Becoming a chartered financial analyst (CFA) can benefit individuals looking to advance their careers in finance. Finance professionals can pursue a variety of certifications, but CFA certification proves one of the most cost-effective options. The CFA charter designation represents one of the highest levels of recognition financial professionals can earn in the field of investment management.

CFA certification bolsters any financial professional’s credentials and opens the door to new job opportunities. A CFA designation demonstrates a finance professional’s work ethic, analytical skills, and grounding in ethics.

Many individuals choose the CFA route because of its relative affordability. Earning an MBA can cost upward of $150,000, depending on the program, but CFA certification costs an average of just $7,000. The certification also qualifies finance professionals to become members of the CFA Institute, a global organization with more than 135,000 members.

Why Become a Chartered Financial Analyst?

CFAs enjoy high earning potential. Most chartered financial analysts earn higher annual salaries than other finance professionals. Read on for more details on what a CFA does and why professionals seek CFA certification.

  • Better Career Prospects: CFAs may join the CFA Institute, which gives members access to countless networking and continuing education opportunities.
  • Professional Credibility: CFA certification represents the new gold standard for professionals on Wall Street. The esteemed classification mandates rigorous qualifications.
  • Globally Recognized: More than 135,000 investment professionals around the world boast CFA certification. The charter enjoys international esteem from universities and regulators. Earning a CFA charter certification opens doors to investment and financial planning careers in more than 30 countries.
  • Real World Expertise: Under the broad business world umbrella, earning a CFA charter is considered entering a niche. CFA-certified professionals boast specific analytical skills and possess in-depth experience in economics, investment analysis, portfolio management, quantitative methodology, and financial reports.

Understanding the Chartered Financial Analyst Exam

Before taking the CFA examination, candidates should have a general understanding of the test's contents. The detailed exam tests professionals’ investment skills and knowledge in various areas of financial planning. Read on to further your understanding of the CFA exam.

Frequently Asked Questions About the Chartered Financial Analyst Exam

  • What Does a Financial Analyst Do? Chartered financial analysts are some of the most highly esteemed financial professionals in the business world. Earning CFA certification provides preparation for elevated careers in competitive fields, such as investment planning and banking, portfolio and stock management, corporate mergers and acquisitions, and business development. Financial professionals can obtain these careers without CFA certification, but more and more employers are seeking professionals with this resume-boosting credential.
  • When Is the CFA Administered? The chartered financial analyst exam comprises three parts. Test-takers can take the first phase, Level I, in June or December. They must take levels II and III, however, in June. Levels II and III take place on the same day, while Level I stands separate.
  • Where Can I Take the CFA Exam? The CFA examination is available internationally in more than 250 cities. Certification candidates can take Level I in any of 170 cities.
  • How Do You Take the CFA Exam? To become a member of the CFA institute, candidates must pass all three sections of the CFA examination within 48 months. Level I consists of two three-hour sessions within the same day. Levels II and III are split into a series of “mini-cases.” Level II consists exclusively of multiple-choice questions, while Level III includes both multiple-choice and essay questions.
  • How Often Can I Take the CFA Exam? Each year, only 43% of CFA charter-seekers pass even the Level I examination, on average. Candidates may take the exam as many times as they need to within the allotted time frame.

Fulfilling the CFA Exam Requirements

Prior to taking the CFA charter examination, professionals must undergo specific training and obtain proper work experience. CFA candidates must complete three levels of minimum requirements before qualifying to sit for the exam. These requirements pertain to educational and professional experience.

Educational Requirements

Before taking Level I of the CFA examination, individuals must complete or be in their final year of undergraduate study in business, finance, or economics. To continue on to Level II of the examination, they must have graduated with their bachelor’s in that same field.

 

Professional Requirements

More experienced professionals seeking their CFA certification may qualify through work experience. Individuals with at least four years of relevant professional experience may qualify for the CFA exam. The work experience must relate to business, but it does not have to be in finance or investment specifically.

 

Exam Composition and Timing

The CFA charter examination features three parts. Level I has two sections, completed over two three-hour sessions in the same afternoon. This exam level comprises 240 multiple-choice questions in total (120 per section).

Levels II and III of the CFA exam take place on the same day, after candidates have been scored for Level I. Level II also consists of 120 questions, but they divide into 20 “mini-cases.” To solve these cases, test-takers must read a given scenario and answer the questions that follow. Level III includes case-based scenarios in addition to a number of essay questions.

The chart below offers an overview of what you may encounter in Level I of the examination.

Level I CFA Exam Structure

Morning Session (3 Hours)

120 multiple-choice questions, covering all topics

Questions on the Level I examination follow a multiple-choice format. These problems may be formatted as questions, statements, or tables. Test-takers choose between three possible answers (A, B, or C).

A sample question: “An analyst suspects that a particular company’s U.S. GAAP financial statements may require adjustment because the company uses take-or-pay contracts. The most likely effect of the appropriate adjustments would be to increase the company’s:

  • A. return on assets
  • B. debt-to-equity ratio
  • C. interest coverage ratio

Afternoon Session (3 Hours)

120 multiple-choice questions, covering all topics

Like the morning session, the afternoon session of the Level I examination consists entirely of multiple-choice problems formatted as questions, statements, or charts.

