Top 3 Reasons To Become a CFA

If you’re interested in a career in finance, you have a lot of options for financial certifications that can boost your career path. However, many of these certifications are expensive and may be specific to the United States. If you’re looking for a cost-effective certification that will give you global recognition and a deep understanding of finance, you may consider becoming a CFA. We have outlined the top 3 reasons you should consider the certified financial analyst credential below.

 

1. Promising Career Path

When you complete the CFA program, you become a CFA Institute member, which is a global network of over 135,000 investment professionals. The CFA charter is recognized by regulators, universities, and certification programs in at least 30 countries. That’s a pretty impressive club to join when it comes to networking. You’ll gain unmatched career resources and relationships, as well as access to jobs around the world that require a CFA certification.

With your unique skills, you can qualify for a variety of investment-related jobs. The most popular destination for CFA charterholders is portfolio manager, but there are lots of other positions such as research analyst, consultant, risk manager, corporate financial analyst, and even chief executive!

2. Boost Your Salary

Since the CFA program is one of the most respected designations in the financial field, the salary is quite impressive. There are a number of factors that can determine your possible salary including experience, education, position, size of employer, and location.

After one to four years of experience as a CFA, you can expect to earn a median salary of approximately $68,383. That number goes up to $87,732 after five to nine years, according to PayScale. Professionals with more than 20 years of experience are paid a median salary of approximately $155,100. (Note that these are the median salaries and they do not consider other factors.)

Your salary could be higher or lower depending on what job title you have with your CFA certification. Financial analyst is one of the lower paying CFA positions with a salary range of $43,218 to $78,374. Chief Financial Officers, on the other hand, make much more and can expect a salary in the range of $67,786 to $217,242.

There are many positions that fall in the middle of these two positions’ salaries, such as investment analysts. Also, many CFA charter-holders are compensated with bonuses and incentive pay on top of their attractive salaries. Even with the other factors like location and size of the company, the salary of a CFA is the top reason for many to go after this prestigious title.

 

3. The Gold Standard

The CFA charter is considered the “gold standard” of Wall Street qualifications due to its rigor. If you work hard to get your CFA, you prove to everyone that you have expertise in investment management and financial analysis.

Compared to other programs in the business world, like the MBA, the CFA charter specializes in niche areas of business and is much less broad. By earning a CFA title, you gain analytical skills and expertise in quantitative methods, economics, financial reporting, investments analysis, and portfolio management. This set of skills and specialized knowledge makes you a very valuable employee and will definitely serve you well throughout your finance career.

 

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Most Commonly Asked CFA Exam Questions with Mike Carmody

We get a lot of great CFA exam questions and want to provide you all with the best possible answers. To do so, we spoke to a true CFA expert, one of the brilliant minds from AdaptPrep, a leader in the CFA exam review space. Mike Carmody is a CFA charterholder and Fellow in the Society of Actuaries. Over the past two decades, Mike has helped prepare thousands of candidates for actuarial and CFA exams through study guides and live and online seminars.

 

Given how daunting the CFA exam is, how can one plan ahead before they start studying?

 

With most major goals in life, you need to start with the end in mind. For candidates studying for a CFA exam, the “end” is passing the exam. You need to make a detailed plan, starting with that end goal. To do so, I would:

  • Build a plan that incorporates all the activities you need to pass, such as reading the material, watching video lessons, and working practice problems. It’s important you make a daily schedule, beginning with the first day you will start studying and ending on the exam date. Adjust it for known activities, like vacations or busy work weeks. [See our CFA Exam Schedule to remember all the important dates]
  • Be realistic in your plan. If you have a full time job, don’t assume you can study 8 hours every day. That just won’t happen. Also, leave some cushion in the schedule for unexpected events. You don’t know when they will occur or what will be the cause, but you know something will come up that impedes your study process. You need the cushion in the schedule so you won’t fall too far behind.
  • Then you need to stick to the schedule. You can’t allow yourself to skip days here and there. Eventually the days will turn into weeks, and you won’t be ready on the exam day.

 

Is it worth it to become a CFA?

 

Before you start the process of taking the CFA examinations, you need to do a thorough assessment of your career goals and whether or not passing the exam is essential to your future success. You will spend many hours studying, and there is a real chance of failure. You need to know the CFA Charter is worth the effort.

In the past, a college degree helped differentiate you in the job market. Now those degrees are a dime a dozen. It’s difficult for employers to know how much you learned in college, because academic standards across colleges varies tremendously.

So you need something that is objective and recognized to set you apart. A CFA designation meets that criteria. The exams have rigorous passing standards that are recognized around the world. The designation proves you have the ability to digest a massive amount of material on varied topics, which is critical in many financial roles.

The Charterholder designation won’t guarantee your dream job, but it will help separate you from other applicants. You need something to give you an edge in competitive job markets.

 

What is the ideal study schedule for someone who is working while preparing to take the CFA exam?

 

The ideal study schedule is unique for each person. It depends on your familiarity with the topics tested and your ability to perform well on exams. You certainly don’t want to study too little, but you also don’t want to study too much.

It’s probably best to study over a three to six month period. If you study more than six months, then it’s hard to retain what you learned at the beginning. If you study less than three, then it’s really like cramming for a huge exam, which seldom turns out well. You should also spend more hours in the last month compared to the first month. That is when you are bringing everything together for the exam day.

Here are some other study tips:

  • If you are not familiar with some of the topics, then you may want to pre-study those before the six month schedule begins. That will allow you to keep the pace when you read through the curriculum.
  • You have more going on in your life than just studying for the exam. Many hours will be dedicated to work and family time. So you must somehow fit quality study time into the schedule.
  • For most people, the best times to study are early in the morning, late in the evening, and on the weekends. That means you will likely have to give up some fun activities during those times, but at least it is for only a season.

