The chartered financial analyst (CFA) is a certification for financial professionals demonstrating expertise in topics such as equity investments, financial statements and wealth planning. A famously hard-to-achieve credential, it carries clout in the financial services industry. But recently, fewer applicants are sitting for the CFA Level 1 exam. This may lead some professionals and investors to question whether this charter has maintained its value in today’s financial services industry. Here’s what to know about earning the CFA, the dropoff in applicants and the value it holds for practitioners and consumers.
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What Is a CFA?
The chartered financial analyst (CFA) is a professional certification illustrating expertise in various areas of financial analysis and investing. To earn this credential, applicants must pass three notoriously difficult exams. Additionally, they must complete qualified professional or work experience, submit letters of reference and submit an application.
CFAs may work as accountants, portfolio managers and equity research analysts, among other professions. The total cost of taking the three CFA exams ranges between $2,550 and $3,450. Additional fees may apply throughout the process.
Falling Numbers of CFA Applicants
The CFA Institute, which administers the CFA program, has seen the number of applicants taking the CFA Level 1 test drop over the past several years.
According to the Financial Times, in the year ending August 2019, about 160,900 candidates sat for the CFA’s Level 1 exam. After the COVID-19 pandemic upended test-taking plans, the number dropped to 73,688 the following year. In the year ending August 2021, 125,775 students took the exam. And about 93,000 students have taken the Level 1 test so far this fiscal year.
The decline traces its roots to the COVID-19 pandemic, which has disrupted study and test-taking plans on a global scale, Robert J. Langrick, senior head of the CFA program for CFA Insitute, told SmartAsset. “The pandemic has had an effect on our exam operations,” he said, citing test cancellations in Shanghai and Beijing. He also referenced individual applicant cancellations due to positive COVID tests and other pandemic-related challenges.
Financial professionals may also be eyeing the CFA’s famous level of difficulty, according to the FT article. Recently, the pass rate for the first test has fallen below 30% for several test-taking cohorts. The long-term average pass rate for that test is 42%.
The Value of the CFA
For financial professionals, becoming a CFA requires making a financial calculation: thousands of dollars and hundreds of study hours versus the financial and professional opportunities the CFA provides. So is it worth it? “It depends on who you are and what you want to get out of it,” Langrick says.
While future employers may eye a CFA credential with admiration, clients may not understand what it means. The CFA doesn’t have the same brand recognition as the certified financial planner (CFP) designation, which has fought for increasing relevance among clients and practitioners.
But Langrick says that the CFA charter shows that a professional has strong chops when it comes to investing strategies and concepts. Applicants often consider the CFA against an MBA, he says.
According to a CFA compensation study, the average total compensation for a portfolio manager with a CFA charter was $177,000.
Thanks to various factors, including the COVID-19 pandemic, the CFA has seen a dropoff in applicant demand. Professionals and consumers can familiarize themselves with the characteristics of this charter and what professionals who hold it bring to the table.
What to Consider When Choosing an Advisor
- Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Understanding the alphabet soup of letters that follow a financial professional’s name can sometimes be confusing. Learning the different financial certifications and what they mean can help you decide which type of financial advisor best suits your needs.
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