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Six situations in which doing a CFA could do you a disservice

A CFA can only be good for your career – right? After all, it’s not easy: only 20% of people make it through all three levels, and as few as 34% of people pass the CFA Level 1.

However, even though a CFA is often a good career move, in some situations it simply isn’t. Which situations? Well…

1) When you really want to work in trading

The CFA is particularly geared to people who want to work in fund management and equity research.

Even the CFA Institute admits as much: “Money managers and equity researchers are our primary market,” says UK spokesman Steve Wellard. “We’re also increasingly seeing uptake for our exams by people who work in high net worth wealth management.”

Although Wellard says the CFA can be useful for people who want to work in trading (“The strength of the programme is that it’s a generalist qualification”), would-be traders who come touting CFA qualifications may be seen as slightly misinformed.

“A CFA is most relevant if you are investing in public markets,” says Jim Nairn, a director at Cornell Partnership. “It’s a lot less relevant if you’re a trader.”

2) When you really want to work in private equity

Just as touting a CFA may make you look a little ill-informed if you want to move into trading, it could appear out of place if you want to work in private equity.

“Top private equity funds are much more interested in whether you’ve been a top ranked analyst at Goldman Sachs than whether you’ve done a CFA or not,” says David Howell, managing director of private equity recruiters EM Financial. “A CFA really won’t make much difference.”

3) When you don’t have the time to spend 15-20 hours a week reading (potentially dull) study materials

The CFA itself estimates that studying for each of its three exams will take 15-20 hours a week over 18 weeks, and that candidates spend an average of 300 hours preparing for each exam.

This is a significant portion of time, particularly given that the study materials don’t appear particularly engaging. “In my opinion, it’s brain-damagingly boring,” says one senior ex-trader who’s currently studying for Level 1. “I’m supposed to be doing it now, but am finding it very difficult to get started.”

Before committing to studying the CFA, it’s therefore worth considering the opportunity costs. A CFA may be mandatory if you want to get a role in investment management or equity research, but in other areas it’s a merely a nice to have. Is spending 15-20 hours a week on extra study really the best use of your time?

4) When you’re out of the market and trying vainly to get back in

A CFA shows commitment to working in financial services, but if you’ve already got financial services experience and no one will take you up on it, do you really need to demonstrate how committed you are?

Instead of spending all that time studying (see point 3), you might want to spend your time networking with recruiters and contacts still working in the industry. They’re more likely to increase your chances of getting back in than a CFA – particularly if it’s just a CFA Level 1.

Equally, a CFA won’t make much difference if you’re out of the market and want to get back in to a totally different area (particularly if that area happens to be the front office and your experience is in the back/middle office). “Some people take the CFA in the hope that it will get them into an area of financial services they wouldn’t otherwise have access to,” says Nairn. “Clearly that’s a gamble. More often than not, it won’t pay off.”

5) When you repeatedly fail level 1

66% of people failed the CFA Level 1 exam last December. There are no limits on how many times you can take the exams, but Wellard says most people give up after two or three attempts.

If you can’t pass CFA Level 1, and your employer, or potential employer becomes aware of this, it will not look good – you’re better off not trying at all.

6) When you put time aside to complete level 1, but have no intention of completing levels 2 or 3

Since the CFA’s conception, only 117,831 people globally have passed CFA Level 3, a process which takes three to four years (and at least 900 hours of study).

By comparison, 20,000 or more people pass CFA Level 1 every year. Therefore, if you really want the CFA to make a difference to your career, you’ll need to become a full charterholder and complete all three levels. Only having Level 1 could be construed as a lack of commitment.

Comments (58)

Comments
  1. I would also add: when you’re in the back office, and are interviewing for another back-middle office role, because it shows you are one of the thousands who want to move from back to front office (and will likely never make it…), which shows a lack of commitment for the back office role you’re interviewing for…

    BackOfficeSlave Reply
     
  2. I would say the time required is more likely, well in excess of 300 hours study at each level for the average candidate.
    If the charter was easy to obtain, then obviously it would be worth less, but to have completed any level is better than not having done it.
    If you have to pause in your studies due to a heavy work schedule, then surely that shows commitment to the company.
    I really don’t see working toward the CFA as anywhere near as negative as the article implies.

