It's pretty easy to bump into someone in the financial profession who is really excited about entering the chartered financial analyst (CFA) program. Sometimes they know what they are getting into, sometimes they don't. They may have no idea how much time it takes or exactly how having the charter may help or hurt them.
Make no mistake—earning the CFA designationis a grueling process, so before you commit, consider what it takes to earn it, how it will benefit you and your career, the negatives of going through the process, and whether the pros outweigh the cons.
Key Takeaways
- Earning the CFA is a prolonged, pricey, and altogether challenging process that may not be right for every financialprofessional.
- To become a CFA, a candidate must pass the three-level exam, build up work experience in a related field, provide letters of reference, and apply to join the CFA Institute.
- The hardest part of the process for many people is the educational component, with each level of the exam generally warranting 300 hours of prep time.
- Despite the considerable financial commitment and time investment that is required to prepare to take the exam, roughly 50% of all applicants fail.
- For some who achieve the CFA, the rewards include a higher salary, a better reputation, and an advancement in career; forothers, the impact of the CFA on their salary, reputation, and career is more muted.
Chartered Financial Analyst Requirements
The CFA Institute requires four steps to become a CFA. They include:
- Pass all three levels of the CFA exam in succession.
- Acquire qualified work experience before, during, or after the program.
- Submit two to three professional references.
- Apply to join the CFA Institute, which includes completing a professional conduct statement.
For many people, the most difficult part of earning a charter is fulfilling the educational requirements. The CFA program consists of three exams encompassing a "candidate body of knowledge" (CBOK) that the CFA Institute believes is necessary for those in the investment profession.
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What Is a CFA?
The CFA Test Levels and Time
The test for level I is given in February, May, August, and November, while the exams for levels II and III are given three times and twice a year, respectively, on alternating months. Candidates must pass each level before moving on to the next.
Pass rates tend to hover around half. In February 2022, pass rates were 36% for the level I exam. Pass rates were also at 44% for level II. Of those who took the level III exam in November 2021, 43% passed.
The investment of time is crucial. The CFA Institute estimates the average candidate should expect to spend at least 300 hours preparing for each level. In fact, the average candidate spendsan average of 323 hours preparing for each exam (303 hours for level I; 328 hours for level II; 344 hours for level III).
Before entering the chartered financial analyst (CFA) program, be sure you've considered the costs, the time commitment, and whether it's likely to help you to get to where you want to go in your career.
CFA Professional Requirements
Once you've considered the time required to pass the levels, you must next look at the professional requirements needed. Before a candidate can become a CFA, they must have accrued 36 monthsof acceptable work experience. Fortunately, the CFA Institute's definition of acceptable experience is fairly broad, encompassing such areas as trading, economics, and corporate finance.
For work experienceto qualify, time must be directly involved in the investment decision-making process or producing a product that impacts that process. However, there are a number of candidates who enter the program and are not in fields where anything they do can be construed to be within the realm of acceptable experience. Some of these candidates may find that while they are able to pass the educational requirements, they will not receive the designationbecause they do not have the required professional experience.
The CFA Institute
Finally, before candidates can receive their charters, they must join the CFA Institute. If you need help, the CFA Institute's websiteexplains theprocessin detail.
50%
The so-called "pass rate" of individuals who take the three-level CFA exam.
The Advantages of CFA Certification
To help you decide whether to pursue the charter, let's take a look at how it might bebeneficial to you and your career.
How the Charter Could Benefit You
First, there is an educational benefit; you will learn a great deal and add a great credential to your CV. Then, there is a boost to your reputation. People in the business know the time and dedication it takes to earn the charter. When they see you have earned it, they will likely believe you have the ability, dedication, ethical grounding, andanalytical skills necessary to do the job in question.
There also may be financial benefits. You may see your salary increase after you've become a CFAor you may surpass other applicants who don't have this designationwhen competing for a new job. The operative word here is "may." Hard work,skill,luck, dedication, political savvy, and character have just as much to do with one's success in the investment profession as education,so don't view the charter as your golden ticket to financial paradise.
