What is a Chartered Financial Analyst (CFA)?

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Definition:

The Chartered Financial Analyst (CFA) designation is an internationally recognized certification for investment-management professionals, indicating they’ve met requirements for financial knowledge and application of ethical and professional standards.

🤔 Understanding CFAs

The Chartered Financial Analyst (CFA) designation is an official certification for investment-management professionals like portfolio managers, investment bankers, and securities analysts. It’s an internationally recognized, prestigious credential among investment professionals, indicating they’ve met requirements for financial knowledge and application of ethical and professional standards. To gain CFA certification, which is administered by the nonprofit CFA Institute, candidates must pass three levels of exams as well as have four years of relevant professional experience. The process demands rigorous training and study; it requires at least three years to complete the CFA program - an average of more than 300 hours of study per level - and less than half of CFA candidates pass.

Example

A Chartered Financial Analyst (CFA) certification is an official credential attesting that the holder has met standards of high-quality work, academic rigor, and ethical behavior in the investment-management field. It’s analogous to credentials in other professional trades, such as the Certified Public Accountant designation in accounting. The holder is known as a CFA charterholder, and can attach the credential to their name professionally - e.g., “John Smith, CFA.” Achieving the CFA designation can help a current professional looking to advance their career in investment management, or a finance student looking to start a career in that industry.

Takeaway

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.

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What is a Chartered Financial Analyst (CFA)?

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.

What does a Chartered Financial Analyst do?

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.

How do you become a CFA charterholder?

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

Pass the CFA Level I, Level II, and Level III exams

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.

Complete relevant work experience

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.

Other requirements

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.

What is on the CFA exams?

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:

Topic AreaLevel ILevel IILevel III

| 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.

When are the CFA exam dates?

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.

Is the CFA credential better than an MBA?

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.

What are the limitations of the CFA charter?

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.

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Sign up for Robinhood and get stock on us.Certain limitations apply

New customers need to sign up, get approved, and link their bank account. The cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at rbnhd.co/freestock. Securities trading is offered through Robinhood Financial LLC.

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This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Check out Robinhood Financial’s Fee Schedule for details.

Brokerage services are offered through Robinhood Financial LLC, (RHF) a registered broker dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (RHS) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (RHC) (NMLS ID: 1702840). Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. The Robinhood spending account is offered through Robinhood Money, LLC (RHY) (NMLS ID: 1990968), a licensed money transmitter. A list of our licenses has more information. The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard®. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC is not a member of FINRA and accounts are not FDIC insured or protected by SIPC. RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

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