How to Become a Chartered Financial Analyst (CFA)
| Liz Simmons Updated on June 29, 2022
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A chartered financial analyst (CFA) certification is a voluntary credential from the CFA Institute. This global organization promotes education, professionalism, and ethics in the investment industry. One of the most respected credentials in the field, the CFA charter indicates expert-level knowledge and experience in investment analysis.
CFA certification typically requires three difficult tests, a bachelor's degree, and at least three years of relevant professional experience.
Certification can improve a financial analyst's reputation and lead to better-paying career opportunities. CFA certification can be especially valuable for investment managers, buy-side traders, and sell-side traders. Financial advising, financial planning, and economics professionals can also benefit from this credential.
This guide explains how to become a CFA and explores CFA exam requirements.
Crunch the Data:
Why Get Certified as 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 certification.
- Better Career Prospects: CFAs may join the CFA Institute, which gives members access to networking and continuing education opportunities.
- Professional Credibility: Certification is the gold standard for professionals on Wall Street. Certificate-holders typically meet rigorous qualifications.
- Global Recognition: More than 167,000 investment professionals around the world hold CFA certification. The charter enjoys international esteem from universities and regulators. Earning a CFA certification opens doors to investment and financial planning careers in more than 160 countries.
- Real-World Expertise: The business world considers CFA certification a niche credential. CFA-certified professionals possess specific analytical skills, along with in-depth experience in economics, investment analysis, portfolio management, and financial reporting.
What Are CFA Certification Requirements?
CFA certification is a difficult process featuring strict education, experience, and exam requirements. These include three levels of tests.
To register for the Level I exam, candidates must meet one of the following CFA certification requirements:
- Hold a bachelor's degree
- Be an undergraduate student within 11 months of graduation
- Have a combined 4,000 hours of professional work experience and/or higher education acquired over at least three sequential years.
The CFA charter is a globally recognized certification that opens doors around the world. Individuals living in certain countries subject to U.S. sanctions cannot take the CFA exam.
Applicants can meet CFA certification requirements by earning a bachelor's degree (or equivalent) in any field. Candidates in the final year of their bachelor's program also qualify to take the CFA certification exam.
An aspiring CFA can substitute 4,000 hours of professional experience (or a combination of work experience and education) to meet the education requirement. The work experience used to meet the education requirement does not need to be investment-related.
CFA certification requires at least 4,000 hours of relevant professional experience. To qualify for financial analyst certification, the work must directly relate to investment decision-making or add value to the process.
Full-time, part-time, and remote work experiences before, during, and after the chartered financial analyst program qualify toward the 4,000-hour requirement. Potential roles that qualify for this requirement include financial advisor, financial planner, portfolio manager, or investment banker.
Candidates cannot substitute education for the professional experience requirement.
What Does the CFA Exam Cover?
The chartered financial analyst exam comprises three parts: Level I, Level II, and Level III. Test-takers must complete each section of this computer-based exam at qualifying testing centers. Candidates do not take all parts of the test on the same day, but they must complete them sequentially.
Level I features 180 multiple-choice questions and lasts 4.5 hours. Candidates complete the test over two 135-minute sessions with an optional break in between. The first session covers professional standards and ethics, financial reporting, economics, and quantitative methods. The second session explores fixed income, equity, derivatives, and portfolio management.
Level II consists of vignettes with 88 accompanying multiple-choice questions. It takes four hours and 24 minutes. Level II comprises two sessions that last two hours and 12 minutes each, with another optional break in between the two periods.
Level III features vignettes with accompanying multiple-choice and essay questions. It takes four hours and 24 minutes to complete. Like Level II, Level III contains two sessions split into two hours and 12 minutes each, with an optional break in the middle.
CFA Exam Structure
|Level I||180 multiple-choice questions||Two 135-minute sessions|
|Level II||Vignettes with 88 accompanying multiple-choice questions||Two sessions split into two hours and 12 minutes each|
|Level III||Vignettes with accompanying multiple-choice and essay questions||Two sessions split into two hours and 12 minutes each|
Scoring the Exam
Machines grade the exam's multiple-choice sections. Teams of CFA charter-holders grade the essay questions on the Level III exam using guidelines from the CFA Institute. Chartered financial analysts also double-check the grading for 10% of the multiple-choice questions on the other exam levels.
After grading the essays, the team of CFA professionals compares answers, re-grading questions if they disagree. At the end of this process, the CFA Institute calls a meeting and creates a minimum passing score (MPS) for each level of the exam using a specific methodology.
The CFA Institute does not make the MPS public, but research suggests a score of around 60-70%. After calculating the minimum passing score, the CFA Institute applies the MPS to each exam. The MPS changes every year. CFA test-takers do not receive numeric scores. All levels of the CFA exam receive pass or fail grades. Students pass if they score at or above the MPS.
