Should You Get the CFA?

 

By Ann Logue

It's a credential-happy world out there, and financial analysis is no safe haven. Buy side or sell side, if you're doing investment management, securities research, or analysis, you'll be thinking about becoming a Chartered Financial Analyst (CFA). Why submit to the rigorous certification process? Because CFAs can become CEOs, principals, chief investment officers, and portfolio managers. Here's what you need to know.

 

 

To Do

To get a CFA, you'll have to:

	pass three grueling six-hour exams;
	work in financial analysis for at least three years (this is a fairly broad category, financial reporters can qualify);
	join both the Association for Investment Management and Research (AIMR) and one of its 90 local societies.

 

 

Why Get It?

"The CFA demonstrates a level of commitment to the business," says C. Beth Cotner, chief investment officer for the Large-Cap Growth Equities division at Putnam Investments in Boston.

	If you are trying to get into money management and/or security analysis, sitting for the CFA exams will help make you attractive to potential employers.
	At a minimum, familiarity with the program gives you something to discuss in interviews and shows you have done some research into the industry.
	Helps you stand out in a pile of resumes as being committed to financial analysis as a disciple, not as someone interested primarily in a way to get rich quick.
	It can also make switching careers easier.

Conrad Herrmann, senior vice president, portfolio manager, and director of the Equity Group at Franklin Advisers in San Mateo, California, says, "If someone is coming in from industry, the CFA provides a platform from which to catapult themselves into the business. And it shows a level of commitment to the career change."

 

 

Who Employs CFAs

Of AIMR's 41,000 members worldwide (60,000 more are enrolled in the program), 60 percent work for a mutual fund company, an investment management firm, or an investment bank. The largest employer of CFAs is Merrill Lynch, and 22 percent of AIMR's members are portfolio managers.

 

 

The Tests

The tests are not easy. One quick way to find out if you can go ahead and sign up, or need to brush up your economic and accounting skills, is to take AIMR's excellent CFA Candidate Self Assessment Test (in PDF format).  Successful candidates must pass three successive levels of exams, given only once a year.  According to AIMR, students study on average 250 hours to prepare for each six-hour exam. In 1999, 64 percent passed the Level I exams, 54 percent passed the Level II exams, and 59 percent passed the Level III exams.  Remember, you have three years to take the first exam after you register. You then have seven years to complete the testing process and get the experience you need to become a CFA.

 

 

What's Covered

The subject areas include ethics and professional standards, economics, accounting, quantitative and statistical methods, portfolio management, and valuation and investment theory. Equity, fixed-income, and alternative investments such as real estate and venture capital are covered, and a global perspective is emphasized (almost 40 percent of those taking the exams work outside of North America).  Check out AIMR's Candidate Body of Knowledge for all the topics covered.

 

 

CFA or MBA?

"You learn as much or more in the CFA program as in an MBA program because the exams are focused on the kinds of things you need to know to be a stock investor," says Cotner. In fact, many people pursue the CFA rather than an MBA. On the other hand, the MBA is a broader managerial credential that you can carry from industry to industry.

Herrmann agrees with Cotner on the value of the CFA program. "It's one of the metrics we look at," he said. "It's not required, but we strongly encourage it. It's a way of making sure that all of our analysts are on the same page and that they can discuss things in a common language."

 

However, the two credentials aren't mutually exclusive. According to AIMR, 46 percent of people sitting for the CFA exams also have an MBA.

 

 

Getting It Paid For

Franklin Advisers pays for review courses and gives bonuses to people who earn their CFA certificate, a practice that is not uncommon in the financial services industry. If you're a student with proper faculty sponsorship who wants to start the CFA program, AIMR offers a scholarship program for full-time students.

 

 

But

If you are not convinced that financial analysis is the career for you, you might want to channel your time and energy elsewhere. While you gain a lot of excellent knowledge from studying for and passing the CFA exam, few people outside of the securities business will give you credit for it.

Want to know more about the industry?

 

Click on the link below for a file containing more informaiton on various industry consultants and advisors

 

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