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Chartered Financial Analyst

Updated on March 28, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Chartered Financial Analyst (CFA®) Definition

Chartered Financial Analyst (CFA®) is a globally recognized designation, which, when acquired, ensures that the person can be fully trusted with the investment analysis. These people are open to joining different positions in the financial sector, especially investment management.

Chartered Financial Analyst (CFA)

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Anyone aspiring to join the best investment analysis teams has to clear the three-part CFA examination. These individuals are the best fit for decision-making roles in industries that deal with investing. In addition, being called a CFA makes a person a versatile professional.

Key Takeaways

  • Chartered Financial Analyst (CFA®) is a credential that ensures the one acquiring it is an expert at investment analysis and can be trusted to help clients make wise investment decisions.
  • The exam has three levels, and the students must clear all the levels one by one to be eligible for the CFA license.
  • The candidates clearing the exam can join as an investment banker, portfolio manager, credit analyst, chief investment officer, etc.
  • The examination tests everything from the candidates’ theoretical knowledge to their practical exposure.

CFA Explained 

Chartered Financial Analyst (CFA®) is a program that demonstrates the expansive knowledge and skills of people who complete it successfully. The professionals are the most competent resources for their capabilities and reliability with respect to the company code and ethics. 

Being globally marked, the credential of chartered financial analyst exam gives the professionals possessing it an opportunity to stand out. Investment firms and financial organizations consider the ones with this designation professional of higher standards. Moreover, the charterholder has the skills to adapt to the transforming investment industry, which makes them an ideal match for the sector.

An aspiring candidate of a chartered financial analyst exam must adopt a step-wise approach to become a CFA charterholder, which is as follows:

  • Clearing CFA exams
  • Acquiring required relevant work experience
  • Submission of reference letters
  • Applying for regular membership as a charterholder

CFA checks the expansive knowledge and skills of the candidates, their willingness to remain updated with the latest best practices adopted in the industry, their familiarity with real-world scenarios, and other relevant aspects covering their aptitude.

The curriculum covers ethical standards, economics, quantitative methods, financial statement analysis, equity investments, corporate issuers, fixed income, derivatives, portfolio management, alternative investments, wealth planning, etc.

Requirements

Before one fills up the application for the Chartered Financial Analysts program, one must fulfill one of the following requirements:

  • Have a bachelor’s degree or equivalent credential, or
  • The selected CFA exam date must be 23 months or less from the graduation examination date that the aspirants are about to appear for, and candidates must have received their bachelor’s degree before sitting for the CFA Level II exam, or
  • Possess 4,000 hours of work experience and/or higher education involving a minimum of three years with the credentials acquired before the candidates sit for the Level I exam. The days of education and the days of work experience must not overlap.

Examination

The Chartered Financial Analyst exam comprises three levels:

  • When the aspirants fulfill the criteria mentioned above, they can apply for CFA Level I, a multiple-choice test. 
  • Once the candidates of chartered financial analyst program clear Level I, they appear for CFA Level II, Vignette-supported multiple choice questions. 
  • After clearing the second level, they appear for the Level III exam, a Vignette-supported essay type, and Vignette-supported multiple choice questions.

Candidates can register for the exam and schedule it on the official website.

Cost

Candidates must pay USD 350 as a one-time enrollment fee while registering for the CFA Level I examination. This charge will not apply to other levels of this exam. If one requires rescheduling the exam, an extra charge of USD 250 applies.

Jobs

As stated above, professionals with Chartered Financial Analyst licenses are trusted with assisting clients in making investment decisions. Investing is an essential affair in an individual’s life. A CFA lends hands to investors and ensures they have exposure to all aspects of an investment before deciding on an asset to invest in.

CFA Jobs & Roles

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The roles of a Chartered Financial Analyst range from trading and asset management to developing and managing investor portfolios. The person also takes care of the proper regulation of the investment vehicles.

The niches and sectors where CFAs are employed include portfolio management, research and consulting, risk analysis and risk management, private wealth and asset management, etc. In addition, a CFA can be an investment banker, credit analyst, auditor, chief investment officer, etc.

Salary

The compensation of a CFA varies in terms of employment, experience, specialization, and employment sector. However, the average base salary for a CFA is USD 126,000, leading to a total compensation of USD 177,000.