 

What accounts for the low pass rates for Level 1 (when compared to Level 2 and 3)? Is there any trend upward or is it going to hover around the 43% rate?

 

Many people take the Level I exam just to try it out. Unfortunately, that’s not an effective way to pass the Level I exam. There’s no real commitment to put in the time and effort necessary to prepare for the actual exam. Some candidates probably assume it will be as easy as their college exams—that’s just not the case.

The pass rate for Level II is not much different than Level I. Level II is a more difficult exam than Level I, and many of the candidates just aren’t prepared. Level III pass rates are higher, but still pretty close to 50%. But the competition for Level III is stiffer, so that more than offsets the higher pass rate.

The CFA Institute wants to maintain the value in the designation. One way to do this is keeping the pass rates low. They’ve been pretty stable for the past decade, and I expect they will continue to stay in this range. [There are minor adjustments you may want to make when preparing for Level 1, Level 2 and Level 3]

 

What is the typical career path for a CFA?

 

I don’t think there is a “typical” career path for a Charterholder. The portion of the career spent studying for the exams is very small relative to the entire career. But, you don’t stop learning after you obtain the designation. The financial industry is constantly evolving, and you must keep pace to stay relevant.

As you progress through your career, you will likely migrate into various areas. That’s a big benefit of the CFA Charterholder designation. It is valued in many financial functions, so it provides credibility for you as you move into different areas. [Learn how much CFA’s can make with our CFA Salary Breakdown]

 

What are some unique study tips for CFA exam candidates?

 

  1. Many candidates spend too much time studying the material, and too little time studying the exam. You have to do both. Make sure you understand how they ask the questions on the exam. That will dictate how you need to learn the material.
  2. Most of the exam questions test very specific concepts. They are not too involved, because you have time constraints (90 seconds per question on Level I). Don’t overcomplicate the questions.
  3. Don’t try to master all the material. You will run out of time. You don’t have to know everything to pass the exam.

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Let’s Examine the CFA Scoring System

Examining the CFA scoring systemYou finished taking your first level of the CFA exam, now what? You’re probably have tons of questions about how the exam is scored and when you’ll know your results. These are all valid questions and frustratingly complicated to find direct answers.

Your CFA exam result will either be a pass or did not pass. Seems simple enough, but what determines a not passing score and who’s calling the shots? Let’s check out what goes on behind the scenes and resolve any confusion you may have about how your CFA exam will be graded.

Availability of Your Results

For CFA Levels 1 and 2, your results will be available within 60 days of your exam date. CFA Level 3 results are released within 90 days of your exam date. Once you get your results (assuming you passed) you are allowed to register for the next level of the exam.

If you did not pass, don’t be too hard on yourself because technically, you’re in the majority. In 2016, the pass rates for Levels 1 and 2 were below 50% and Level 3 was 54%. You will receive additional information with your “did not pass” results that highlight your performance relative to all other candidates. I suggest you use this to help guide your studies for when to retake the exam. Checkout my blog post on how to recover from a CFA Exam failure.

Who’s Grading the CFA Exam?

Most of the CFA exam is in multiple choice format, which means they are machine graded. But don’t worry, the graders will manually score 5-10% of the multiple choice tests in order to ensure that the machine is in check.

Early on in the grading process, there will be a reevaluation of the multiple choice questions depending on the results and complaints logged during the exam. If the CFA Institute comes to the conclusion that a question was unfairly unclear, the points go to you. This ensures you don’t get screwed over when the CFA Institute makes a mistake in the way a question was phrased.

The Level 3 exam includes essay questions which cannot be graded by a machine. Instead, essays will be graded in a 2 week period in Charlottesville, VA by a whole camp of graders. These graders are the best of the best and come from academic and professional fields. If you think becoming a CFA is hard, these graders are the elite that make up 15% of the people that are accepted into this role. Those 50% pass rates aren’t as scary in comparison.

The graders form into teams of 3 or 4 and score one question or a question part that relates to the group’s speciality area. There is a whole process with junior graders and senior graders that check each other’s work to maintain consistent quality control. After all the essays have been graded, the middle 50% is graded again to double check the borderline cases. Graders see only the essay content they are given. They will not know your name, test center, or even how you performed on other questions—giving you the most unbiased score possible.

What is the Minimum Passing Score for the CFA Exam?

Passing the CFA ExamTo pass any of the CFA Exam Levels, you need to match or beat the Minimum Passing Score (MPS). Great! Now, what is that score? Unfortunately, the MPS is not public knowledge nor a straightforward number for you to aspire towards. Even though the MPS is never known externally, chances are it has a maximum around 70%.

After each exam administration, the CFA Institute Board of Governors sets the MPS for each level. They approach the scoring system in this manner to ensure fairness to candidates across administrations as the difficulty of each exam is taken into account when setting the MPS. Once the MPS is set, the CFA Institute generates the results of the candidates who took the exam to determine who passes and who doesn’t.

Why Ethics Can Decide Whether you Pass or Fail

If your results are borderline, graders will go back and check out how you did in the Ethics section. If you performed strongly, your borderline score becomes a passing grade. If you failed the Ethics section, your borderline score turns into a fail.

This “Ethics Adjustment” was instituted by the Board of Governors to place emphasis on ethics. This started in 1996 and has become a factor in the pass/fail decision for those scores that are borderline. This can be either a negative or positive impact for you, so make sure you give Ethics the love it deserves and know it very well so you can have that extra boost if needed.

