Why is everyone taking the CFA exam?
A. 64% B. Kill me now C. Do I even want to be a CFA?
▶ A record number of people signed up to take the CFA exam. Is it worth it? ▶ “It’s not a negative. It’s just nobody is asking for it”
If you have a young Wall Streeter in your life, be kind to her this summer. Many have just taken the first level of a three-part exam to become a chartered financial analyst, and the results are due beginning in late July. The exam is the ultimate test of how to put values on assets, from stocks and bonds to credit derivatives and distressed securities. But there’s one question that’s not on the test: Is becoming a CFA worth it?
The designation is cheaper than going for an MBA, which can take two years and cost upward of $100,000, but the CFA exam is far from easy. Candidates typically spend more than 300 hours studying for each of the test’s three levels and thousands of dollars on fees and materials. Four out of five people who start the process drop out. Typically, fewer than half of the candidates who sit for each level of the test end up passing.
Despite its difficulty, or perhaps because of it, the CFA is more popular than ever. This year a record 172,682 candidates from 183 countries registered to take the exam in June. That would be an 88 percent increase from the almost 92,000 people who took it in 2008. Global turnout for the CFA rose after the financial crisis, with young financiers looking to burnish their résumés as banks slashed jobs. The CFA has grown particularly popular in Asia, which now accounts for almost half of all test takers.
The Charlottesville, Va.-based CFA Institute, which administers the exam, says it’s tried to keep the test rigorous over the years to maintain its value.
For those who do end up passing, the reward can be a top job on Wall Street. The world’s biggest banks dominate a list of places where CFA charter holders are employed. JPMorgan Chase is at the top, with more than 1,500 on staff. Almost a quarter of all CFAs work as portfolio managers. About 16 percent take jobs as research analysts. Roughly 7 percent are executives at the chief level.
While there are plenty of uber-rich CFAs, including noted bond guru Bill Gross of Janus Capital Management, the odds of a big immediate payoff are pretty low. About 73 percent of job postings that specified compensation and included a reference to the CFA designation offered a salary below $100,000, according to research by recruiting company Phaidon International.
Six recruiters say a CFA designation can lead to a raise or help someone land a job, but it’s rarely seen as a musthave qualification. “It’s not a negative,” says Robin Judson, who runs her own investment recruiting firm in New York. “It’s just nobody is asking for it.”
The CFA does appear to have more value than other financial certifications. A study done by Investment-News and the consulting firm Moss Adams found that lead financial advisers with CFA credentials earned about 24 percent more than certified financial planners and 23 percent more than advisers who are certified public accountants.
Standard registration fees for each level of the CFA range from $825 to $860, which covers the curriculum, a study planner, and practice tests. The real cost is the time spent studying, says Steve Horan, managing director for credentialing at the CFA Institute. That commitment, he says, is evidence of a strong work ethic and a willingness to invest time and effort that speaks to employers. “It does have a mild signaling effect to me that says this one’s a hard worker and is disciplined,” says Adam Zoia, chief executive officer of financial-services recruiter Glocap Search. “I don’t read it as meaning that they are going to be a better investor.”
The bottom line The record 172,000 people who signed up to take the CFA exam last month would be an 88 percent increase from 2008.