CFA Institute

Written By
Paul Tracy
Updated August 5, 2020

What is the CFA Institute?

The CFA Institute issues the CFA designation. CFA stands for Chartered Financial Analyst. A CFA charter signifies a mastery of investment management principles and usually takes at least three years to obtain.

How Does the CFA Institute Work?

CFAs must have a bachelor's degree just to enroll in the program, and then they must pass  three six-hour tests (Level I, Level II, and Level III) 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.

The CFA program is a self-study program. Participants purchase a series of books and then take a test at a designated testing facility. The failure rate is notoriously high because the test is so rigorous and the amount of material covered is enormous.

Passing all three tests is just one element of obtaining the CFA charter. To 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 one’s own investments.

Why Does the CFA Institute Matter?

Obtaining the CFA charter isn't easy, and relatively few people have the designation. 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. 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.