Dealing with the Uncertainty Factor

You’re probably not feeling too reassured by now, especially knowing that the MPS isn’t public knowledge. And as number people, it can be hard to swallow such uncertainty when we know how much is at stake. The only way to deal with this is to be as prepared as you can. Make sure your ethics are solid as they can help tip the balance in your favor and be sure to choose the right CFA prep course to maximize your study efficiency. Know your learning style, and arm yourself with the best tools to allow yourself the best chance to pass.

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What Are the Differences Between the CFA Exam Levels?

To become a CFA agent, you must pass Levels 1, 2, and 3 of the Chartered Financial Analyst Exam. You will be tested on a range of topics that are relevant to the coveted position. But what exactly are the differences in terms of structure and material between the different exam levels?

CFA Level 1

The first CFA exam you must take is 6 hours long and is broken up into two three hours sessions–one in the morning and one in the afternoon. During each session, you must answer 120 questions, which leads to a total of 240 questions. That brings you to an average of 1.5 minutes to answer each question. These multiple choice questions are freestanding, meaning they are not dependent on each other.

This level focuses on basic concepts of tools, ethical and professional standards, investment valuation, and portfolio management. The ethics are a big part of this level and the remainder of the CFA exam (Levels 1, 2, and 3). You will have to know the code of ethics, professional standards, and the Global Investment Performance Standards (GIPS) to be able to answer the many questions this section. Depending on how you perform on all other topics, your score on ethics could decide whether you pass or fail.

A lot of Level 1 will test you on financial reporting and analysis. Again, you want to build a solid foundation in this area during your studies to ensure you will do well on the subsequent levels. You will be asked to interpret the three financial statements (balance sheet, income statement, and cash flow), and understand the ratios and other complex concepts like revenue recognition, inventory analysis, long-term assets, and taxes.

In addition to ethics and financial reporting, Level 1 will cover a wide spectrum of topics, including alternative investments, derivatives, fixed income, equity investments, portfolio management, corporate finance, and quantitative methods. Some topics may require proportionally more time to study than others. However, it is important to not only memorize the information, but also to possess a deep understanding of concepts in order to succeed later in the exam. That’s why students who supplement their study with an additional test bank or video lectures tend to fare better than those who who do the bare minimum.

CFA Level 2

While also being made up of multiple choice questions, Level 2 is structured differently than Level 1. Questions are organized into groups of six called “item sets.” Each item set will be have a mini case statement followed by the accompanying six questions. This is tricky, as the questions are dependent on each other, meaning if you get one wrong, chances are you get all 6 wrong. There will be a total of 20 item sets separated by the two sessions—ten for the morning and ten for the afternoon.

Level 2 of the CFA exam focuses on the application and analysis of concepts learned in Level 1. This means there will be questions regarding asset valuation, equity, and fixed income. So if you studied well enough for Level 1, this next level will have you prove your knowledge through application.

Financial reporting and analysis is a major part of Level 2. The important concepts are accounting for inventories, accounting for long-lived assets, accounting for leases, inter-corporate investments, accounting for acquisitions, variable interest entities (VIEs), and financial reporting quality. You will have to know the process and principles thoroughly in order to use their application correctly.

You will be faced with concepts in corporate finance in many questions. You will have to know key concepts such as capital budgeting, capital structure, dividend and repurchase policy issues, corporate governance, and mergers and acquisitions.

The CFA Level 2 exam is a little trickier than Level 1 since you are asked to apply concepts, rather than just understand them. So, it’s critical that you spend time practicing and taking CFA mock exams, while reviewing your weaker areas throughout your preparation. Wiley provides 3 full mock exams that are widely considered to be the best, while Bloomberg has 8 full mock exams, more than any other test prep company.

CFA Level 3

This level is only offered in June and is set up differently than the previous levels. You still have morning and afternoon test sessions, but the types of questions will be different. Your morning session will include 10-15 essay type questions. These questions may give you a situation where you must produce your own recommendation or solution. The afternoon session will consist of 10 item sets, like the question format of Level 2.

Level 3 focuses on portfolio management and wealth planning, making up half the points of the entire level. You will have to face portfolio management concepts in both morning and afternoon sessions such as behavioral finance, risk management, and individual and institutional wealth.

The number of concepts that can be tested are limited but important. One highly tested concept is the Investment Policy Statement and its components. Economics, which was tested on in both Level 1 and 2, is included under portfolio management in this level. Other important concepts are managing portfolios of institutional investors, asset allocation, risk management applications and evaluating portfolio performance.

The Level 3 exam is probably the toughest out of all three levels since many of the questions are posed in essay format. The key to success is to practice as many essay type questions as possible and master topics specifically related to portfolio management, which is at the core of this level. I recommend getting a study guide for Level 3 specifically, since the format is so different from both sections 1 and 2.

How to Pass CFA Level 1How to Pass CFA Level 2How to Pass CFA Level 3

Now that you know more about the three different levels of the CFA exam, you should begin to create a solid plan for your test preparation. Creating an honest study schedule and arming yourself with a superior test prep course are your best possible moves to successfully passing each level on your first try. Minimizing the stress and anxiety in your preparation really starts with a confident decision in your test prep course.

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How Much Does it Cost to Get a CFA

Sure, you know the many benefits that come from being a CFA, but do you know the exact cost associated with getting to that point? Well, we may not be able to pin down an exact cost, but we can come pretty close. There are a lot of intangibles that could affect the overall price of the CFA journey, but we can outline the basics for you.

Before we dive into the rudimentary numbers, you can expect the cost of becoming a CFA to be around $5,500. This is a mid-level estimate, so let’s see exactly what YOU are going to pay.