How the Charter Could Benefit Your Career
There are a number of financial fieldsin which having the charter is a substantial plus. The obvious one is investment management. As the investment industry continues to become more competitiveand morecommoditized, it will become almost imperative for any credible investment manager to earn the charter.
Outside of investment management, there are a number of other professions in which charterholders will benefit considerably:
- Buy-side traderor other buy-side professional positions
- Sell-side analyst, associate,or other sell-side professional positions
- Business school professor
- Economist
- Financial advisor or financial planner
Beyond this list, there are a number of professions in which having the CFA charter helps, but where it is not a career roadblock if the financial professional does not have it.
The Disadvantages of CFA Certification
The CFA charter is not a guaranteed path to riches and glory. Before taking the plunge, carefully consider several drawbacks to earning one.
The Time Needed to Complete It
Becoming a CFA is a huge investment in time, between studying for and taking the exams and logging the minimum 4,000 hours of experience required over 36 months. You will sacrifice time with family and friends and the pursuit of hobbies you enjoy. And after committing all that time, there is no guarantee that you will earn the charter.
The Cost of Enrollment and Registration
While this factor may not be a major consideration, it is worth pondering. A level I candidate will pay a one-time program enrollment fee plus an exam registration fee. Level II and III candidates will pay a registration fee as well. There is also the cost of the books and study programs you'll have to buy. Altogether, you should expect to spend several thousand dollars each timeyou attempt the exams.
The CFA Won't FixYourCareer
The CFA is not a cure-all remedy for an ailing career. If you're enrolling in the program to jump-start a stalling career, you may want to look at other reasons your career is not moving forward first. Perhaps before investing inordinate amounts of time and a substantial amount of money into building your pedigree, you might choose to improve your soft skills, such as work ethic and political suaveness.
Pros
Increases knowledge
Boosts reputation
May increase salary
May improve career
Cons
Huge time crunch
(Video) Why the CFA Program might NOT be for youMay not earn the charter
Expensive for many
May not help career
What Is a CFA Salary?
According to the CFA Institute, the median total compensation for charterholder portfolio managers is $177,000 and the median base salary is $126,000. The difference between the two numbers is a result of the impact of cash bonuses and long-term incentives.
How Do I Become CFA Certified?
To become certified, you must pass the three-level CFA exam; build up work experience before, during, or after the program; submit several references; and apply to join the CFA Institute.
Is the CFA Exam Difficult to Pass?
By most accounts, the three-level CFA exam is challenging to pass. Each level of the exam typically warrants at least 300 hours of preparation and the pass rate is roughly 50% or lower.
Is a CFA Better Than an MBA?
Both the CFA and the MBA are valuable to financial professionals looking to develop their expertise, bolster their reputation, and advance their careers. Possessing both can give an individual a leg up as well. Financial professionals who work asmoney managers and registered investment advisors are especially keen to get a CFA.
The Bottom Line
A variation of the good old-fashioned cost-benefit analysis may be the best way to decide whether or not to undertake the program. On paper, plot out the costs versus the benefits of becoming a CFA.Your decision may changeas your career changes. A lost promotion in five years may make earning the designation more worthwhile.
FAQs
So, You Want to Earn Your CFA? ›
Pass all three levels of the CFA exam in succession. Acquire qualified work experience before, during, or after the program. Submit two to three professional references. Apply to join the
If you're aiming to work in roles such as financial analysts, portfolio managers, or investment bankers, the CFA designation can be a valuable asset. However, if you want to pursue careers in other areas of finance, an alternative certification or qualification may be more relevant.
How hard is it to earn a CFA? ›Overall, the CFA exams are very difficult, but candidates can increase their chances of passing by studying for over 300 hours, utilizing alternative prep materials, answering as many practice questions as possible, and creating a structured study plan.
