So You Want to Take the CFA Exam: The Pros and Cons

Written By
Paul Tracy
Updated January 16, 2021

Chances are you've seen this curious designation on a few business cards: CFA. It stands for Chartered Financial Analyst, and it's an indication that the professional has traveled down one of the longest and hardest credential-earning roads there is. In a nutshell, a CFA charter signifies a mastery of investment management principles and takes at least three years to obtain. It is one of the highest awards bestowed in the investment industry and is an internationally recognized and respected designation that opens doors and raises pay. Sounds pretty good, right? Well, before you sign yourself up to take the rsi, faaccountingt consider the pros and cons of making your own way down that credential-earning road.

Here are some of the advantages to enrolling in the CFA program.

A CFA Shows You Know Your Stuff
Obtaining the CFA charter isn't easy (learn more about this in the "Cons" section), and relatively few people have the CFA designation--under 100,000 as of this writing. CFAs must have a bachelor's degree just to enroll in the program, and then they must pass a series of three six-hour tests that require a comprehensive understanding of accounting, economics, and portfolio management, as well as successful demonstration of a high level of proficiency in the valuation and analysis of both equity and fixed-income securities. Ethical standards and principles are also a major part of the program.

A CFA Could Accelerate Your Career
Because the CFA is so difficult to obtain and is, as a result, a relatively rare designation, CFAs are in demand and usually end up working for a broad range of employers, from mutual fund firms to hedge funds to investment banks to brokerage houses to boutique money managers. Having the charter is often a huge leg up in these circles.

CFAs are Connected
Being in "the club" means more than hob-knobbing with investment professionals in your town. The CFA is a truly global designation that opens doors to around the world, because the program teaches fundamentals and investment principles that are relevant around the world.

You Don't Have to Go to Class
The CFA program is a self-study program, so the only time you'll ever find yourself in a class is because you enrolled in an independent review course or a tutoring program. You simply have the books shipped to you and then you show up for the test. And because the CFA designation is often regarded as equivalent to an MBA, the cost is much lower than going to B-school.

The CFA program, as you may realize by now, is a challenge. Here are some things to consider.

Say Goodbye to Your Memorial Day Weekends (and most of your other weekends)
The CFA coursework is generally considered "master's level" and typically requires 250 hours of study time per level (that's 10-15 hours a week for 18 weeks). You can take the Level I exam in either early June or in December, but the Level II and Level III tests are only given in early June each year. This means that while everybody else is celebrating the advent of summer over that three-day Memorial Day weekend, you're inside cramming for the exam.

Statistically Speaking, You'll Have to Retake at Least One Test
The failure rate for the Level I exam is a notorious 66%. Levels II and III are about 50% depending on the year. And if you fail one year, not only will you have to start studying all over again, you'll probably have to buy more books instead of using all of the new ones--because the test (and the book list) changes every year.

Credentials Don't Guarantee the Job
As with any credential, the CFA charter is no guarantee that you're qualified for every job you apply for, nor does it guarantee that the chartered investment advisor you hire will be everything you ever dreamed of.

Passing All Three Levels Doesn't Mean You Get the Charter
Passing all three tests is just one element of obtaining the CFA charter. To actually get the charter, candidates also have to be sponsored for membership in the CFA Institute and they have to have four years of "qualifying" work experience in evaluating and applying financial, economic, or statistical data involving securities or other investments, or producing work that adds value to the process. Summer, part-time, and internship positions do not qualify, nor does managing your own investments--though you may be qualified to do that after you've obtained your CFA.

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