Benefits

This qualification of chartered financial analyst certification has several benefits and uses in the financial industry, which are as follows:

Detailed knowledge- A certification in this field arms the candidate with in-depth knowledge related to analysis and investment, work ethics, economics, etc, which gives a comprehensive understanding regarding the financial management and markets.

Globally recognized – It is a globally recignized course and is equally useful in any economy which is especially in the developing stage. The candidates of chartered financial analyst certification are highly respected due to their exceptional expertise and ethical commitment towards their jobs. This opens the doors for global career opportunities.

Versatile – This career option is very versatile in nature and knowledge acquired from this program can be applied in various areas of the financial market across sectors and industries.  

Work ethics – The professional follow strict ethical standards and abide by the code of conduct enforced by the CFA institute. Such high level of professional commitment and standards raise their credibility in the market, providing them with an array of career options.

Good growth path – This study has good future growth path in the industry, related to portfolio analysis, management and research, or any other related roles. Innumerable financial institutions and asset management companies who have very good market base and credibility, hire such professionals, to enhance their growth prospects and expansion plans.

Networking – Through this qualification, it is possible to create a good network among finance professionals and provide opportunities regarding knowledge sharing or understanding and keeping track of the latest industry trends.

Chartered Financial Analyst Vs Chartered Financial Planner(CFP)

The above two types of courses and certifications are highly esteemed and sought after in the financial world. Both are equally valuable and trains the candidate with in-depth knowledge and skill. However, there are some important differences between them as follows:

  • The main difference lies in the type of work they do. The chartered financial analyst courses concentrates on a larger setting, where they deal with big investment firms from both buy and sell side, but the latter typically helps the client, who are mostly individuals, with their financial plannings and portfolio optimization.
  • The former are usually dealing with hedge funds, mutual funds and other big investment options, involving huge amount of money management, typically of corporates. But the latter plans mainly for retirement, insurance, property purchases, tax plans, educational planning or any other related long term financial goals that will ensure stability and security for future purposes.
  • The former is often engaged in jobs like providing financial analysis and recommendations which are beyond investment decisions, but the latter deals with basic financial topics.
  • The chartered financial analyst courses provide more of a corporate level job where there is a requirement of skills for analysis, financial valuation and portfolio management but the latter is more of a personal level job requiring clear understanding of the risk-taking ability, time horizon and objective of the client and design investment plans for the same.

Thus, the above are some important differences between them. It is necessary to have a clear understanding about them in details so that the candidate is able to easily identify the path they want to select in order to have a successful financial career in the industry.

Frequently Asked Questions (FAQs)

Do you need a CFA certification to become a financial analyst?

CFA is one of the most critical financial qualifications that one must need to have to enter the field as an analyst. However, when it comes to becoming a financial analyst, CFA is a desirable qualification in most financial organizations. In short, someone doesn’t need CFA certification to become a financial analyst.

Is a Chartered Financial Analyst worth it?

Clearing CFA exams opens many doors for those who aspire to have well-reputed and well-paying jobs. Being a trustworthy individual for helping clients make wise investment decisions is a huge criterion. The charterholders prove to have the knowledge and skills required to undertake investment analyses and, based on the same, suggest to clients where to invest and when. This is what makes CFA a worthy certification.

How to become CFA?

First, the candidates must check if they fulfill the eligibility criteria to appear for the CFA exam. If yes, the next step is registering on the official website. The registration is done at a fixed cost and makes one eligible for the Level I exam. Once cleared, they would require appearing for the following two levels. After the candidates clear all the levels of the examination, they need to acquire the relevant work experience, submit referral letters and obtain a regular CFA membership.

This article has been a guide to Chartered Financial Analyst (CFA) and its definition. We explain the examination, salary, jobs, cost, requirements, vs CFP. You may learn more from the following articles –

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Comments

  1. Johnathan Ferrick says

    Thank you for providing such a knowledgeable post. Sir I wanted some advice from you. As I am graduate student and I am confused in CFA And FRM, so would please tell me which one should I choose for my better future?

    • Dheeraj Vaidya says

      Hi Johnathan, Can you give me some background? please refer to this article CFA vs FRM for details

  2. Brendan Wario says

    First I must say you are really doing a great job through your blogs. I also wanted to know more about CFA Examination I mean how to get prepared for CFA exam? If you have any study material about CFA examination then please let me know