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CFA Exam Application Costs

Let’s start at the beginning. So, you’re working in a finance job, see some of your peers climbing the ladder a little quicker, and want to beef up your resume and standing at your company. The best way to do so is to get a financial certification, which often means that you’re going to need to study for, take, and pass the CPA or CFA—these are the two most common designations, but there are plenty more.

Being a Chartered Financial Analyst holds a little more weight than having your CPA—people could argue about this, but the numbers don’t lie—for many financial institutions. Though the test is harder, the arduous process brings you a ton of respect. It also tends to cost a little more than the CPA, but it’s worth it.

The first payment for the CFA exam is a one-time enrollment fee of $450. So, if you pass or if you fail to complete one of the three levels, you’re still paying the same amount. For those of you reading with pen and paper ready to calculate the total cost, this is the first of many expenditures.

CFA Exam Registration Costs

That whole one-time fee thing, that’s done now. When you register for Level 1, Level 2, or Level 3, you’re going to pay a scheduling fee for each of the individual exams. The costs for each level are the same, but how much you’re paying depends on when you actually register.

Early Registration: $650

Regular Registration: $930

Late Registration: $1,380

As you can see, it behooves you to register as early as possible, as the cost more than doubles if you don’t do so before the late registration deadline. So, let’s aim for the middle with regard to your potential timeliness and say that you’re going to pay $930 per section. That’s $2,790 for all three levels, bringing the total at this point in the process to $3,240. You’re thinking “Okay, nice, that’s not too terrible!” However, you’re forgetting that you need to study for this exam.

CFA Exam Review Course Costs

You need to study for the CFA exam, unless you’re some type of savant. Seriously though, no one passes this exam without putting in HOURS AND HOURS of studying for each level. CFA exam review courses come in all shapes and sizes, but the range tends to be as follows:

Level 1 Courses: $400-$1,600

Level 2 Courses: $400-$1,500

Level 3 Courses: $300-$1,350

Once again, we are going to aim for a middle-of-the-road course, which would put you at roughly $900 per level. So, not to do the simple math for you, but let’s do it anyway: that’s $2,700. To this point, you’re looking at $5,940.

If you’ve paid attention while reading, you can see that the stated “total” cost can vary quite a bit. If you get your act together and register early, you can save almost $1,000, or more than double that compared to the late registration cost. Review courses are pretty all over the place, price-wise, so you could pay a lot more or a lot less.

Basically, you could end up paying as little as $3,500 or as much as $8,500…if you live close to the testing centers and pass the first time around.

Potential Extra Costs

Let’s get back to that original “middle” number of $5,940. This number can increase significantly if you’re not near a licensed testing center. You would have to factor in airfare, hotel costs, and a number of other necessary expenditures (food, water, cab fare) if you’re traveling to take the exam.

Another big cost that may be incurred is the repeat exam fee. You’re going to have to pay all over again for each level, but not for the initial enrollment fee, as this is a one-time cost. So, it may be worth it to pay more for a really thorough review course and take a little more time studying to avoid the retake process, which can be $650-$4,140 depending on how many exams you fail and when you’re able to register.

It’s not cheap to become a CFA, but it’s certainly worth it in the long run. You’re investing in yourself and your career if you’re taking this exam, so be sure to put in the time and effort to make it worth it.

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CFA vs CPA

CFA vs CPA, which one is better? The Certified Public Accountant (CPA) and Chartered Financial Analyst (CFA) designations are two of the most sought-after credentials in the financial field.

Many finance professionals choose to pursue these qualifications because they want to improve their career options, get promoted, or make more money.

Each career path has distinct differences in educational requirements, responsibilities, and opportunities. The best way to choose which certification to pursue is to understand how they are different.

CFA and CPA Differences

CFA is the professional credential offered by the CFA Institute to investment and finance professionals. The CFA is recognized worldwide and is the equivalent of a master’s degree in finance with minors in economics, accounting, statistical analysis or portfolio management. For those who are interested in a career as an equity analyst, fund manager, asset management, or hedge fund manager, the CFA is an excellent choice.

CPA, on the other hand, is the title held by accountants in the United States who have passed the Uniform Certified Public Accountant Exam and have met additional state education and experience requirements for membership.

Originally a designation for public accountants, the CPA is now highly relevant for non-public accountants, tax accountants, and finance professionals as well. CPAs also have legislative rights to sign certain tax forms and audit reports, which gives them additional ethical and professional responsibility. Each individual state’s laws govern the different functions a CPA may perform.

For both designations, candidates must meet certain educational requirements in addition to passing the exams; however, to become a full-fledged CFA you must also have 4 years of qualified investment experience.

CPA versus CFA Exams

The CPA Exam

There are four parts to the CPA Exam. The exam is uniform throughout the US, meaning that the content and structure is the same in every state.

There are specific windows in which candidates can schedule the CPA exam. Each window is two months long, and there are a total of four exam windows throughout the year: Jan/Feb, Apr/May, Jul/Aug, Oct/Nov. As of 2012, the individual parts and content are as follows:

  1. Business Environment and Concepts
  2. Financial Accounting and Reporting
  3. Audit and Attestation
  4. Regulation

Pass rates for the exam are typically 50% or slightly lower, and the exam is only offered in English. In 2014, cumulative pass rates for the four parts of the CPA exam were 46.35%, 55.46%, 47.60%, and 49.41%.

The completely computerized exam consists of multiple-choice questions, task-based simulations (case studies), and written communications. Testing centers in Japan, Brazil and four Middle Eastern countries make it possible for candidates outside of the US to sit for the CPA exam as well.

