Chartered Financial Analyst (CFA) Explained

A Chartered Financial Analyst, or CFA, is someone who has completed the CFA Institute’s CFA program, earned the experience requirements of the program, and passed the rigorous three-part CFA exam to demonstrate expertise in investment tools, l valuation, portfolio management and wealth planning.

The CFA is considered one of the most difficult certifications to obtain in the financial industry. Only about 45% of candidates pass all three exams. For finance professionals aspiring to an analytical role, you can’t do better than a CFA charter. Investors looking for the best investment manager for their money might keep an eye out for that acronym on business cards.

Although the CFA charter is known as the investment management certification, CFAs can apply their knowledge in a variety of careers. Some of the more common areas where CFA charterholders work include financial analysis and research, investment strategy and consulting, Portfolio Management, and risk analysis and management. CFA jobs can range from data scientists to accountants and auditors to relationship and wealth management roles to investment managers. You’ll find CFAs in investment banking, financial planning, sales, and trading.

As part of their role, CFAs tend to focus on the analysis or business side of finance rather than working face-to-face with clients. A CFA is more likely to handle portfolio construction and daily trades in an account than to help a client create an overall financial plan. That said, CFAs can also be financial planners. In fact, having your CFA can make you an even more effective financial planner due to the depth of investment knowledge provided by the training.

Since CFAs can work in a wide range of jobs, the average CFA salary varies. It is also important to note that many investment professionals earn considerable bonuses on top of a base salary. So while the median base salary for a CFA in a portfolio manager position is around $126,000 per year, total compensation including bonuses is closer to $177,000 per year. This is considerably more than the median salary earned by financial advisors in the United States of $89,330.

There are four criteria for become a CFA: You must complete the CFA program and pass the CFA exams, meet the work experience requirement, provide two to three letters of reference, and apply to become a member of the CFA Institute. You will also need an international passport to take the exams. Most CFA candidates already have a background in finance, accounting, economics, or business, but career changers or students are also welcome to take the program.

To enroll in the CFA program, you must meet one of the following conditions:

  • Hold a bachelor’s degree or equivalent degree from a college or university.
  • Be an undergraduate student within 11 months of graduation.
  • Have a combination of 4,000 hours of work experience and/or a combination of work experience and higher education.

the CFA exams are some of the toughest exams in the financial industry. Expect to study over 300 hours for each of the three exams. The exams must be taken sequentially, each lasting approximately four and a half hours divided into two sessions. The average success rates between 1963 and 2021 vary from 42% on the first part to 56% on the third part.

To meet the work experience requirement, you will need to have spent at least 4,000 hours in 36 months working in an investment management related role. You can complete the CFA work experience requirement before, during, or after the CFA program, but you will not get chartered until this requirement, along with the two to three professional reference letters, has been completed. fulfilled.

The financial sector has an impressive number of professional certifications. The Financial Sector Regulatory Authority recognizes more than 200 professional titles. With such an alphabet soup after many names of professionals, it is worth knowing the most outstanding qualifications.

Whether you are a finance professional considering the next step in your career or an investor looking for the best professional to partner with, the CFA designation is worth considering. Someone with their CFA has demonstrated a deep understanding of investment management and the dedication to complete one of the toughest tests in the industry.

  • Educational advancement: The CFA program teaches advanced investment analysis and management techniques.
  • Shows dedication: Completing the rigorous CFA program and testing requirements demonstrates your dedication to your field.
  • Wide Application: The CFA can help you advance your career in various investment management roles.
  • Globally recognized : The CFA charter is a globally recognized designation.
  • Self-learning: The CFA program is a self-study course that you can take at your own pace.

  • Long: To pass the CFA, you will need to devote approximately 300 hours of study time to each of the three tests.
  • Limited availability of tests: The three tests, which must be taken in order, are only offered at certain times of the year.
  • Cost: Expect to pay a one-time registration fee of $450, exam registration fees of $700 to $1,000 plus study material costs.
  • Low success rates: Chances are you will have to retake at least one of the tests, which means paying an additional registration fee and studying again as the test changes every year.

The CFA designation is provided by the CFA Institute, a global nonprofit association of investment professionals. CFA is an independent association that works to set standards for investment management professionals.

FAQs

Getting your CFA takes a lot of time and study. The value of the CFA will depend on your goals. Finance professionals who want to excel in asset or investment management or analysis may find that the skills and authority gained through the designation can help them excel in their careers.

A CFA is more likely to focus on investment management and may work primarily for corporate clients, while a Certified Financial Planner will focus on helping individual clients create holistic financial plans.

Although a CFA is not required for a career in investment management, it can help accelerate that career by demonstrating your knowledge and dedication. For individual investors, working with a CFA can provide assurance that the professional you are partnering with has the expertise to manage your portfolio. That said, it is not necessary to work with a CFA for investment advice.