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To be a chartered financial analyst (CFA) is to have passed three rigorous, six-hour exams encompassing economics, ethics, money management and a number of other financial topics. Becoming a CFA charter holder requires an average 1,000 hours of study and four years of experience. According to the CFA Institute, which administers the program, less than one in five candidates receive the CFA designation. Financial professionals with a CFA must also follow a code of ethics and standards. Many financial advisors hold the CFA designation.
What Is a Chartered Financial Analyst?
A Chartered Financial Analyst is a highly trained investment professional who specializes in analyzing financial markets and managing investment portfolios. The designation is awarded by the CFA Institute and is widely regarded as one of the most respected credentials in the finance industry. To earn the CFA charter, candidates must pass three levels of exams, gain relevant work experience and commit to a strict code of ethics.
CFAs are trained to evaluate a wide range of investments, including stocks, bonds and alternative assets. They use financial modeling, economic analysis and company research to assess value and identify opportunities. This expertise allows them to make informed recommendations and develop strategies tailored to client goals.
A key responsibility of many CFAs is constructing and managing investment portfolios. They consider factors such as risk tolerance, time horizon and market conditions when allocating assets. By balancing these elements, CFAs aim to optimize returns while managing potential downside risk.
CFAs work in various roles across the financial industry, including asset management, investment banking, research analysis and financial advisory services. Their broad skill set makes them valuable in both institutional and individual client settings. As global markets continue to evolve, the demand for CFA charter-holders remains strong.
Who’s Eligible to Become a Chartered Financial Analyst?
The CFA Institute is a global organization seeking to promote a high level of financial literacy and knowledge in the investment and financial planning industries. As a result, a CFA certification is widely considered to be one of the most important designations among investment analysts and financial advisors.
To register for the CFA program, you must:
- Have a bachelor’s degree, be in the final year of completing a bachelor’s degree or have four years of full-time work experience
- Have an international travel passport
- Understand English
- Hold up against certain conduct criteria mandated by the CFA Institute, including past accusations, complaints or convictions
- Live in an eligible country
Of course, you also must pass all three levels of the CFA exam. The CFA Institute administers each level once a year in June, though Level I is also available to take in December. For reference, the CFA Institute recommends studying for at least 300 hours before each level.
What Does the CFA Exam Consist of?
Each level of the CFA exam is similar in that they all involve rigorous testing of ethics, investment tools, asset classes, portfolio management and wealth planning. However, all three levels deliberately focus on a different subset of relevant knowledge.
- Level I exam: This section places a major emphasis on general knowledge and comprehension of various financial and investing subjects. There are two three-hour sessions that include 120 multiple choice questions each.
- Level II exam: CFA candidates will delve into case studies that involve application and practical analysis. There is a morning session and an afternoon session, with 10 and 11 questions each.
- Level III exam: This focuses on a synthesis between knowledge and practicality. The morning session is headlined by 8-12 essay questions, while the afternoon session has another 11 case studies.
Once you complete the necessary requirements, you’ll become a member of the CFA Institute and receive your certification. Subsequently, you must pay annual dues and certify every year that you are adhering to the standards of the CFA Institute.
The CFA Institute releases pass rates for each level of the CFA exam. For June 2019, they go as follows:
- Level I: 41%
- Level II: 44%
- Level III: 56%
What Does a CFA Do?
Typically, CFA charter holders work in investment analysis roles at financial advisor firms, investment firms, insurance companies, banks and investment funds (like hedge funds). That said, you don’t have to be a CFA in order to be an investment analyst or investment professional. In fact, there are plenty of successful and knowledgeable investment analysts and financial advisors who aren’t CFAs.
Overall, the CFA designation signals a mastery of financial analytics, trends and markets. While you’ll usually see CFAs in finance-based roles, it’s not unlikly to also see CFAs in roles that have less to do with financial analysis.
Bottom Line
The CFA certification is time-consuming and difficult to obtain. Any CFA-certified financial planner or advisor will have a firm grasp on investment analysis, management and other skills. While not all financial advisors or investment professionals are CFAs, it’s among the highest standards a financial professional can meet, and it’s surefire way to signal to employers and clients alike that you’re serious about your work.
Investing Tips
- A financial advisor who holds the CFA designation can help you achieve your investment goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Investing is a great way to grow your assets and keep you on track for a comfortable retirement. Use SmartAsset’s investment calculator to see if you’re saving enough to reach your goals.
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