Each participant receives a summary of their performance on each section of the exam. Candidates get their test results for levels I and II within 60 days. Level III test-takers receive their scores within 90 days.
What Are the CFA Exam Requirements?
The CFA Institute runs the CFA exam. Registration requires each candidate to hold a bachelor's degree or be enrolled in the last year of a bachelor's program. Applicants can also qualify by completing 4,000 hours of professional work experience or a combination of professional work experience and higher education.
To register, each individual must create an online account, pay the required fees, and schedule an exam at a Prometric testing center. Make sure to register for each exam about four months before the test date.
In 2022, CFA hopefuls can take Level I in February, May, August, and November; Level II in February, August, and November; and Level III in May and August.
Each candidate must hold an international travel passport, live in a participating country, and be able to take the tests in English to meet CFA exam requirements.
The CFA Institute does not ask applicants to submit documentation of their degrees or work experience when registering. It may require proof of education at any time before or after certification.
Paying for the Exam
A chartered financial analyst candidate must pay a one-time $450 CFA program enrollment fee when registering for the Level I exam. CFA exam registration fees cost $700 (early birds) or $1,000 (standard) for each exam level.
Rescheduling any part of the test within the exam window requires a $250 rescheduling fee. Applicants who fail and want to retake any part of the CFA exam must pay the same registration fees again.
How Can You Prepare for the CFA Exam?
The best way to increase your chances of passing the notoriously difficult CFA exam is to give yourself enough study time. The CFA Institute estimates that successful candidates spend about 300 hours studying for each level of the exam.
Top Tips on How to Become a CFA
- Take Practice Tests as Often as Possible
- Regularly practicing test questions is critical to understanding the material. Repeated attempts will reveal your strengths and weaknesses in each section.
- 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. Use this time wisely by taking the CFA exam early in your career. The older you get, the less free time you will have.
- Develop a Strategy
- The most successful test-takers know how they react to different kinds of questions in the heat of the moment. CFA candidates should even brush up on the subjects they know best.
- Join a Local CFA Chapter and Attend Meetings
- Most major cities maintain local CFA chapters. Many chapters host monthly meetings and provide a list of local job openings.
- Keep a Balanced Schedule
- Most people maintain full-time jobs while studying, making it important to find a regular outlet for relieving stress. Make sure to keep a consistent schedule for physical activity that will help you blow off steam while you're studying.
Practice Exams and Study Resources
Find a CFA Institute-approved exam prep provider here. These organizations follow the CFA Institute's standards and guidelines. Search by course format and exam level to find the right prep provider.
This website, run by charterholders, offers resources to help CFA candidates pass the CFA exam. Started in 2012 as a blog, 300 Hours provides study tips, mock exams, and forums for CFA candidates to ask questions.
This blog from Kaplan Schweser includes articles about how to pass the CFA exam. Topics include what to do if you fail, Exam Level I versus Level II, and sample questions.
Professional Insights on Being a Chartered Financial Analyst: Lou Haverty, CFA
EXPERT ADVICE: EXAM TIPS AND BEING A CHARTERED FINANCIAL ANALYST
Why did you decide to pursue a career as a 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, 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 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 had been better when I graduated, I might not have had the motivation to earn the CFA charter.
Did you earn a degree in accounting?
No. I earned a bachelor of science 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 it 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 one out of five 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 yourself until exam day. That means spending a few hours each night reading and taking practice questions.
What Is Needed to Maintain CFA Certification?
Chartered financial analysts must renew their membership yearly to maintain CFA certification. The CFA Institute recommends that each charterholder completes 20 hours of continuing education, including at least two hours of standards, regulations, and ethics each year.
Should You Get Multiple Certifications?
CFA certification is considered the gold standard for the investment analysis field. Many chartered financial analysts may not need to earn any other certifications. For one example of when multiple certifications can be useful, check out the following credential:
Certified Financial Planner: A CFP certification indicates skill in helping people with personal investments. This can be complementary to the CFA, which usually focuses on institutions with investments. Candidates who hold the CFA charter meet most coursework requirements for CFP certification.
Questions About Financial Analyst Certification
What does a chartered financial analyst do?Chartered financial analysts offer portfolio management and investment advice to organizations and individuals. Job titles for CFAs include investment banker, portfolio manager, financial analyst, and research analyst.
What are the CFA exam requirements?To register for the CFA exam, each candidate needs a bachelor's degree or must be in the last year of a bachelor's program. They can also qualify by meeting professional experience requirements. CFA exam requirements include an international travel passport and the ability to take the test in English.
How much does CFA certification cost?CFA certification costs vary depending on when you register. They usually do not exceed $5,000 total. Each applicant pays a one-time $450 fee when they sign up for the CFA program and pays for each test separately. Registering early qualifies candidates for a discount.
Is financial analyst certification better than an MBA?Both financial analyst certifications and MBAs can lead to well-paying careers. However, becoming a CFA costs much less money and does not take as long as it does to earn an MBA.
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