If you’re interested in advancing your financial career, you might consider becoming a chartered financial analyst (CFA). But what exactly does it take to pursue this career path?
The core requirements of CFA certification
Let’s start with a description of the basics. The requirements to become a CFA are dictated by the CFA Institute, a professional organisation dedicated to supporting investment professionals.
They include:
Pass the CFA exam. The CFA exam itself unfolds on three different levels. You’ll need to study for the CFA exam dutifully if you want a chance to pass.
Attain the proper work experience. Fortunately, you can attain this qualified work experience at any point in the process, whether before or after the rest of the program.
Provide professional reference letters. You’ll need to submit two to three reference letters recommending you for CFA certification.
Apply to the CFA Institute. This requirement includes several sub-steps; for example, you’ll need to become an affiliate of a local chapter of the CFA Institute and provide a professional conduct statement.
Let’s explore each of these in more detail
The CFA exam
There are three distinct levels of the CFA exam, and you’ll need to pass each level in the correct order; for example, you’ll need to pass level I before moving onto level II. The test for level I is given twice a year, in December and in June. The tests for levels II and III are only given once a year, in June.
The pass rate for each level are roughly half; 43 percent of people passed the level I portion of the exam in June of 2018. At level II, pass rates were 45 percent. At level III, 56 percent of people passed.
Before taking on the exam, the CFA Institute recommends that a candidate should spend approximately 300 hours preparing. On average, candidates spend 318 hours preparing for each level of the exam.
Each level of the exam covers a wide range of different topics related to your career as an investment financial analyst. The structure of each level of the exam is public knowledge; for example, the first level of the exam includes questions related to:
- Ethical and Professional Standards
- Quantitative Methods
- Economics
- Financial Reporting and Analysis
- Corporate Finance
- Equity Investments
- Fixed Income
- Derivatives
- Alternative Investments
- Portfolio Management
However, the exact questions will vary, and the structure itself may change from year to year. Because this process can be confusing and complicated, it may be in your best interest to enlist the help of a professional study service.
CFA work experience
You’ll also need to prepare the proper work experience before you can finalise your certification as a CFA. This requirement isn’t particularly strict. You’ll need a total of 48 months of work experience in the field; this can include roles in a variety of areas, such as stock trading, economics, financial analytics, and corporate finance. However, at least half of your time in each position must allow you to be directly involved in the process of making investment decisions.
For some candidates, meeting this requirement can be tough. It may require you to seek new responsibilities in your current job, leave your current position, or work hard to get hired in an acceptable position.
Providing professional reference letters
Before you can apply to the CFA Institute, you’ll need to prepare several professional reference letters – the CFA Institute recommends 2 to 3. These should come from people who have worked directly with you, such as a boss or a mentor in the field. The requirements for these letters aren’t explicitly stated or described, but they should be concise, formal, and should showcase you in a positive light. Make sure you have a solid professional relationship with someone before asking them to write you a recommendation letter.
Applying to the CFA institute
Once you’ve met the other requirements, you’ll need to apply to become a member of the CFA Institute. After joining, you’ll be responsible for paying annual dues; these dues will be prorated if you’re joining the Institute for the first time. For more information on joining the CFA Institute, you’ll need to reach out to your local chapter of the organisation.
Preparing for your journey to become CFA
Becoming a CFA can help you boost your reputation, land a better job, and make more money in your career as a financial analyst. However, this journey isn’t for everyone. Preparing for the exam is difficult, time consuming, and it ends in failure half the time. CFA dues can be expensive, and you’ll need to dedicate at least 4 years of your life to getting the experience necessary to join. Think carefully before taking the next steps, and prepare yourself for the journey.
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