  3. How is

    “Candidates took a record 104,111 exams for all three levels combined in June, a 45 percent increase from June 2007. Level 1 candidates totaled 44,209 in December, an 18 percent jump from two years ago.”

    equal to

    “Since the CFA’s conception, only 104,111 people globally have passed CFA Level 3, a process which takes three to four years (and at least 900 hours of study).”

    ?

  4. @LSEgrad – you’re right. The correct figure is 117,831. It’s been amended.

    Sarah, Editor, eFinancialCareers Reply
     
  5. bullseye to true that why I have a hedged cerftified FRM – all six points are 100% valid

  6. I really believe studying toward the CFA is great and will surely help in any career endeavour. I think the curriculum as a whole is very rewarding intellectually. Even for trading I guess this can prove to be useful.

  7. Cfa is a silly qualifiaction

  8. The problem is… if you BELIEVE everything you learnt in the CFA Program, this article might apply to you. But if you take it as an opinion in practice, to use along with other finance tricks and intuition, and prove to your interviewers that this is your position, I think it’s a bingo…

  9. Yeah…to go in PE you need to be a top ranked analyst in GS

    GS? that one who predicted oil to reach 200$?
    That one who screwed up Greece? That one who screwed up clients with CDOs?

    What are recruiters talking about? In this blog i never heard that firms recruit the people who have the knowledge….only GS, MS, and top brands…again: what are we talking about?

  10. Alan is a silly name

  11. In response to the 1st comment. If you’re in the back office, why are your taking the CFA if you want to stay in the back office? The whole idea is the get the hell out, because If you don’t take the CFA that is where you will stay the rest of your life.

    If you can’t pass level 1 you shouldn’t be working front office in the investment profession. Its as simple as that.

  12. In my experience as a trader at a US bulge bracket, a CFA was seen as incredibly positive and a Director got his job because the CFA pushed him ahead of the others. All the departments would pay for their analysts to get this qualification and in my interviews at other firms they seem to love that I’m studying for it, so don’t be too disheartened by this article.

  13. 1) work in trading
    AGREE
    2) work in private equity
    AGREE
    3) don’t have the time
    Who couldn’t find 1 hour in the morning, one in the evening, 7 days a week over 5 months. Most people spend longer than this in the pub. Also, if you find the material dull you shouldn’t be doing it. Admittedly, an equity analyst doesn’t find GIPS fascinating but the majority of the material and the course’s ‘primary market’ is aimed at money managers and equity researchers (as already mentioned)…..
    4) When you’re out of the market and trying vainly to get back in
    Absolute rubbish, especially in the current job market. Who spends more than 16 hours a day talking to recruitment consultants? If you spend 14 hours a day, you still have time to study those 2 hours a day, 7 days a week for 5 months.5) When you repeatedly fail level 1
    AGREED
    6) have no intention of completing levels 2 or 3
    If a back office stats guy is putting numbers together, I’d prefer him/ her to have a thorough understanding of what he/ she was doing. Level 1 offers this and more. I’d hire an otherwise equal candidate if they had CFA Level 1 any day…..for the right job

  14. @t, I don’t agree if you can’t pass the CFA Level 1 you can’t be a trader. I know an MD who didn’t pass and he is an incredible trader with great PNL.

  15. I am a CFA charterholder and I work as an equity senior PM. The CFA charter is extrmely valued in my company and CFAs get paid 30%-50% better than those who are not charterholders. Is it justified? I don’t think that a CFA charterholder is better automatically because of his charter BUT I think that usually the CFA charter reflects excellence in many aspects of life, specially commitment.

    If anyone takes his time to calculate which is the probability of passing all the 3 levels consecutively she will find that it is near 10%. CFAs are special.

  16. Fantastic comments. I like. CFA is fun!

  17. I meant front office within the domain of the ‘investment’ profession.

    A trader is not an investor he is a speculator.

    A speculator is someone who seeks to buy and sell in order to take advantage of market price oscillations. An investor is someone who buys securities so that they provide a good income or capital gain by virtue of them being based on something of real and increasing worth.

    If you cannot value something, it is a speculation.

    So, yes you are right.That is why you don’t need the CFA to be a trader, anyone can be one. So let me rephrase, if you are ‘valuing’ investments and cannot pass level 1 CFA you shouldn’t be working front office in the investment profession.