The CFA Exam

Compared to the CPA exam, the format for the CFA is much less flexible. Three levels of the exam must be passed sequentially, and the CFA institute recommends that candidates begin to prepare at least six months in advance (at least 300 hours of study) for each of the three levels of the exam.

The CFA exam is offered only on specific dates. You cannot schedule this test at your convenience, as candidates all over the world take the exam on the same day. The CFA Level I exam is offered twice each year, in June and December, but Levels II and III are offered only once a year in June. Unlike the CPA exam, the CFA is a pencil and paper test, rather than computer-based.

In 2016, 43% of exam-takers passed the Level I exam (June), 46% passed the Level II exam (June), and 54% passed the Level III exam (June).

CPA vs CFA Salary

CPAs earn anywhere between $40,000 and $120,000 or more, whereas CFA salaries typically fall between $70,000 and $150,000 or more.

Overall, the CPA is the more widely recognized, safer, and more traditional path for those interested in a career in finance or accounting. By contrast, the CFA is probably a better option for those pursuing careers as financial advisers, investment banking analysts, portfolio managers, private bankers, research analysts, and traders.

In choosing a career path, you should determine what interests you most about finance and whether you are a risk-taker or more traditional. The CFA has a lower entry barrier, but takes much longer to complete (it takes the average candidate 4 years to pass all three levels of the exam and obtain the credential). Becoming a qualified CPA is a more flexible process that can be accomplished within a much shorter time frame. Both certifications are valuable and worth the time and money invested if you are planning for a successful career in the financial industry.

If you ultimately decide that becoming a CFA is the right path for you, then you need to prepare yourself as best as possible. One of the first steps in your preparation should be choosing a test prep that will lead you to success!

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FRM vs CFA

There are many opportunities if you are interested in building a career in the world of finance. The FRM and and the CFA are two top certifications in the financial industry that are internationally recognized.

Attaining these rigorous certifications can improve your chances of rising to the top of your field, but which qualification is best for you?

To help you decide, we have summarized the differences between these two certifications and the main reasons for pursuing them below.

CFA

The Chartered Financial Analyst (CFA) credential is the professional qualification offered by the CFA Institute for investment and finance professionals. A CFA is recognized worldwide and is comparable to holding a master’s degree in finance with minors in economics, accounting, statistical analysis, or portfolio management. For more information about preparing for the exam, see our comparison of the Best CFA Study Materials.

Some of the main requirements for becoming a CFA charter holder include completing a university degree (or equivalent), having four years of professional work experience, agreeing to follow the CFA Institute’s Code of Ethics and Standards of Professional Conduct, passing all three levels of the CFA exam, becoming a member of the CFA Institute, and applying for membership in a local CFA society. Here are more details concerning CFA requirements.

If you are interested in a career as an equity analyst, fund manager, asset management, or hedge fund manager, the CFA is an excellent choice.

FRM

The Financial Risk Manager (FRM) designation is an international professional certification offered by the Global Association of Risk Professionals. To achieve the FRM designation, you must complete a challenging, two-part, practice-oriented examination that covers the major topics in financial risk management. You must also demonstrate two years of relevant professional work experience. This designation is not as broad as the CFA and is most useful for you if you focus on risk management in the financial industry.

See our comparison of the best FRM exam study materials.

CFA vs FRM Exams

The CFA Exam covers a broader range of financial topics than the FRM. These include ethical and professional standards, quantitative methods, economics, financial reporting and analysis, equity investments, and fixed income. For more detail on how the different topics are weighted for this exam, click here.

You must complete each level of the CFA exam before you can move on to the next. The CFA Institute recommends preparing for each exam at least 6 months in advance and studying for at least 300 hours for each level. It takes the average candidate 4 years to obtain the credential.

The CFA exam is only offered once a year in June (except the Level I exam, which is offered twice a year, in June and December). The exam consists of two three-hour sessions, one in the morning, the other in the afternoon. All candidates take the exam on the same day. The CFA Institute offers the exam at test centers in many locations around the world.

The FRM Exam is different in that it focuses on the topic of risk management in various areas of the financial industry. Both parts of the FRM Exam are pencil and paper multiple-choice exams. Offered in English only, this exam can only be taken on two days a year (in May and November.)

Each part of the FRM exam is four hours in length. You can choose to sit for one or both parts of the exam on the same day, however, if they fail Part I in the morning session, Part II of the exam (taken in the afternoon) will not be graded. Part I contains 100 multiple choice questions, and Part II contains 80 multiple choice questions.

FRM vs CFA SALARY

The median annual salary for a CFA with one to four years of industry experience is approximately $68,383. In general, CFAs can expect to earn between $65,000 and $150,000 or more a year.

In comparison, the average salary for those with FRM certification is approximately $86,000 a year.

Note that salaries will vary significantly according to type of employer, location, industry, and professional experience.

The financial services industry is an extensive field and a number of different qualifications and certifications can help you rise through the ranks to reach the top of the profession. Additional certifications will take time, energy and money to attain, but may very well be worth it if they give you a competitive edge in the job market.

If you ultimately decide that becoming a CFA is the right path for you, then you need to prepare yourself as best as possible. One of the first steps in your preparation should be choosing a test prep that will lead you to success!

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How to Pass CFA Level 1

You’ve decided you are ready to take on the challenge of the CFA exam and become a Chartered Financial Analyst (CFA). Make sure you have thought this through because it’s going to be a tough couple years. Even though only 20% of the people who take Level I make it all the way to the end and earn their CFA license, there is no secret to passing the exam.

You will need an organized and disciplined approach to conquer this beast. I’m here to help you through it, starting with Level I. Trust me, you don’t want to just dive in, as you want to have an idea of your overall studying strategy.

