What is a Chartered Financial Analyst (CFA)?

The Chartered Financial Analyst (CFA) credential is like a membership in a very exclusive club…

Some clubs are very hard to get into. You may have to jump through hoops, pay some expenses, and complete some tasks. Once you get in, people know how much effort you put into it. Likewise, a CFA credential is hard to get - less than half the people in the program pass, and they spend an average of four years completing it, studying more than 300 hours for each of the three exams.

The Chartered Financial Analyst (CFA) designation is a professional credential for people in the investment management industry around the world. The CFA designation, issued by the nonprofit CFA Institute, is held by more than 167,000 professionals, known as CFA charterholders, as of April 2020.

To become a CFA charterholder, a CFA candidate must complete the three CFA exams - Level I, Level II, and Level III - as well as gain four years of relevant work experience. It isn’t easy: it takes an average of four years to complete all three CFA tests, in addition to the work experience. From 2010 to 2019, the average pass rate on CFA exams was only 44 percent.

Chartered Financial Analyst (CFA) charterholders work in the investment management industry - typically investing money, or analyzing or providing advice on potential investments. They may be money managers, also known as portfolio or fund managers, who make investment decisions for an individual or organization. They may be investment analysts, researching and checking the information used to make investment decisions. They may be financial advisors who assist customers with investing and managing their money and reaching their financial goals.

A CFA candidate becomes a charterholder by passing the CFA exams, completing the relevant work experience, and meeting other requirements.

To enroll for the first CFA exam, the Level I exam, you must either have a bachelor’s degree, be close to completing one, or have four years’ full-time professional experience, not necessarily in the investment management industry.

The CFA Institute offers the Level I exam in June and December; starting in 2021, it will expand to four times a year. The Level II and III exams are given only once a year, in June. It takes an average of over 1,000 hours of study to pass all three exams.

Once you register to take an exam, the CFA Institute allows you to attempt that exam up to two times. If you don’t pass on those attempts, you must re-register to take it again.

To gain the CFA designation, you must have at least 4,000 hours of relevant experience, completed in a minimum of 36 months. The CFA Institute requires that at least half of your work experience either has a direct connection to investment decision-making or contribute to that process.

You must apply to the CFA Institute and to your local CFA Society - there are more than 65 local societies in the United States. You must also submit two professional references - three, if none of your referrals are active members of your local CFA Society.

The CFA exams help establish that an investment professional has the required level of knowledge and skills to work competently and ethically. The exams cover the CFA Institute's Candidate Body of Knowledge (CBOK), 10 topic areas covering finance, economics, investment, and professional conduct. These are the 10 areas and about how much of each exam is devoted to each area:

| Ethical and professional standards | 15% | 10-15% | 10-15% | | Quantitative methods | 12% | 5-10% | 0% | | Economics | 10% | 5-10% | 5-15% | | Financial reporting and analysis | 20% | 15-20% | 0% | | Corporate finance | 7% | 5-15% | 0% | | Equity investments | 10% | 15-25% | 5-15% | | Fixed income | 10% | 10-20% | 10-20% | | Derivatives | 5% | 5-15% | 5-15% | | Alternative investments | 4% | 5-10% | 5-15% | | Portfolio management and wealth planning | 7% | 5-10% | 40-55% | | Total | 100% | 100% | 100% |

(Source: CFA Institute Reports)

Every year, the CFA Institute reviews the CBOK and makes necessary adjustments for the next year’s exams.

In 2023, the CFA Institute will offer exam level 1 February 14th-20th, May 16th-22nd, August 22nd-28th, and November 15th-21st.

Exam level 2 will be available May 23rd-27th, August 29th through September 2nd, and November 22nd-26th.

Exam level 3 dates will be February 21st-23rd, and August 29th through September 5th.

Whether you should get a CFA credential or a master’s in business administration (MBA) degree is a personal decision that depends on several factors, including your career goals and requirements from your current or prospective employer.

The CFA is often a professional requirement for senior-level positions in the investment-banking industry. If you’re seeking to advance a career in investment banking, the CFA credential may be a better option than an MBA.

The investment profession is evolving significantly, because of rapid technological advances and other factors. Fintech innovations are lowering the cost of investment advice, for instance. A CFA charterholder may need to supplement their knowledge of the information offered through the CFA process with other knowledge and skills.

Robinhood is not affiliated with the CFA Institute and does not endorse any professional designations.