Why would you want a CFA? ›Getting your CFA charter allows you to gain analytical skills and expertise in quantitative methods, economics, financial reporting, investment analysis, and portfolio management. This set of skills and knowledge you will develop as you become a CFA charterholder will serve you well throughout your career.
How much will a CFA increase your salary? ›The CFA charter prepares you for a variety of investment-related jobs, such as portfolio manager, risk manager, and research analyst. Seven percent of CFA charterholders even go on to be chief-level executives. In general, the CFA designation increases salaries by around 15-20%.
What are the disadvantages of doing CFA? ›| Pros | Cons |
|---|---|
| Flexibility | Difficult to achieve |
| Respected designation | High-stakes |
| Opportunities | Competitive industry |
The CFA charter is one of the most respected designations in finance and is widely considered to be the gold standard in the field of investment analysis. To become a charter holder, candidates must pass three difficult exams, have a bachelors degree, and have at least four years of relevant professional experience.
Is CFA harder than the bar? ›The test to become a Chartered Financial Analyst is one of the most challenging credentialing exams. With a pass rate of less than 11% for all three levels, the CFA passage rate is lower than most state bar exams.
Is the CFA the hardest exam in the world? ›CFA (Chartered Financial Analyst)
According to the Wall Street Journal, the CFA exam is the most difficult exam in the world, with less than 1/5th of candidates clearing it, after repeated attempts, on a yearly basis.
The pass rates for the CFA and CPA exams are similar, but the CFA certification typically takes candidates several years longer to obtain than the CPA certification. In that respect, the CFA certification is typically viewed as harder than the CPA because of the greater time commitment and work experience requirements.
How much does a CFA cost? ›
You'll pay multiple fees to take the CFA exam. The one-time enrollment fee is $350. The standard registration fee for each level of the exam is $1,200.
Are CFA in demand? ›The CFA professionals who complete all three levels of CFA exams in India are in high demand as they are skilled financial experts.
Is the CFA impressive? ›The CFA designation is good signalling tool and a quality indicator. However that credibility and respect you get as a charterholder is probably recognized and appreciated by a sub-set of the finance sector, not all.
What pays more CPA or CFA? ›Salaries can vary widely for both CFAs and CPAs based on location, experience level, and company size. That being said, according to Payscale the average salary for a CFA is $102,000 and the average salary for a CPA is $94,000.
What is the highest paid CFA? ›Highest salary that a CFA can earn is ₹15.3 Lakhs per year (₹1.3L per month).
What is the average salary of CFA Level 3 in USA? ›The average salary range for CFA Level 3 is 67,786 USD to 217,242 USD. The average salary range for CFA Level 3 is 67,786 USD to 217,242 USD.
How many people fail CFA? ›Falling Pass Rates
The Level I pass rate fell to as low as 22% in July of that year, down from 49% in 2020. Level II and Level III pass rates fell to 40% and 42%, respectively, from 55% and 56% the previous year.
Many CFA charterholders consider the Level 3 CFA Exam the most difficult because of the time and thought needed to answer the constructed responses successfully. While the typical Level 3 CFA Exam pass rates are the highest of the CFA Exams, only around 56% of CFA candidates pass the exam.
What is the hardest subject in CFA? ›- Financial Statement Analysis - The most challenging aspect of Financial Reporting and Analysis is likely not the content itself but rather the abundance of information. ...
- Fixed Income- Many readings in FSA are purely theory-based and are filled with terms.
| Top Employers of Chartered Financial Analysts in India | |
|---|---|
| Recruiters | Salary Package (in Rs lakh per annum) |
| JP Morgan and Co | 3.08 to 20 |
| The Goldman Sachs Group Inc. | 2.06 to 40 |
| HSBC | 5.24 to 30 |
Is the CFA as valuable as an MBA? ›
An MBA is more costly to acquire than a CFA and typically requires being a full-time student, while someone studying for a CFA can simultaneously hold a full-time job. However, the tradeoff is that after completion, an MBA often gives a bigger boost to your earnings potential than a CFA.
