What Is CFA?

Last week, I noticed that one of the most common questions of this blog’s visitors is a rather simple one:

“What Is The CFA”?

It’s certainly an appropriate one and you’d think that I have would have covered this already but in fact, I have not really done so. First off, CFA stands for Chartered Financial Analyst. It is a title given all around the world to candidates that can fill 2 main requirements:

Pass the 3 exams that are given once per year (except for level 1 which is given twice)
Accumulate 4 years of acceptable work experience which is generally defined as working in financial markets (the exact criteria is not that simple but let’s go with that for now)

One big difference is that this title is not any type of national title, it is a private company that has been giving the exam for a few decades and oversees exams, membership rules and guidelines, etc. The fact is that the CFA stands for much more than passing 3 exams. A big part of the exam is the ethics part and CFA encourages firms to adhere to the CFA codes of ethics which are in some ways a step above the rules and guidelines of organisations such as the SEC.

Why is the CFA such a prestigious title? First off, the exam is very difficult, the large majority of candidates do not end up finishing the exam. Also, the exam is very broad and requires candidates to get some knowledge in ethics, economics, accounting, asset, debt and derivatives pricing, portfolio management and others. That makes the exam very challenging to study.

To remain chartholders, candidates must pay an amount every year as well as pledge their adherence to the CFA code of conduct.

How does the CFA compare with titles like an MBA, a CPA, CFP or others? They are all very different but I would say that the CFA is generally most helpful for candidates that want to pursue a career related to financial markets. That can be in trading, protfolio management, research analysts, etc. Being able to place 3 letters next to one’s name generally gives them a good shot at getting an interview. Once that is done, candidates must of course proves themselves to get the job.


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