 

Registration and Fees for the CFA Exam

Once candidates qualify for the exam, they may register for a particular test date. The CFA Institute recommends that test-takers dedicate at least 300 hours of study to exam preparation, in addition to prerequisite education and field experience.

Registering for the CFA Exam

  • How to Register - The CFA Institute mandates that all candidates for CFA certification hold an international passport to sit for the exam. They must also complete a professional conduct statement form to verify that they know of and comply with the code of professional conduct. Prospective CFA Institute members must live in a participating country.
  • When to Register - Prospective CFA candidates may register for their Level I examination any time before the June or December testing dates. Individuals may not register for Level II or III examinations until they have passed Level I. Candidates may complete the latter two exam sections any time within 48 months of passing Level I.

Paying for the CFA Exam

Earning a CFA charter represents one of the most affordable certification options for finance professionals, but candidates still face expenses. To register early, individuals pay $650 for registration plus a $450 enrollment fee for each level of the examination. Latecomers pay up to $1,380 for registration, plus additional fees for each consecutive level of testing.


Scoring the Chartered Financial Analyst Exam

The CFA Institute does not reveal its specific grading criteria, but test-takers should understand what they can about how the institute will evaluate their exams. Knowing how scorers approach CFA exams may help candidates provide the answers scorers are looking for.

  • What Score Do You Need to Pass the CFA Exam? The CFA Board of Governors does not establish required points to pass until the exams are graded. After grading, the Board sets a minimum passing score for each section of the exam. This score varies greatly from year to year.
  • How Does CFA Exam Scoring Work? Test-takers receive results indicating either “pass” or “did not pass.” Individuals do not know how many points they scored in each section, but they do receive indication of whether they scored below 50%, between 50-70%, or above 70%.
  • Who Scores the CFA Exam? A machine and CFA professionals score the exam. Test-takers complete the multiple-choice sections with a scantron, which a computer grades. Professionals with CFA charters score essay questions.
  • When Are CFA Exam Scores Released? CFA exam results go out to test-takers within 60 days of completing their Level I or Level II examination. Level III CFA charter candidates receive their results within 90 days.

After the Exam: Maintaining Your CFA Certification

Once they have passed all three levels of the CFA charter examination, professionals must continue their education. The CFA Institute requires all members to dedicate themselves to continued study to advance their individual careers and the future of the institute as a whole.

 

Preparing for the CFA Exam

The CFA Institute recommends that all CFA charter seekers complete at least 300 hours of intensive study to prepare for the exam. Even for those with an undergraduate degree and several years of work experience in the field, this exam is considered especially grueling. Studying is the best defense against one of the toughest tests in a financial professional’s career.

Top 10 Tips for Exam Preparation

  1. Strategically Plan Your Study Topics: Level I represents the most commonly failed exam phase. CFA candidates benefit from focusing their studies on the more heavily weighted exam sections. For example, questions in financial reporting and analysis carry 20% of the exam’s weight, while corporate finance demands only 8% of the test’s weight.
  2. Focus on Practice Problems: Experts advise that focusing on practice problems over reading material may help candidates better prepare for the testing environment. Test-takers should worry less about how many questions they get wrong and concentrate on understanding why they answered incorrectly in the first place.
  3. Follow the 50/10 Rule: Using a timer, set aside 50 minutes of uninterrupted study per hour. If you find yourself distracted at any time in those 50 minutes, restart your timer. When you make it to 50 minutes of pure study, reward yourself with a 10-minute break.
  4. Take Complete Practice Tests: Taking full practice exams, in addition to completing individual practice problems, strengthens your endurance for exam day. Completing these full days of “exams” lessens your chances of burnout, as well.
  5. Study in Small Increments: While the 50/10 rule works well when you have large chunks of available time, you may also benefit from short bursts of study whenever possible.
  6. Minimize Distractions: By minimizing distractions in your study space, you can maximize productivity. Consider taking alone time with your work, silencing your phone, and shutting out background noise.
  7. Plan Carefully: To complete the 300 hours of study time recommended by the CFA Institute, plan to give yourself at least six months to study before taking the test.
  8. Make the Most of Prep Courses and Materials: The CFA Institute supplies prospective test-takers with test preparation materials. For a fee, these study aids are available online, in print, or as audio guides.
  9. Pay Attention to Details: Each of the 10 testing subjects proves critical at all levels of the CFA charter examination. Some sections are weighted more heavily than others, but candidates should demonstrate competency in every tested area.
  10. Develop a Strategy: The most successful test-takers know how they react to different kinds of questions in the heat of the moment. Experts recommend spending more time brushing up on the subjects in which you traditionally excel. Studies show that test-takers make the most careless errors in their most comfortable subjects.

 

CFA Practice Exams and Study Resources

In preparing for the CFA examination, practice tests and study questions often prove the best study materials.