Is it OK to fail CFA? ›Very few candidates pass all three CFA exams on their first attempt. CFA Institute estimates it takes the average successful candidate four years to complete the CFA Program. So failing one level, if not two, makes you an average candidate. It is difficult for most candidates entering the program to accept this.
Is CFA harder than law school? ›CFA Exams Pass Rates
The CFA exams are perhaps the most challenging exams out there. They are often referred to as “bar none” the toughest exams—even harder than medical school or law school exams—with pass rates that hover around 50% and were much lower during the recent pandemic.
Scoring high enough on the MCAT to gain admission to a U.S. medical school (MD program not DO) is more difficult than passing the CFA. For some candidates not schooled in finance, passing the CFA could be more difficult than a respectable MCAT score.
What's the hardest professional exam? ›- Civil Services Exam (CSE)
- GATE.
- GRE.
- Master Sommelier Diploma Exam.
- ICAI CA Exams.
- CCIE (Cisco Certified Internetwork Expert)
- Mensa International.
- CFA.
If you don't pass the CFA exam, review the exam results and performance summary provided with your score. Candidates should re-evaluate their study plan and enroll in a CFA prep course. Along with a strategic study plan, you'll need a strategic test-taking plan, which incorporates the structure of the exam.
What is the hardest exam in the US? ›What are the hardest test exams in America to pass? The USMLE, the Graduate Record Examination, the Cisco Certified Internetworking Expert, Mensa, the California Bar Exam, the MCAT, the Chartered Financial Analyst Exams, the SAT, and IELTS are the toughest tests in America.
Why is CFA Level 2 the hardest? ›Level 2 is much harder than Level 1 simply because it is more intense – the depth and detail Level 2 goes into (and tests on) is greater, as it is more application-focused. More importantly, candidates need to get used to answering the vignette-style multiple choice questions that is new in Level 2 (see tip #4).
How long does it take to become a CFA? ›The Time Needed to Complete It
Becoming a CFA is a huge investment in time, between studying for and taking the exams and logging the minimum 4,000 hours of experience required over 36 months.
If you plan to join a public accounting firm and work yourself up to partnership, there is no need for a CFA, CMA, CIA, MBA, or any other qualification. The CPA is best for public accountants and those accountants who plan to work for the “Big 4” accounting firms.
Does CFA include accounting? ›
The CFA Program is a three-part exam that tests the fundamentals of investment tools, valuing assets, portfolio management, and wealth planning. The CFA Program is typically completed by those with backgrounds in finance, accounting, economics, or business.
How much is CFA worth in USA? ›On average the base CFA Salary In US is $126,000 USD and total compensation of about $177,000 USD. CFA Professionals have a wide range of scope to hold different positions in the finance industry in various streams such as trading, asset management, investment portfolio management, and the like.
Do you have to pay again if you fail the CFA exam? ›You do not need to pay this fee again, just the exam registration fee. If you need to re-sit for any level of the exam, be sure to sign up for you next exam as soon as possible so you benefit from the lower early registration fee.
Why is the CFA so expensive? ›CFA® Exam fees can be very expensive, partly because it's actually made up of three separate exams that are very comprehensive. Most candidates think about the registration fees and the costs of actually taking the CFA® exam, but they don't consider all of the additional expenses that go with it.
Does CFA require a lot of math? ›in mathematics is not necessary to do well in quantitative methods, but having a background in statistics will certainly be helpful. An 8%-to-12% weight means that candidates should expect anywhere from 15 to 22 questions on quantitative methods.
What is the best degree to become CFA? ›To obtain a CFA, candidates must take on average four years to complete the program, including an estimated 400 hours of study time. An MBA or Master of Business Administration degree complements the CFA degree; for employees who want to move up the corporate ladder, both credentials might be necessary.
Is 4 months enough for CFA? ›Successful Level I candidates spend more than 300 hours preparing for the exam on average. The best strategy is to leave at least four months (approximately 17 weeks) to finish all the reading material.
