The Chartered Financial Analyst (CFA) designation is one of the most respected and sought-after designations in the finance and investment worlds.
What Is the CFA Designation?
The CFA designation is awarded by the CFA Institute to candidates who pass a set of rigorous exams and meet other specific requirements. The program gives candidates and CFA charterholders a strong foundation of advanced investment analysis and portfolio management skills. The emphasis is on real-world application and not academic theory. It is considered by many to be the top investment management designation available.
The CFA designation curriculum includes 10 major topic areas. Overall, candidates are required to learn the analysis tools, apply the tools and concepts to value a variety of investment securities, and synthesize the entire curriculum, enabling them to use it in real-life portfolio management and wealth planning situations. The topic areas are: ethical and professional standards, quantitative methods, economics, financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management and wealth planning.
Pass Rate and Testing Requirements
To earn the CFA designation, a candidate must first pass three levels of exams in sequential order. The 10-year historical pass rate for the level-one exam is 43% and the 10-year historical pass rate for the level-two exam is 45%. The 10-year historical pass rate for the level-three exam is 56%. When looking at these pass rates, it is important to note that all candidates taking the level-three exam have already passed levels one and two. Beyond passing the three exams, a candidate must have at least 36 months of qualified work experience, become a member of the CFA Institute and pay annual dues, and sign off annually on the CFA Institute code of ethics and standards of professional conduct.
CFA Designation Pros and Cons
Earning the CFA designation undoubtedly increases a candidate's knowledge of investments. If a financial advisor is employed in a larger organization such as a bank or other financial institution, earning the CFA designation can bring career advancement opportunities, as the candidate becomes more valuable to the organization. Considering that it takes approximately 300 hours of study per level, and about four years to obtain the designation, if an employed financial advisor has the time to complete the designation, there are almost no drawbacks. The candidates' personal investment knowledge skyrockets and this translates to better, more efficient solutions for their employers.
If the financial advisor is self-employed and building a practice outside of an organization, then a more critical analysis of the decision must be made. The designation will certainly increase the advisor's knowledge, but there is a large opportunity cost in terms of time. That time may be much better spent prospecting for clients, building the business and making operations more efficient. Plus, it is important to keep in mind that the CFA designation is solely focused on investments. Successful financial advisors are proficient in much more than investments. They are masters of insurance planning, risk management, investments, tax planning, estate planning, retirement planning and employee benefits planning.
While the CFA is the best designation to pursue in terms of investment knowledge, it certainly does not cover all of the aspects of financial planning. In very general terms, however, the CFA designation may help those in the corporate world more than those starting their own financial planning business.
FAQs
Education and career benefits
Should a financial advisor get a CFA? ›
While the CFA is the best designation to pursue in terms of investment knowledge, it certainly does not cover all of the aspects of financial planning. In very general terms, however, the CFA designation may help those in the corporate world more than those starting their own financial planning business.
What percent of financial advisors are CFA? ›
If you bend it as much as you can and say they are all in the US, then 3757 out of 223,400 (yes, the years are imprecise), you get about 1.7% of financial advisors in the US with the CFA designation. The number could be less, it could be more, but that's the rough math.
Do financial analysts need CFA? ›
Financial analysts do not need the CFA credential to work in the field, but employers may prefer individuals with certification. Candidates with a relevant degree alone can qualify for entry-level positions.
Is pursuing CFA worth it? ›
According to the CFA Institute, this credential "is the professional standard of choice for more than 31,000 investment firms worldwide."1 It can be especially helpful if you don't have an undergraduate degree in finance, economics, or accounting, and your goal is a job or career in the finance industry.
Is CFA harder than CFP? ›
While both the CFA and CFP exams are quite difficult, the CFA exam is known to be one of the most, if not the most, challenging certification exams in the financial industry. It consists of three 6-hour exams that must be completed and passed in sequential order.
Should I get both CFP and CFA? ›
For those who already hold the CFA® designation, earning CFP® certification makes you more attractive to employers and clients alike. Holding both designations demonstrates that you're committed to serving your clients, and that you offer added expertise and specialization in your profession.
How many CEOS have a CFA? ›
On the other hand, the CFA Institute reports that only 7 percent of all its graduates are working as chief executive officers of big corporations. The most popular career for CFAs is portfolio manager, with 22 percent of individuals working in this position being charterholders.
What is the average cost of a CFA? ›
The total CFA exam cost ranges from $3,220-$8,270 for all 3 levels. The total cost of all 3 CFA exams ranges from $3,220-$8,270, assuming 3 consecutive passes with no travel & accommodation costs. These are the 2024-2025 CFA exam fees breakdown by level: CFA Level 1: $1,340–$2,990.
Is a CFA prestigious? ›
Although the CFA designation is not required, the study and work requirements represent a high level of expertise. Holding the qualification indicates a high level of specialization to employers and potential clients.
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 harder than CPA? ›
CFA vs CPA Exam difficulty
Both are challenging and require gaining skills and knowledge in complex topics. However, the CPA Exam generally requires less studying - around 80 to 120 hours per section compared to 300 hours per section of the CFA Exam, and the CPA Exam also has a higher pass rate.
Should a financial advisor be certified? ›
Financial advisors can further establish their credibility by getting a certification. Certifications are not required but are encouraged by financial advisory firms. In addition to passing the certification exam, many of these certifications also require extensive coursework or work experience.
Can you give financial advice with CFA? ›
On the other hand, CFAs give advice to various institutions, such as banks, mutual funds, pension funds, insurance companies, and securities firms. They focus on stocks and market analysis, helping companies and institutions make good investment decisions. CFAs also put together portfolio allocations for individuals.
Who should get a CFA? ›
Pursuing a CFA can lead to better jobs and higher salaries. Particularly if you are entering a field like investment management or seeking to become an economist or financial advisor or planner, the CFA can be a definite boost.
Is CFA worth it for consulting? ›
Because CFA charterholders have mastered a curriculum that provides comprehensive investment expertise, many employers list the CFA designation as a preferred credential for consultant roles.
