The CFA Institute is not really a super-profitable organization

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This is a brief article for anyone who found out yesterday that they failed June's CFA Level I or Level II exams and is in search of some schadenfreude as rehabilitation, or for anyone who complains that the CFA Institute is unfairly charging them its $275 annual membership fee as a way of profiteering from financial services employees. - The CFA Institute is a not-for-profit organization with a tiny operating margin.

None of this will come as news to anyone familiar with the CFA's 2017 annual report, published on the internet for all to see (just Google 'Fiscal Year 2017, CFA Institute'). But it's worth stressing to anyone who thinks the CFA Institute is printing money on the back of its notoriously difficult exams.

Last year, the institute generated total operating revenues of $313m, mostly from its certification arm, as follows:

CFA revenues

However, these were almost entirely consumed by the Institute's enormous $304m operating expenses, distributed as per the screenshot below. The resulting operating margin for the CFA Institute last year was around 3%. Nor was this a one-off: in 2016, the CFA Institute's operating margin was 5%.

It might therefore be said that the charitable Institute is running its exams and membership services out of the goodness of its own heart.

CFA Institute expenses

Of course it's always possible to be more generous, particularly when it comes to member services. As the Institute's expense list shows, it's a very (very) big spender when comes to marketing. It's clearly a costly business staying at the forefront of candidates' minds. Marketing and communication spending at the Institute is nearly 40% higher than spending on member and society services, and only 22% below the Institute's spending on the exams themselves.

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