So you want to earn a CFA? Pros and cons for advisors

Register now

In the financial industry, it's pretty easy to bump into someone who’s pursuing a chartered financial analyst certification. Sometimes they know what they’re in for and sometimes they don't. But, make no mistake, earning the CFA designation is a grueling process that can seriously benefit an advisor’s career — but only when the pros outweigh the cons.

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” that the CFA Institute believes is necessary for those in the investment profession. There are three requirements to become a CFA: Pass all three levels of the exam in succession, acquire 48 months of “acceptable professional work experience” and join the CFA Institute, which includes completing a professional conduct statement and becoming an affiliate of a local chapter.

The test for level I is given in December and June, while the exams for levels II and III are given only once a year in June. Candidates must pass each level before moving on to the next.

Unfortunately, the pass rates are grim. Between 2008 and 2017, more than 1 million candidates attempted the level I exam, but only 126,000 made it past all three levels.

The investment of time is crucial. The institute estimates the average candidate should expect to spend at least 300 hours preparing for each level.

Once you've considered the time required to pass the levels, look at the professional requirements needed. Before a candidate can become a CFA, they must have accrued four years of acceptable work experience. Fortunately, the CFA Institute's definition of acceptable experience is fairly broad, encompassing such areas as trading, economics and corporate finance. At least 50% of the work experience must be spent directly involved in the investment decision-making process or producing a work product that informs or adds value to that process. However, there are a number of candidates who enter the program and are not in fields where anything they do falls 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 designation because they do not have the required professional experience.

The pros: First, there is the educational benefit. Advisors learn a great deal and add a great credential to any resume. Then, there is the boost to a 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 and analytical skills necessary to do the job in question.

There also may be financial benefits. Advisors’ salaries may increase after they’ve become a CFA and they may surpass other applicants who don't have this designation when they compete 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.

There are a number of financial fields in which having the charter is a substantial plus. The obvious one is investment management. As the investment industry continues to become more competitive and more commoditized, 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 charter holders will benefit considerably, including:

  • Buy-side trader or 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 cons: The CFA charter is not a guaranteed path to riches and glory. Becoming a CFA is a huge investment in time — a minimum of 250 hours per year over three years. 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.

Then, there’s the cost. 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, advisors can expect to spend several thousand dollars each time you attempt the exams.

The charter is not a panacea 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 money into building your pedigree, you might choose to improve your soft skills, such as work ethic and political suaveness.

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 change as your career changes. A lost promotion in five years may make earning the designation more worthwhile.

CFAs Certified Trusted Advisors Career advancement Career planning RIAs Practice management Client strategies