Start Studying Earl

You have about 300 hours of studying ahead of your for Level I, so I suggest starting 5 to 6 months before your exam date. There is a lot of material—an understatement if there ever was one—so it is important to pace yourself. This will help prevent you from burning out before exam day arrives. I also strongly recommend you use a CFA test prep course to aid your self-studies, in addition to the CFA Institute syllabus.

Make a Study Schedule

The material for Level I is generally not difficult to understand for any business-savvy person, but the amount is substantial—you’re going to see a lot of your basic econ 101 material, but also a ton of higher level concepts weaved into this mix. Some test prep guides will suggest 250, but the average amount of time spent studying for passing candidates is around 313 hours. Don’t underestimate the time and effort it takes to pass this exam. If you’ve already put in 280 hours of work, what’s another 20 or 30 in the grand scheme of things?!

A crucial step in passing the CFA is setting a strict study schedule for yourself to tackle the mountains of material ahead of you. If you can stick to your schedule and really avoid skipping any planned sessions, then you have the self discipline to pass Level I and ultimately the entire CFA exam. I thought about it like I was the kid who had to watch the other children play while I was inside doing homework—it wasn’t fun, but I knew there was a reason behind it all.

Don’t Forget About Ethics

After reading the curriculum, a big mistake you could make is to ignore the Ethics portion. This is a bad call since the Ethics material will extended to all three levels of the CFA exam. You should be able to understand Ethics for Level I so when you move forward to the other levels you will have a strong base set in place.

It’s rumored that you cannot pass the exam without passing Ethics. This is technically not true because you can skip Ethics if you crush everything else, although that’s extremely rare. BUT, your score in Ethics will decide whether you pass or fail if you are close to the minimum passing score. The “ethics adjustment” will determine whether you crash or burn. It’s always a good idea to seek out additional CFA test prep materials if the CFA Institute curriculum is too dry for you.

Practice, Practice, Practice Exams

The most important part of your study schedule is the practice exams. Many will plan to study the material up to right before the exam day, but largely ignore the practice tests. This is a huge mistake and leads to a below-passing score. You should give yourself plenty of time (some say around a month) before the exam to take as many practice exams you can. A good rule of thumb is to shoot for 6 practice exams before test day.

The purpose of practice tests is to let you know if your hours of studying have paid off. Practice tests pinpoint your strengths and weaknesses, telling you which areas need more work and what topics you have mastered. They will also help you gauge the time it takes you to complete the exam, which is a concern for Level I. Utilize the practice exams in your test prep course, and you will significantly improve your chances of success.

Keep an Eye on the Time

There are 240 questions in Level I and a limited amount of time. Level I is the most time restricted in terms of the volume of questions that need to be answered, so the risk of not finishing is always there. If this happens to you on test day, it is better to guess blindly for the rest of test than nothing at all. There is no penalty for guessing.

Shoot for 70%, But Don’t Worry if You’re Lower

The Minimum Passing Score (MPS) set by the CFA Institute will never be higher than 70%. This means that the highest score bracket for passing a specific topic is 70%-100%, but you do not need to reach that in every topic to pass, as long as you can make up for losses in another topic.

You should aim for 70% or higher in your practice exams so on test day you will be confident that you are at least close to passing on the topics with which you are struggling and exceed that level in your stronger areas. Remember, 70% in the actual exam equals success, but below 70% does not always mean failure.

Get Ready for Exam Day

After months and months of studying, you might forget to give yourself time to prepare for the exam. You will need to sort out the logistics of exam day to avoid running into any surprises that can fluster you on test day. Read up on what to bring on exam day and you may want to check out where the test center will be beforehand. Don’t put your efforts in vain by forgetting your passport or some other logistical error. These details should be the least of your worries before taking the CFA Level I exam. Best of luck!

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Which Jobs are Open to CFA Candidates?

CFA Group WorkingIt’s easier to see the light at the end of the tunnel if we understand exactly from where that illumination comes. In other words, knowing what jobs are open to CFA charterholders makes studying for the levels of the exam a little easier.

I passed each section of the CFA, but I knew WHY I was taking the test in the first place. I had a role at my company for which I wanted to be qualified, and getting the CFA accreditation was the only thing standing between me and that position (which came with a considerable raise).

So, let’s walk through the great and high-paying jobs that are open to charterholders to help make studying for the CFA exam a little easier.

CFA_Job_Opportunties

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Portfolio Manager

Okay, so this is the most common destination for charter holders. After passing the exam, almost a quarter of CFA accredited financial employees will end up as portfolio managers—that number changes, but it’s generally true, according numbers from the CFA Institute.

What exactly does this role entail? Basically, this is a research-intensive position for people who are well organized and able to understand both general and specific market trends. The size of the firm will dictate whether you’re going to deal with a single fund or a larger investment group. Regardless of the size of the fund, however, you’re going to be speaking with other researchers, handling clients, meeting with internal analysts, studying the markets, and finally making investment decisions.

This is a role that will be a mainstay in the investment industry for years to come, with an expected uptick in employment growth seen by the Bureau of Labor Statistics.

Chief Executive

Well, this role is pretty self explanatory, as it’s usually seen as the non-board member pinnacle of every company. Having a CFA accreditation won’t guarantee you this corner office, but it will definitely be a solid foundation on which to build your case for securing that role.

Most CEOs of reputable companies have some type of certification, accreditation, or advanced degree. While many people think the MBA is the overpowering initialism to throw after their name, some could argue that the CFA is harder to get. Given the total amount of studying time, the more concentrated nature of the test, and the fact that you likely are studying while working full-time, passing all three levels of the CFA is more than enough to land qualified candidates the CEO job.

