The current professional exam topics covered by Trial Exams include the Chartered Financial Analyst (CFA)
The Chartered Financial Analyst (CFA) designation is regarded by most to be the key certification for investment professionals, especially in the areas of research and portfolio management. It is, however, one of many designations used today. This can cause some confusion as investors and professionals alike puzzle out what each designation means and which is best. This article will take an in-depth look at the CFA designation. If you are a professional considering the CFA, we provide the information you need to begin weighing the costs and benefits of this decision.
Exam Preparation: CFA Level 1
The CFA designation is given to investment professionals who have successfully completed the requirements set by the globally recognized CFA Institute (formerly the Association for Investment Management and Research, or AIMR). To be eligible for the CFA designation, candidates must meet the following criteria:
1. Pass three rigorous, six-hour exams over several years.
2. Have 48 months of "acceptable professional work experience." Although the CFA institute allows a fairly broad interpretation here, the experience usually has to be financial in nature.
What Is the CFA Institute?
The CFA Institute is a global non-profit professional organization of more than 100,000 charterholders, portfolio managers and other financial professionals in 135 countries. Its stated mission is to promote and develop a high level of educational, ethical and professional standards in the investment industry.
The CFA Exams
Most people considering the CFA designation tend to worry about one thing – the exams. The exams are divided into three levels. Level 1 is written twice per year in June and December. It tests the candidates' knowledge of investment theory, ethics, financial accounting and portfolio management.
CFA Pass Rates
This course of study was formed in 1962 and is constantly updated to ensure that the curriculum meets the demands of the global investment industry. This graduate-level curriculum generally entails six months of study prior to each exam date. Pass rates vary from year to year, but since the first exam was given in 1963, the overall rate is 44% and the 10-year average pass rate sits at 39% as of 2010. Moreover, fewer than 20% of the candidates pass all three tests in the first three attempts, so it is important for candidates not to get discouraged.
CFA charterholders often seek careers at institutional investment firms (such as hedge funds or mutual funds), broker-dealers, insurance companies, pension funds, banks and universities. Some go on to work for governments in the areas of regulation and public policy. By the time the designation is earned, the charterholder will have the generally acquired four years of work experience, which also helps prepare them for a higher level financial profession.
What Do CFA Designations Mean to Investors?
When an investor is dealing with a CFA charterholder, he or she can make some basic assumptions. In generally, a CFA is committed to becoming better at his or her craft, whether it is security analysis, portfolio management, business reporting or some other service. In addition, the individual has agreed to maintain a higher level of integrity by following CFA Institute's Code of Ethics and Standards of Professional Conduct.
In other words, investment professionals with a CFA designation have put in a significant amount of time and effort to better their skills and knowledge on behalf of their clients. This will come as a great comfort to most investors – especially if they are depending primarily on professional advice in managing their financial affairs.
Limitations of the CFA
Although there is a certain mastery required by the CFA exams when it comes to financial concepts and markets, having the CFA designation does not automatically make one a better stock picker or more successful investor. Stock picking is a practical skill that must be developed through experience. While the knowledge gained through studying for the CFA exam won't hurt, the certification alone isn't going to make a market maven out of every charterholder.
The CFA designation does distinguish the charterholder from other practitioners in the eyes of professionals and investors. The successful CFA charterholder has proved his or her ability to withstand rigorous testing, shown a capacity for learning and made a serious commitment to conduct his or her professional life according to high ethical standards. It's not magic, but it may be the next best thing.