFA qualification matters.
Daniel Murray, the global head of research for EFG Asset Management, says he decided to take the chartered financial analyst (CFA) tests when he realized there were some of what he calls “holes in my knowledge.” Putting it another way, Murray said that although he felt very well-qualified academically, he “wasn’t always speaking the same language as other people.”
Also important, said Murray, is the weight the CFA designation carries. “It’s a very good base level qualification that ensures everyone is qualified to a minimum standard.” It holds credibility for clients and employers.
Its particular educational benefits lie in the breadth of knowledge and experience it requires. “It doesn’t teach you to be an expert in anything, but it forces you to have a very broad understanding of the investment industry.”
Murray predicts that a CFA designation after a name will prove more and more important. “It’s increasingly essential, whereas 10 years ago it was useful. For young people not to enroll in the CFA program is a career-limiting move.” But “although it does open a door,” once you’ve got it, “you then need to get practical experience.”
The second case study comes from Mark Parsonson, the executive director at Liongate Capital Management. His decision to undertake a CFA was the “credibility it gives me with both clients and the investment professionals that I deal with.” It “acts as a signal. It’s a rigorous qualification and as such carries a lot of integrity in the industry.”
Parsonson decided to take part in the CFA program in the second year of his professional life. “It was useful when I was starting out. It was a signal to others that this was a job I was dedicated to.” And when he received the CFA charter, it was a catalyst for an internal promotion. “It’s been very helpful in opening up the right doors.” He attributes this largely to improved credibility, and this credibility rests on the academics. The CFA “gives you a perspective of the industry as a whole and acts as a broad knowledge base.”
Parsonson concludes that with the environment remaining difficult for the professionals within it, “the credibility of the qualification is becoming more important.” A CFA is a recipe for improved job security “by helping you stand out from the crowd.”