  • CFA Institute: The CFA Institute offers a comprehensive study guide to aspiring CFA candidates. Online resources include exam-readiness guides, practice tests, and other assorted study materials.
  • Wiley Efficient Learning: The Wiley Efficient Learning team offers an array of online resources for individuals looking to boost their test-taking abilities before the CFA charter examination.
  • Kaplan: Kaplan offers test prep in just about every area of upper-level studies. Individuals studying for their CFA charter exam may find study materials and full practice tests through Kaplan online.
  • Analyst Prep: Developed by existing CFA chartholders, Analyst Prep provides study tools, including readiness checklists and practice tests, to prospective test-takers.
  • Allen Resources: Allen works to help individuals study as efficiently as possible. Study materials available on Allen Resources focus on streamlining exam prep through reading materials, practice tests, and online audio banks.

Expert Advice: Exam Tips and Being a Chartered Financial Analyst

Lou Haverty, CFA, has 16 years of experience in various areas of commercial banking, including middle-market capital markets and portfolio management. He is the founder of Financial Analyst Insider, a resource for aspiring finance and accounting professionals to advance their careers.

Why did you decide to pursue a career as a chartered financial analyst (CFA)?

I graduated college during the dot-com crash. The year before I graduated, the job market was really strong and most students were receiving multiple job offers with signing bonuses. The following year, when I graduated, the market turned, job offers were drying up, and some companies even rescinded their offers.

It was very clear to me that I needed to figure out how to stand out in a very crowded job market. After talking with other professionals in the industry, I realized that the chartered financial analyst designation was most often referenced as being the most prestigious, but also the most difficult, financial designation to earn.

The challenging nature of the job market was what gave me the motivation to get through all three levels of the CFA exam. The designation has been extremely valuable for me in terms of getting more difficult interviews as well as being more effective as a financial analyst. The irony is that if the job market was better when I graduated, I may not have had the motivation to earn the CFA charter.

Did you earn a degree in accounting?

No, I earned a BS in business administration with a major in finance. I came close to getting a minor in accounting, but I didn’t complete the necessary classes.

At the time, I made the decision to major in finance because I knew I wanted to be a financial analyst. However, what I didn’t fully appreciate was that successful financial analysts really needed a very strong understanding of accounting fundamentals in order to be effective.

I should have taken more accounting in college; the CFA exam was very heavily weighted toward accounting material. Particularly with the material on the Level II exam. So by making it through the CFA exam, I ended up with a very strong accounting background even though I didn’t get it in school.

How much time do you spend on continuing education, either as a requirement for your profession or for your own personal growth in the field?

I try to attend investment conferences a few times each year. It really comes down to how intense my work schedule happens to be. The conferences are really great opportunities to network with other industry professionals as well as keep up to date with the most relevant trends and topics.

The CFA Institute currently has optional continuing education credits that can be self-reported. However right now, those continuing education credits are not mandatory like what is required for CPAs. It’s always possible that could change in the future.

What are some essential skills someone working as a CFA charterholder must have?

The most important skill is understanding how to spend your time in the most valuable ways. When you are analyzing the financials for a company, there are so many different sources of information available. You need to understand how to prioritize your time in a way where you are focusing only on the most important information and filtering out the noise.

What advice would you give to students who are considering pursuing a career as a financial analyst with a CFA charter?

Working as a financial analyst on either the buy side or sell side of the industry is very competitive. You need to find as many ways to stand out from the crowd as possible. Pursuing the CFA charter is one of the best ways to stand out and let employers know you have a strong understanding of the fundamentals as well as a disciplined work ethic.

Just make sure you prepare yourself for a major commitment if you want to pass all three levels of the exam. Only roughly 1 out of 5 people make it through all three levels of the exam. The secret to passing the exam is starting your studying early (6-8 months before your exam date) and pacing your studying until exam day. That means spending a few hours each night reading and taking practice questions.

5 tips for students preparing to take their CFA exam

  1. Take practice tests as often as possible – Regularly practicing test questions as much as possible is critical to understanding the material. By regularly using practice questions, you will know what sections are your strengths and which sections are your weaknesses. You can be more efficient by focusing your time on rereading sections that are your weaker areas.
  2. Take the exam early in your career – You will never have as much free time to study for an exam as when you first graduate college. Make use of that time by taking the CFA exam early in your career. The older you get, the less and less free time you will have.
  3. Don’t give up – Many people fail a level of the CFA exam and still go on to earn the CFA charter. The key is to not give up. By taking the same exam again, you will already know most of the material and your studying will be more efficient.
  4. Join a local CFA chapter and attend meetings – There are local CFA chapters in most major cities around the country. They typically have monthly meetings and often maintain a list of job openings in that city. Go to the meetings. It’s a great networking opportunity and a great source of financial analyst jobs.
  5. Keep a balanced schedule - Most people are working in a full-time job while studying, so you need to find a regular outlet for relieving stress. Make sure you keep a regular gym schedule or another physical activity that will help you blow off steam while you're studying.

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