Career guidance: Chartered Financial Analyst (CFA)

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The Chartered Financial Analyst designation, or CFA charter, has become the most respected and recognized investment credential in the world. To earn the CFA charter you must have four years of qualifying investment work experience, become a member of CFA Institute, pledge to adhere to the CFA Institute Code of Ethics and Standards of Professional Conduct, apply for membership to a local CFA member society, and complete the CFA Program.

The CFA Program is a globally recognized, graduate level curriculum that provides a strong foundation of real-world investment analysis and portfolio management skills along with the practical knowledge you need in today’s investment industry. It also emphasizes the highest ethical and professional standards.

Q&A: Becoming a Chartered Financial Analyst

Each year, tens of thousands of candidates enroll in the CFA Program and sit for the exams in test centers all over the world. Completing the CFA Program confirms a mastery of the rigorous CFA curriculum, signifies passing all three exam levels, and is one of the requirements for earning the CFA charter.

For those hoping to advance in the business world, the MBA degree has become practically a requirement. But those seeking an edge in the world of finance are increasingly considering a different kind of credential: the Chartered Financial Analyst (CFA) qualification. The CFA designation is considered the gold standard of the investment management field and those who have the credential are expected to have an in-depth knowledge of the investment industry, with many going on to careers as portfolio mangers or research analysts at hedge funds and private equity firms.

Obtaining the qualification is no easy feat; the self-study program takes several years to complete and participants must pass three six-hour exams, as well as agree to abide by a strict code of ethics and standards of conduct. About 180,000 people signed up for the CFA exams last year, and the average age of test takers was 30, according to the Chartered Financial Analyst Institute, a nonprofit organization that awards the Chartered Financial Analyst designation.

Increasingly, more business schools are incorporating aspects of the CFA curriculum into their programs, from undergraduate business programs to Master of Finance programs. As the designation becomes more well-known in the management education world, students are increasingly interested in pursuing the charter at a younger age, some even starting to study for the first level of the CFA exam while still in school, according to the CFA Institute. Others students get the CFA in conjunction with their MBA or their Master of Finance degree.

Bloomberg Businessweek's Alison Damast recently spoke with CFA Institute Managing Director Thomas Robinson, who oversees the education division, about the advantages of becoming a CFA and how studying to be one can help students gain an edge in the job market.

Alison Damast: An age-old question among those headed into the finance world is whether they need to obtain a CFA, an MBA, or both. Do you think there is a benefit to doing both?

Thomas Robinson: Whether you need to do both really depends on what you want to do. A lot of people looking at what to do with their life think is it one versus the other. I view the CFA and the MBA as being very complementary. The CFA is a very specialized credential that focuses really very deeply on 10 investment-related topics. If you want to analyze securities, or if someone wants to specifically work in the investment management area as an analyst or portfolio manager, then the CFA makes a lot of sense and that will get you through the majority of your career. The MBA is more of a generalist designation. You are not able to get as in-depth in the finance topics in an MBA program as in the CFA curriculum. But certainly for those who are in the running for a management position later in their careers, the MBA can be quite useful. I would generally recommend if you want to work in the investment field and ultimately want to end up in management that you start with your CFA, work for a few years, and then do the MBA.

What are some of biggest differences between getting an MBA or a CFA in terms of price and time?
A CFA program takes on average four years to get through, while an MBA program will take one or two years, depending on if you are full-time or part-time. The CFA is designed to be a self-study curriculum and it is something people do while working. It is also very economical. You can get through the CFA program spending less than $3,000. If you assume that you pass each exam on the first try and register in a timely manner, the total fees will be $2,300. Well, that's less than one course costs in most MBA programs.

Are you seeing more people expressing an interest in obtaining the CFA qualification in the last few years?
We were growing very rapidly up to the financial crisis, particularly in the Asia-Pacific region, and we expected a slowdown with the crisis and what was going on in the finance industry. But in reality, each year for the last three years, we've had more candidates than the preceding year. We're not growing as rapidly, but our candidate numbers are still growing. The growth is slow because I think there are fewer investment professionals in the industry after layoffs in recent years. But the people left in the industry are more serious investment professionals and those are the ones always attracted to the CFA program in the first place. Another reason for the uptick in candidates is people realize they need to have something on their résumé to set them apart from others in a very competitive environment.

What are some of the challenges involved in getting a CFA? How much time and study does it typically take for a person to get through the program?
It's a pretty daunting program and it takes a considerable amount of time to get through. The curriculum is designed to be self-study. To become a CFA, you need to pass three exams. When you sign up for the exam, we send you the curriculum to study and a box of six books that are about 3,500 pages, with 18 study sessions. That intimidates a lot of folks and some people don't show up on exam day or fail the first exam and don't continue. About one out of five who sign up for the program actually complete it. You are not allowed to put the CFA designation after your name until you've completed all three exams and agree to abide by the code and standards.

