Updated: Jan 22, 2020
The Chartered Financial Analyst (CFA®) designation is recognized pretty much as the top designation for investment management professionals.
There’s no doubt about the fact that this certification is a valuable one that can help your career and improve your knowledge base. But by how much? This article explores the time and cost trade-off and helps you calculate if the process of becoming a CFA® is worth the end result of being a CFA®.
Steps to Become a CFA®
It’s not easy to become a CFA® Charterholder. You need to take three really tough exams spaced a year apart, demonstrate related work experience, provide reference letters, and commit about $5K to the whole effort. And, from this English major whose skills lie far from high-level math ability and who would be hard-pressed to become a CFA®, you have to be really smart in math!
Steps from the CFA website:
1. Pass CFA Exams - CFA Program contains three levels of curriculum, each with its own exam. Passing the exam for all three levels is a requirement to obtain the CFA charter.
2. Achieve Qualified Work Experience - Complete work experience requirements before, during, or after participation in CFA Program. Your experience must be directly involved with the investment decision-making process or producing a work product that informs or adds value to that process.
3. Submit Reference Letters - In support of your membership application, you will need to provide 2-3 professional references. References will be asked to comment on your work experience and professional character.
4. Apply to Become a Charterholder - Apply to become a regular member of CFA Institute. Once your application is approved and you have joined CFA Institute, you will have earned the CFA charter.
Why It Could Be Worth It
A portion of high-paying financial services jobs require or prefer a CFA® Charterholder. Having the designation puts you in contention for these jobs that you wouldn’t have without CFA® after your name. As the Kaplan Schweser folks put it “the general consensus of most CFA® Charterholders is that it has paid off in terms of career, knowledge, satisfaction, and end results.” It’s definitely a designation that has high recognition even among non-financial people and especially among financial people. Anecdotally, whenever I personally see CFA® after a person’s name, I think, “Wow!”, and I’m more likely to listen to what they are writing in an article or saying in a podcast or teaching me Lynda (now LinkedIn Learning) video. That said, the hours, months, years and dollars it takes to earn the designation may not be worth having a random financial lady think you are smart.
Whether or not the CFA® increases your salary is hard to definitively determine. A number of sites including 300hours, Payscale.com, and AnalystPrep point to the likelihood (if not the certainty) that a CFA® will earn more. The latter article from AnalystPrep does an excellent analysis with detailed considerations. The problem in figuring this out for sure is that people who stay in the industry and gain experience generally are paid more, and having earned the CFA® could be a reason; however, just plain old years in the business could also cause the higher salaries.
It Might Not Be Worth It
The market value of designations is a bit iffy and hard to quantify accurately. For example, I’m a CFP® - Certified Financial Planner ™. The CFP® designation is well respected among financial professionals, but prospective and current clients seem to be utterly unimpressed and uninformed about its value. The fact that I’m a CFP® rarely seems to enter into their decision to hire me. The CFP® designation is expensive and time consuming to get and maintain, and you don’t technically need it to be a financial planner. I’m just not really sure it was really worth it for me to get that designation. I loved studying for it, getting it, and having the letters after my name, but I don’t know that it has really made a career difference or gotten me more business.
Another consideration for why the investment of time and money in a CFA® designation is the recent proliferation of those who hold a CFA® designation. It used to be rare, but enrollment and ultimate achievement are way up, so for all the work and cost and time, I don’t know that is worth it either anymore to embark on that quest with your own time and money. If you have a job that will pay for it and might even give you a bit of work-day time to study, that would be a game-changer and weight it more heavily on the benefit side of a cost-benefit analysis.
A CFA® Idea When You Are Job-Searching
Many financial services professionals are in the job market. One idea for you if you are trying to find a better job in the financial services field is to start the process to become a CFA®. In this case, you enroll and start studying (which means a non-refundable cost of $1000+). Then you can add a resume bullet and keywords in your resume and cover letter that truthfully state that you are a CFA® candidate. When the job database algorithms parse your resume, you have CFA® in there as a true attribute. I’m not suggesting to do this dishonestly – it would be definitely be worth starting to study and beginning the work toward earning that cert since you are in the financial field! – but once you get that job (assuming the CFA® designation is not actually required), you may find that you can abandon the process if you aren’t really interested in it, your new firm doesn’t require it, or the new company doesn’t provide tuition reimbursement.
Kathryn Hauer, a Certified Financial Planner™ with Wilson David Investment Advisors, adjunct professor at Aiken Technical College, and financial literacy educator wrote the "11-Step, DIY, Comprehensive Financial Plan Workbook" and "Financial Advice for Blue Collar America." Her latest book covers basic concepts of money including insurance and taxes, financial traps to avoid, how to pay for college and tech school, and the bright future ahead for blue collar careers. Learn more at her website.