For financial industry professionals whose aspirations lie in analysis, you can’t do much better than the chartered financial analyst marks, which demonstrate knowledge of investments, portfolio management and other aspects of wealth planning. “It is slowly becoming the ‘college degree’ of investment management,” says Bryan Lee, a CFA who is the chief investment officer at Blue Zone Wealth Advisors, “meaning, for some companies, it is a must-have to even attempt to work there.”
What Is a Chartered Financial Analyst?
A chartered financial analyst is a financial professional who’s earned professional marks denoting expertise in investment management. Given by the CFA Institute, the chartered financial analyst program teaches the fundamentals of investment management, from asset valuation and analysis to portfolio management and wealth planning.
Investment management is an evolving ecosystem affected by valuation, politics, economics, accounting, ethics and behavioral science, says Taylor Royal, a CFA and partner and financial representative with Royal Wealth Partners, a Northwestern Mutual private client group. “The CFA charter is the differentiator in finance and dives deep into each of these topics.”
How to Become a CFA
To become a CFA, you’ll need to pass a three-part sequential CFA exam that includes multiple-choice and essay questions. It is considered one of the hardest professional exams in the industry. The average pass rate on each part ranges from 42% to 54%. From 1963 to 2021, only 45% of applicants passed all three exam parts. Candidates report studying for more than 320 hours on average in preparation for each exam.
Depending on when you register, the CFA program can cost between $700 and $1,000 – or more if you need to reschedule your exam date.
You must also complete at least 4,000 hours of relevant work experience over a minimum of 36 months. To be relevant, that work must be “directly related to the investment decision-making process producing a work product that informs or adds value to that process,” according to the CFA website. You can complete this work experience before, during or after passing the exam. But applicants won’t be able to use the CFA designation until they’ve met all these requirements, which also include submitting two to three professional references who can comment on their work experience and professional character.
“The CFA program was a major commitment of time, money and brainpower,” Royal says. “I began studying for each level at least six months in advance of each test and spent countless nights and weekends preparing for each exam.”
Be prepared to turn down a lot of social events while you’re preparing for the CFA exam. “I always tell people there is only one way to approach the program, and that is to go all in,” Lee says. “I have seen past co-workers take multiple years to pass different levels, and it can really be draining.”
He chose to tackle the program as quickly as possible, so while he felt like he was making a lot of sacrifices at the time, he was able to complete the program efficiently by passing each exam on his first attempt. “Looking back, I think that was key to keep my motivation high and remain disciplined and focused,” he says.
He also recommends sticking to a study schedule and taking as many practice exams as possible. But don’t forget to get enough sleep and exercise, so you don’t get burned out. “Understand why you are going through the process and make sure you use that as motivation to get through the difficult and frustrating weekends that you are studying all day while your friends are out having fun,” he says.
To help him get through the exam, Jim Grefenstette, a CFA with DJM Financial, a Northwestern Mutual private client group, joined a study group. The group members met regularly to review topics and hold each other accountable. Grefenstette says having that study group was critical to his progress.
“For any aspiring CFAs, my advice is to come at the work with passion and know that the designation can open doors to a wide variety of successful and fun careers in finance,” he says.
What Do CFAs Do for Work?
CFAs hold a variety of careers across all sectors of the financial industry, from asset management and private wealth management to insurance and commercial or investment banking.
You’ll also find CFAs in emerging sectors like financial technology. CFAs typically work as research analysts or investment consultants or strategists. They may work in portfolio management or risk analysis and management. CFA charterholder portfolio managers reported a base salary of $126,000 in 2019 and a total compensation of $177,000, according to the CFA Institute.
As a CFA, Royal advises sophisticated professionals who have earned their wealth in technology or as business entrepreneurs and managers. He says the CFA credential has helped him demonstrate his ability to meet his clients’ unique financial needs while showing his commitment to higher ethical standards.
Grefenstette chose to get his CFA while working as an analyst for an equity mutual fund. “I wanted to both improve my analytical skills, so I could do my job better, and be able to communicate my qualifications to my fund shareholders, so that they could have more confidence in our fund’s investment process,” he says.
He says he never could have progressed in the field without the skills he developed and honed through the CFA program. “An analyst, to a large extent, must make decisions or judgments based on incomplete information most of the time, as the variables in finance are often as qualitative as they are quantitative,” he says. “I think that aspect makes my job fun every day.”
The CFA charter can also be beneficial to professionals who aspire to work in a more analytical role. It allows them to be heard in the room and demonstrate that they have the required background and drive to advance within the company, Lee says.
“Having a CFA opens the door to more opportunities and allows for growth in your career,” he says. “If your company doesn’t value the designation, it can help you to find somewhere else that will – and will compensate you for your hard work completing the program.”