  18. Would CFA help a newly qualified ACA who is trying to break into asset management / equity research? By the way, I’m not from an audit background but one of the advisory lines. I almost wish I had done audit now – might have had greater chance that way – recruiters seem to like auditors better.

  19. To Back Office slave: I moved from back to middle and plan to move to front. It WILL happen. Only if you want it badly enough. You obviously do not! Shame.

  20. I am studying for the cfa lvl 1 right now after graduating as an undergrad in 2009 with PE experience only to still not have a job. Anyways thanks for the encouragement…but i think it is a good qualification within the realm of finance as well as a standard setter across the world (other than the US and Europe I guess) especially in the emerging markets and middle east. I actually agree with most of your points, atleast with the benefits of the CFA to your specifics, but don’t forget finance is never a straight line game because the ones that are aware of the fundamentals and the rules of the markets can best his opponent. I think the CFA really just sets the standard for your knowledge and its really up to you, which level you want to take that knowledge.

    CFA lvl i candidate Reply
     
  21. Regardless of the flack that the CFA charter takes a couple things stand out, it is hard, you’re part of a very small group if you manage to complete all parts and you are learning something very useful – that counts for a lot.

    As with everything hard to obtain, people are going to try and discredit it.

  22. CFA, as anything else is subjective. Yes it can be valuable especially for candidates who have no previous relevant experience, and yes it it can be boring for those who have experience (why spent all your time learning how to value fixed income if you are an equity analyst!!).

    In my opinion the only difference from CFA to any normal finance degree is the average grade (you need on average 70% to pass CFA which is equivalent to A grade, if you work out the numbers I bet the statistics of pass rates will be comparable to those with average A grade on any degree).

    Basically you need to work harder to pass the CFA, and considering most of candidates are full time employed make it even tougher to find the required time.

    To those who claim CFA’s are specials / smarter (rather socially depressed), that is complete rubbish. Most of sell side analysts are CFA’s nowdays and for some reason they’re always wrong!!!

    And by the way Mr T who values investments based on CFA material most probably lost a lot of money in 2008 (using DCF valuations)!!! Hence if I have to do a samll sample statistics in my company, there is no evidence whatsoever to suggest CFA’s perfrom better!!!

  23. I passed mine in 1997 and the syllabus will have changed but I do remember that despite having a BA in economics and MA in Finance, there was a lot of new stuff for me in there (US-biased including ethics and mortgage backed securities). Arguably these subjects are more relevant now than ever. Admittedly you probably want to do it in your twenties but for anyone who wants to be taken seriously and doesn’t have a professional finance qualification (i.e. ACA not MBA) it is definitely worthwhile. As another poster said the CFA will get you the interview/job over a similar candidate who doesn’t have it.

  24. just wanted to give a shout out to every candidate that is reading this and is freaking out about how many days left to study there are. final sprint, let’s get ’em!!!

  25. Those who talk bad about CFA have probably tried it and failed. Passing CFA in all levels is no mean achievement. Its a qualification for men and not boys. I am still in it and will complete it, discouraging articles like these ones will not derail my focus.

  26. Having one of the tougher designations in Finance is going to work against you – yeah right… More efc tosh!!!

    The CFA’s no silver bullet on it’s own, but it indicates to employers a decent level of technical skills across a broad range of subject matter, intelligence, discipline, commitment & ability to perform under stress. As such, it helps to open doors in areas you may struggle to get a foot in otherwise, embeds a skill set that will enable you to distill pretty much any risk-reward scenario you may come across in Finance & ensures you can have a fairly intelligent conversation with pretty much any financial specialist.

    If you think having that kind of tailwind behind you is going to be detrimental to your career (n.b. not job) prospects then you probably shouldn’t embark on the journey as you may be lacking the grey matter to get it done.

    For those already working towards the designation, or considering it, from my experience, 200 – 230hrs per exam is enough but that still requires a large dollop of discipline & commitment.

    & for those of you sitting in June, good luck. Better you than me!

  27. How amusing: High flying city boys (and girls of course) find the CFA exams difficult, demanding etc. Let’s face it: it’s dead easy. 300h of studying???? Maybe if geography was your primary subject at uni.

    CFACharterholder Reply
     
  28. I fully agree with CFA Charterholder. With the right prep books, a decent level in math, and some financial culture, you can go through the material in much less than 300h per level.
    The difficulty comes from the fact u have to study and work at the same time during 3 years, so obviously it shows determination. And if you have a degree in science, your financial culture will definitely be multiplied, which will be useful for your future job as CEO of a major bank.

