The Relevance Of The CFA Today
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You might be at that crossroad in life, where you have recently heard that a friend of yours has registered for the CFA exams. Now, you have started pondering over whether you should also be pursuing the CFA designation. I have to admit, I am at the same point now. I did some research on this topic and it is a pleasure to share it with you.
Necessary CFA Commitment
You have already heard stories of the huge commitment that the CFA charter requires you to make. How much commitment, you ask?
- Six months of preparation time for each level
- 3 levels in total
- Over 800 hours of study time required collectively for the 3 exams
- Four years of relevant work experience (this is the part that many people will fail to highlight. You might have passed all 3 exams but if you are not working in a relevant career, you will not be granted the CFA title and designation)
- Adherence to the CFA code of ethics and standards of professional conduct.
As someone who has seen a lot of people engaged in the struggle to get the CFA designation, let me warn you right now; it is not a walk in the park, like some would have you to believe. There are a lot of sacrifices that need to be made including having a lack of a social and family life for at least 4 months before every exam. Many candidates find it extremely difficult to take the time out from their busy schedules to study regularly for these exams. You might be too engrossed in your career or maybe you recently have become a parent and there is a shift in your responsibilities.
Whatever the case, CFA exams do require you to be consistent in your studies and complete a minimum of 300 hours of studying for each attempt. So, if you don’t think that you can commit so much time, then there is no point of registering for the exams only to cram the course load in the last few weeks.
I have been there and let me tell you, it didn’t work for me, despite having a very strong academic background.
Time for the million-dollar question …… Is the CFA charter worth your time and is it still relevant today?
Situations where the CFA designation is of no value for you
Let me start by saying that CFA is not relevant for everyone. What do I mean by this?
I am sharing a list below of the most common instances in which CFA designation does not add much value. In fact, you might simply be wasting your precious time studying for it, when you can better utilize it doing something else:
- Don’t take it simply as a personal challenge: In my own social circle, I have seen numerous people take the exam purely as a personal challenge. There is even one close friend of mine, who is a marketer by profession, who took the level 1 exams just out of the social pressure that all his other friends at the time were also appearing for it. Later, I asked him if he was looking to switch his career to finance. He replied in the negative and said that he was happy in his existing career and just wanted to challenge himself; if his friends could do it, so could he.
- The title alone is not useful: If you are working for an organization where the CFA is not a requirement for a promotion, then probably you shouldn’t go for it. Instead, do some other credential that is highly valued by your organization. Out of personal experience over the years, I have come to a simple conclusion. If your existing or future boss is a CFA, then your designation and efforts will surely be recognized; if not, then you should probably give it a second thought.
- CFA program can be costly: There are registration, exam, and study material costs involved. If you are fortunate enough to pass all 3 levels in the first attempt, then you will be spending at least $3,000 including the exam fees and study material costs. Due to the lower passing rates, chances are that you won’t pass all three levels on your first attempt either, just like me. My total investment to date has been over $6,000 and I still have the last level remaining. Approximately, 4 out of every 5 entrants into the program have left it midway. Therefore, I will urge you not to pursue the CFA if you aren’t a hundred percent sure of the reason why you want to in the first place.
- The CFA title alone won’t land you the dream investment job these days: Times are tough and with everything going on in the world including Covid-19, a CFA alone will not be enough. Don’t get me wrong, it will give you a good advantage over others, but if you lack the necessary interviewing skills, you will find it hard to break into a front office investment job. Instead of investing such huge amounts of time on attaining the CFA charter, you can instead use it to develop your professional connections and increase your networking in the industry that you want to enter in.
Why the CFA designation is still relevant today
All things considered, if you can commit the time, money, and efforts required to go through all the three CFA exams, it will definitely open more doors for you.
Let me list down the situations and circumstances in which CFA will boost your career opportunities:
- Global recognition: Afterall, it is one of the most recognized professional qualifications in finance in the world. They don’t call it “the toughest exams on wall street” for no reason. It will offer you greater career mobility. For instance, if you are planning to move to Asia or anywhere in the world, for that matter, a candidate with a CFA charter will be preferred over someone who doesn’t have one.
- Working in the relevant industry: The CFA qualification can be highly useful as a career enhancer if you are already in a finance role, or if you want to switch to another role in the financial sector. The industries that will open to you after attaining your CFA charter are:
- Asset Management: Portfolio management, private banking, fund management, financial advisory, etc.
- Equity Research: Buy-side and sell-side research.
- Treasury and Risk Management: Credit Risk, strategic risk, etc.
- Investment Banking
- Financial services consulting
- Corporate finance
- It commands a higher salary and compensation package: There was a study done to compare the different salaries that CFA vs non-CFA professionals are getting on average across the various relevant industries.
As you can see in the chart above, professionals with a CFA charter have done much better and have a higher average salary across all industries. It is no doubt a good return on investment, given that you can make a huge time commitment to passing all three levels.
Ultimately, I would suggest that if you are looking to start your career in the finance industry or are looking for career growth in a relevant industry, CFA is your best bet. Yes, it will take time, but it will equip you with graduate-level knowledge of finance. Obtaining a CFA charter is a sign of your solid financial knowledge and credentials. Your employers will be impressed, and you will have higher chances of a promotion.
However, before registering for the exams, understand and inform yourself of the sacrifices you will need to make. Determine the importance of the CFA charter for your career aspirations. For instance, a CFA charter for a lawyer is just a complimentary qualification. It might help broaden his professional expertise in financial services, but it is not a crucial requirement of his job.
References for further reading
I wish you success with your decision and maybe exams! You could finally be ending up working for one of The 10 largest Swiss Banks according to their Balance Sheet totals.