Research Analyst

This is a job that’s similar to the portfolio manager in that it requires a significant amount of research, but it’s more intensive and less management based. Instead, you’re doing most of the data culling and leg work. People who favor doing cerebral work that will get used to make larger decisions outside of their own office will love this position.

If you land this job, your analysis will be used to make recommendations on trades and securities. Though you’re not going to be the one who is pulling the levers at your firm, your research and effectively your word will influence the stock market. Based on your input, stock valuations and futures will fluctuate—that’s quite a bit of power.

Because of this, the Securities and Exchange Commission is heavily involved in this sector of the financial industry, which again highlights the importance of this role. Within this title there are three potential areas of operation: you’re either going to be buy-side, sell-side, or working through independent analysis. Based on this designation, you will see your level of influence on the market or clients vary significantly.

Consultant

Consulting work varies quite a bit from industry to industry, and oftentimes will be quite different within certain sectors of the financial world. If you have relevant employment experience and have passed all three levels of the CFA exam, you will have quite a few opportunities to do some consulting work.

Although the CFA is geared toward portfolio and asset management, there’s opportunities outside of this specific area of operation. Even within that specific sector, however, there’s still plenty of roles for you if you prefer the consulting-type of role.

Corporate Financial Analyst

This position is extremely important, as it basically ensures that a business is operating in a manner that maximizes profit and solvency. This role would require a you to analyze past and present data, incorporate projected performance numbers, and then measure this information against that of competitors and the market as a whole.

Think of this role as the sonar operator on a submarine. You’re not the captain or the head of personnel, but you’re going to make sure you avoid problem areas, stay abreast of enemy positions, and are preparing the vessel for immediate action. Those who pass all three levels of the CFA will be able to make quite an impact on any company in this role. Passing all three levels often requires taking a review course. Check out our exclusive CFA discounts and start preparing today!

Risk Manager

Like the corporate financial analyst, this role will ensure that the company stays afloat. This role requires you to use your specific training and your CFA knowledge to assess potential risks and implement strategic planning to minimize potential losses for a given company.

There are a number of things that a Risk Manager needs to monitor, including regulations, internal risky behavior, and employee trends.

Now that you know the job opportunities that are waiting for you, take the first step in becoming a CFA with one of the best CFA review courses!

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CFA Salary Breakdown

CFA SalaryIn considering whether to pursue a professional degree or qualification, two key factors often influence the decision: bettering your career prospects and earning a greater income.

There is some consensus that, after a certain point in your life, the position and the job profile matter more than the salary. This is true to a certain extent, but salary remains an important consideration in any career field.

The Chartered Financial Analyst (CFA) program is one of the most respected designations in the financial field. Salary plays an integral role in the decision to become a CFA, so let’s look at the different aspects that affect the salary of a CFA professional.

The salary of a CFA is based on various factors, including experience, educational qualifications, position in the organization, type of employer, and geographic location. For example, CFA charter-holders who work for multinational companies typically earn more than those who work for smaller firms.

Average CFA Salary

EXPERIENCE

CFAs with one to four years of industry experience can expect to earn a median annual salary of approximately $68,383, whereas those with five to nine years of experience will typically earn an average of $87,732 (source: www.payscale.com). Professionals with more than 20 years of experience are paid a median salary of approximately $155,100.

(Note that these are median salaries, meaning that there will be many people who earn either more or less that those figures.)

JOB TITLE

A great way to compare CFA salaries is by job title. Financial analysts tend to have lower-paying CFA positions, earning salaries between $43,218 and $78,374 (www.payscale.com). Chief Financial Officers typically have higher-paying positions, and earn between $67,786 and $217,242 (www.payscale.com). Investment analysts fall somewhere in the middle and can earn between $43,364 and $86,300 (payscale.com).

(Note also that many CFA charter-holders are compensated with bonuses and incentive pay that may not be reflected in reported salaries.)

COMPANY SIZE

The salary will also vary depending on the type of company or private firm that employs the CFA. Private firms tend to pay more than smaller companies.

BY INDUSTRY

  • Financial Services – median salary of $83,812
  • Insurance and Financial Services – median salary of $91,006
  • Banking – median salary of $93,578
  • Investment Services – median salary of $78,816
  • Wealth Management – median salary of $77,526 (www.payscale.com)

CFA Salaries by Region

Salaries also vary by city and state. Chartered Financial Analysts in New York and California can typically expect to earn more than their peers in Colorado and Pennsylvania. For example, the median CFA salary in New York City is $99,814, as compared to $98,660 in San Francisco, $85,412 in Denver, and $86,375 in Philadelphia (www.payscale.com).

Though starting rates are significantly different around the country, the amount you make consistently increases with your years of experience, which may make the initial investment of time and money in the certification worth it over the long run.

The easiest way to determine how much your salary would increase and whether a CFA charter would benefit your career is to ask peers and mentors for advice, and to research salary information for your target job. Understanding the requirements for achieving your desired job or level of seniority and then analyzing which characteristics and professional certifications can get you there faster are an essential element of planning a successful career path.


CFA Requirements

CFA RequirementsThose looking for an edge in the competitive world of finance should consider the benefits of obtaining the Chartered Financial Analyst (CFA) credential. Earning the globally-recognized CFA charter demonstrates a high degree of specialized knowledge and skills used in investment analysis and decision making.

The CFA credential is considered the gold standard in the field of investment management. Many CFA charter holders go on to have successful careers as portfolio managers or research analysts at hedge funds and private equity firms. The difficulty and low pass rate of the three required exams ensure that this qualification will remain a sought-after distinction in the future. We have compiled the following information to help you make the decision.