Does CFA look good on resume? ›The Chartered Financial Analyst (CFA) qualification is a big asset for an investment professional and should be highlighted on a resume. The CFA Charterholder Program involves passing three six-hour exams and putting in four years of investment-related work.
Is CFA equivalent to Masters? ›Is the CFA Equivalent to a Master's Degree? Since both the CFA Program and an MSFA require an undergraduate degree in most cases and require about the same total amount of study, the CFA is generally considered to be equivalent to a master's degree.
Do you need 70% to pass CFA? ›What is the passing score for CFA Level 1? You can pass with Financial Reporting and Analysis with under 50%, Economics and Portfolio Management with over 70%. The rest subjects are between 50-70%.
Is CFA better than CPA? ›
Professionals with the CFA designation are considered experts in investment analysis. Like the CPA, the CFA opens additional career opportunities and can lead to higher earnings. The primary difference between the CPA and CFA is that the CPA is an accounting credential, while the CFA is for financial analysis.
What is harder CPA or CFA? ›The CPA certification is typically viewed as more difficult than the CFA because it covers a broader set of topics. The CPA exam broadly focuses on all aspects of accounting while the CFA exam solely focuses on finance. In the end, the difficulty of either exam depends largely on your knowledge and experience.
What is better CFA or masters in finance? ›If you are primarily interested in managing wealth for institutions or in an institution such as a mutual fund, then the CFA and/or a Master's are the most recognized. If you are primarily interested in working for a company as a financial analyst, financial manager or in a similar role then a Masters is a good choice.
Is CFA or MBA better for investment banking? ›MBA vs. CFA. If you're just starting out in investment banking, you're probably going for a job as an analyst. This position demands great expertise in number-crunching and financial modeling, skills that are best imparted by the CFA program rather than an MBA.
How much does CFA earn in USA? ›On average the base CFA Salary In US is $126,000 USD and total compensation of about $177,000 USD. CFA Professionals have a wide range of scope to hold different positions in the finance industry in various streams such as trading, asset management, investment portfolio management, and the like.
What is the most difficult CFA level? ›Many CFA charterholders consider the Level 3 CFA Exam the most difficult because of the time and thought needed to answer the constructed responses successfully. While the typical Level 3 CFA Exam pass rates are the highest of the CFA Exams, only around 56% of CFA candidates pass the exam.
How much does CFA cost? ›You'll pay multiple fees to take the CFA exam. The one-time enrollment fee is $350. The standard registration fee for each level of the exam is $1,200.
What is the hardest financial exam? ›According to the Wall Street Journal, the CFA exam is the most difficult exam in the world, with less than 1/5th of candidates clearing it, after repeated attempts, on a yearly basis.
What is the average age of CFA members? ›| Region | Average Age |
|---|---|
| United States | 45.3 |
| Brasil | 37.0 |
| Asia Pacific | 39.1 |
| Mainland China | 35.5 |
While the Master's in Finance provides more general knowledge and is better suited for those who practice in more general fields in the business and financial sector, the CFA program is particularly tailored to those who need more specialized skills, such as investment analysis, portfolio strategy, and asset management ...
Do I need a masters to get a CFA? ›
To fulfill the CFA Program entrance education requirements, you must have a bachelor's (or equivalent) degree or your exam window must be within 23 months of your graduation month.
What is higher than CFA? ›Compared to the Chartered Financial Analyst (CFA), a Master of Business Administration (MBA) provides a broader overview of business principles.
Do investment banks prefer CFA? ›You can have all the degrees and qualifications in the world, but the impact a CFA Certificate will have on your career is unmatched. To pursue your dream of becoming an investment banker, you must attempt the CFA exams and obtain the certification.
Do I need a CFA for private equity? ›A lot of limited partner private equity firms will hire undergraduates and then put them through the CFA. It's rare for direct investment firms to do the same. However, we also see a lot of junior investment bankers with CFA level one, as it shows both technical knowledge and evidence of commitment.”