Are banks increasingly looking to hire people who have the CFA designation?
That varies a lot. Some financial institutions or investment management firms do require it for some positions. Others see it as an add-on. Having the qualification does differentiate the candidate. If an employer is looking at someone for an investment job, they'll probably be more interested in the CFA because it shows deep knowledge skills in the practice area. We are seeing more and more job ads now that say CFA preferred or CFA required.

Have you seen more business schools starting to incorporate aspects of the CFA curriculum into their undergraduate and graduate programs?
Some universities run specific noncredit prep courses that help people study for the exam. Other schools are embedding our body of knowledge into for-credit classes in their curriculum. We're seeing many universities develop Master of Finance programs that are specifically geared toward the CFA program. We have a university partners program where we recognize 132 universities around the world that have embedded at least 70 percent of our body of knowledge into the curriculum and incorporate our code of ethics. These are places like University of Oxford's Saïd Business School (Saïd Full-Time MBA Profile) and Cornell University's Johnson Graduate School of Management (Johnson Full-Time MBA Profile), where you can earn a degree and work toward a CFA designation at the same time. Some undergraduate programs are even embedding Level One material into the undergraduate curriculum.

Most people think the process of studying for the CFA exam is something one undertakes once one is out in the working world. Can undergraduate business school students start studying for the CFA while they are still in school and what is the advantage of doing that?
We are seeing many students who are seniors in their university starting to do the program. It helps give them an edge and gives them something to put on their résumés, so employers know they are working toward the CFA when they are first out there interviewing. It gives these students a head start because they can get the first exam knocked off before graduation or right near graduation.

( Courtesy: Businessweek )

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Meera Siva: Here are some tips to ace the Chartered Financial Analyst (CFA) exam

Candidates appearing for the tough Chartered Financial Analyst (CFA) exam are likely to be jittery. Pass rate statistics for the three level exams are grim — 38 per cent, 42 per cent and 52 per cent for levels one, two and three, respectively, for the June 2012 exam. This is in spite of the fact that most exam takers have prior finance education and work experience.

“CFA is a very rigorous course”, says Anand Krishnakumar CFA, MBA ACA, Co-founder and Principal at ArkCap Financial Advisors LLP, “It tests you right from the basic fundamentals to the practical everyday complexities.”

So what does it take to ace the exam? As someone who passed the three levels in a span of two-and-a-half years, I can highlight three key aspects.

It may seem redundant to advise that the candidates must learn the study material. But this obvious requirement is often overlooked by many. Skimming through condensed material from friends or test preparation providers may work well for a select few, especially at level one and sometimes at level two. It may come to haunt you at level three where mastery of fundamentals boosts one’s confidence and chances of clearing the exam.

I recommend studying the long, detailed, well-selected and thoughtfully presented material from the CFA Institute. Creating one’s own cheat sheet with formulae and important concepts also helps to reinforce learning.

Along with knowing the topics, the exam requires the ability to apply the concepts to situations in the item set. Doing a lot of problems from question banks, sample exams and attempting questions at the end of the chapter reinforces concepts in the testable topics. Repeated practice also increases thinking and answering skills and speed, as it familiarises you with the exam format.

For level three, doing written essay exams help immensely, as most of us may have lost touch with pen and paper writing. Being able to write the salient points concisely requires thought and doing it quickly needs repeated practise.

Even while putting effort into studying the financial concepts and practising, many candidates under-prepare for the ethics portion. One may consider it too easy to put any effort or too subjective to master. By putting your heart into appreciating the principles of ethics covered, you can reap the rewards not just in the three levels of exams, but also in your life-long career.

You also need to focus on planning your time. The exam has a mix of math and qualitative questions. The numerical questions are typically straight forward and one can arrive at the right answer without ambiguity. The theory questions tend to be conceptual and mistakes are more likely as the wrong option tends to look correct. At level one, you can consider doing the math problems first to ensure a base score before attempting theory questions.

Running out of time happens a lot at levels two and three, as the item sets are long. Underlining important data while reading the passage saves times when one returns to answer the questions. For the essay portion of level three, spending too much time on any one question is a ‘no-no’ and setting time limits is a must.

Before the exam, check the test centre and know the route to get there. Keep your ID ready, ensure your calculator has new batteries and that you have pencil, pen and erasures. On the night before the exam, get a good night’s sleep.

Worldwide, the number of charters awarded annually has more than doubled in the last five years, from 4,618 in 2008 to 10,903 in 2012. This should cheer every one of the approximately 20,000 candidates from India, who are possibly working full time and putting in long hours for the exam.

“CFA is about investing in yourself, your career and your integrity,” says Biharilal Deora CFA, FCA, CIPM, a senior investment professional, “It's about committing to uphold the highest ethical standards for your life.”