CFA Exam Registration

Several requirements must be met before candidates can enroll in the CFA Program and register for the CFA Level I Exam (the first of three separate, 6-hour exams). Prospective candidates must:

  • Have a US bachelor’s degree or equivalent, or be in the final year of their bachelor’s degree program at the time of registration; or
  • Have four years of work experience; or
  • Have a combination of work and college experience that totals at least four years
  • Be sure they understand the Professional Conduct Statement and Candidate Responsibility Statement
  • Be prepared to take the exams in English
  • Have a valid international travel passport (required for exam registration and admission to the test center)

After you have fulfilled the requirements above, you should create an account, and then enroll in the CFA program and register for an exam.

The CFA Certification

Those who meet all the certification requirements are referred to as CFA charter holders. To obtain the CFA charter, a candidate must:

  • have completed a university degree (or equivalent)
  • have four years of qualified, professional work experience
  • agree to follow the CFA Institute Code of Ethics and Standards of Professional Conduct
  • pass all three levels of the CFA exam
  • become a member of the CFA Institute, and
  • apply for membership in a local CFA society

The Exam

The CFA exam tests a large curriculum that is divided into three separate levels. The three tests must be taken in order, and they can be taken as many times as necessary. The exams increase in complexity according to level. Level I tests basic knowledge of the standards and some analysis, Level II tests how to apply those standards to typical situations and involves more complex analysis along with valuing assets, and Level III tests how to synthesize and apply the standards in a portfolio management and compliance context. See more about the CFA exam here.

The Level I exam consists of two three-hour sessions that include 240 multiple choice questions based on the Level I Learning Outcomes Statements (LOS) developed by the CFA Institute.

The Level II exam consists of a 10-item set in the morning session and a 10-item set in the afternoon session of the exam. Each item set includes a case-statement and six multiple choice questions. Candidates must refer to the case-statement for information in order to answer six multiple choice questions correctly. There are a total of 120 multiple choice questions, as compared to 240 on the Level I exam.

The Level III CFA exam consists of essays in the morning session and item sets in the afternoon session. This exam has 10-15 questions that may have multiple parts. The Level III exam has a maximum score of 180 points.

The CFA Institute offers the Level I exam two times per year at test centers in many locations around the world. Although the Level I exam is held twice a year (June and December), the Level II and III exams are only held once a year in June. The CFA Institute recommends preparing for each exam at least 6 months in advance and studying for at least 300 hours for each level. It takes the average candidate 4 years to obtain the credential.

You must enroll as a CFA candidate and register for the exam in order to sit for it. Those who register early have the option of a discounted rate ($630 for Level I); those who register on time will pay more ($930), and those who register late will pay the most ($1,380). Enrollment and registration fees include access to some study and curriculum materials. You can also lower the overall cost of becoming a CFA through great discounts on the best study materials available.

Given the large curriculum and many preparation hours that are required to pass this challenging exam, candidates should seriously consider enrolling in a CFA exam review course. These courses can help identify strengths and weaknesses, provide opportunities for consistent study and completing practice questions, give candidates peer and/or instructor support, and result in a higher chance of passing each exam on the first try. Compare the different CFA study materials today and get started on your journey to becoming a CFA!

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CFA Exam Pass Rates

CFA Exam Pass RatesThe Chartered Financial Analyst Exam is notoriously challenging. Candidates all over the world take the exam on the same day, in either June or December, depending on the level. (Only Level I is offered in both months, Level II and Level III are only offered once a year in June).

Due to the large amount of material covered on the exams, the CFA Institute suggests that candidates begin to prepare for each level of the exam at least 6 months in advance, and recommends approximately 300 study hours per level.

In recent years, pass rates for the first two levels are well below 50%. The 10-year weighted average CFA exam pass rate for Level I is 38%, for Level II it is 43%, and for Level III it is 54%. It takes the average candidate 4 years to pass all three levels of the exam and obtain the credential. This is clearly not an exam that should be taken lightly. A solid program of preparation is absolutely essential.

CFA Level I Pass Rate

According to the CFA institute, recent pass rates of the Level I exam have been somewhat higher, with 43% of candidates passing in June 2016, and 43% of candidates passing in December (up from 42% respectively in 2015). Candidates who pass can begin to prepare for the Level II exam.

CFA Level II Pass Rate

The percentage of candidates who pass the Level II exam is only marginally higher. In 2016, only 46% of exam-takers passed Level II.

Those who do not pass are required to retake the exam the following June. Candidates may take the exam as many times as they need to pass.

CFA Level III Pass Rate

By the time candidates take the Level III exam, their odds of passing are greater, and the percentage of those who pass appears to be rising. In 2016, 54% candidates passed the Level III exam, as compared to 53% who passed in 2015. That’s why it’s imperative to find the right CFA course for your needs, so that you can develop consistent, efficient study habits to beat the odds. The Level III exam appears to have become more rigorous over time, given that pass rates from the 1960s through the mid 1990s typically ranged between 70-96 percent, with only a few exceptions (see the CFA Institute statistics here).

CFA Exam Locations

The CFA exam is held in more than 180 cities in June, and more than 60 cities in December. The Asia Pacific region accounts for about 42% of the total registrations, followed by 36% in the Americas. The remaining 22% come from Europe, the Middle East, and Africa.

The CFA continues to be the preferred certification exam of financial professionals worldwide. Even though pass rates are low, the popularity of this course is on the rise, presumably because investment banks and financial institutions increasingly recognize the value CFA charter holders bring to their organizations.

Overcome the odds and ensure your success on the exam through a solid CFA review course!

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