  29. As a Charterholder, Id hire a fellow Charterholders in any front office job, not only because the materials guarantee a comprehensive understanding of ANY investable asset, but also because passing the “$%&% exams implies that you have the GUTS to overcome the demands of any job.

  30. Anon – if you already have an aca then the cfa is only worth doing if you are kicking your heels and can’t get any interviews. as you will probably have noticed from these comments, there are very few people saying “I did the cfa and found that it gave me finance skills which made me better at my job”. Everyone does it with a pragmatic angle in mind (promotion, improve cv, comps with peers, mo fo switch etc). So to answer your question, if you are spending your evenings wallowing in your misfortune at having spent three years in internal audit then yes, studying towards the cfa can only be a positive, but it doesn’t gaurantee you anything I’m afraid.

  31. Hi anon, wrt your Audit comment, I am faced with a dilemma at the moment – Big4 Audit vs Adisory. Why do you say recruiters value Audit more? My exit plan is IBD, so would appreciate your advice. Thanks!

  32. @bujarak – The CFA lays down the fundamental analytical tools. It is definitely not the be all end of portfolio management and financial analysis, but merely a stepping stone.

    You don’t need to have the CFA, but you need to have the knowledge within it to competently work in the investment profession regardless of what valuation techniques you employ as a fund manager or in equity research. Look at all the widespread incompetence and fraud around us in the financial markets. The whole financial system would be better if more “investment” professionals had the same calibre of knowledge and commitment to ethics as CFA charters. Either you do an finance degree, a similar qualification, or take the long slow road of learning as you go along, while anyone with any ambition quickly leapfrogs over you. The point is that if you can’t understand the basic and foundational knowledge in the level 1 CFA (as the real world is a lot more complicated), regardless of where you obtained it, you shouldn’t be managing other peoples money because then you are just speculating.

    Also, if you even think you are going to fail…your right, you already have, don’t bother attempting it.

  33. If you argue that CFA is boring and time confusing then I would not except you to do well in the Finance industry, period. And that goes for the author of the article as well as some of the commentators.

    Most of the work in the industry is boring, just ask an I-banker or even Micheal Burry, who I might add read through entire prospectus for CDO’s. It’s called mental capacity and without it get ready for an early career switch.

  34. The CFA degree shows that you have done formal self-training in specialized areas like derivatives ,valuation etc.As a recruiter I will be very happy to hire CFAs because it shows that the candidate is keen to acquire more knowledge in a specialized field.Doing the CFA reveals a positive attitude to continuous learning which an ever-changing market demands.As to sectors, the CFA is relevant to almost every financial career be it private equity, investment banking, sell-side work or buy -side work.

  35. CFA isllustrates you have a basic understanding of finance which forms the foundations for many disciplines.

    Also, you can choose to disclose whether you are a charterholder or not.

    I’d rather have those 3 letters after my name. If you can’t use them to your advantage, then you probably don’t deserve them.

  36. Its not necessary to study 300hours to pass the CFA. I passed my CFA 1 & 2 in first attempt by hardly studying 130-150hours.

  37. @ CFACharterholder. You’re just showing off cos you’re there. You can’t call it easy with a 12hr+ job – I didn’t! CFA doesn’t make you any better at valuing stocks/ managing money. It does give you the tools though. Whether you believe the material or not, it’s better to have the knowledge and make an informed decision than be blind to techniques/ views.

    We digress from the subject. This was a terrible article. If you know the first thing about the CFA and it’s target audience you would know it’s not a ticket to becoming a trader, work in PE etc. Also, anyone with a brain cell knows if you spend 3 years failing the 1st of any 3 exams, you should just give up. Don’t you think people do this due dilligence before embarking?

    I would bet that recruitment consultants and journalists commenting have not passed the CFA, so I discredit their opinions. A recruiter might have an idea of the indirect recruitment market, but has no idea of the # of CFAs applying directly. Don’t know many back-office CFAs either. If you are out there – go take these recruiters and journalist jobs. Better pay and you’ll know what you’re talking about – I’m proud our profession HAS a chartered designation.

    Chartered Recruitment Consultant/ Journalist? Reply
     
  38. All those CFAs and most equity researchers and fund managers still underperform the market averages… :-)

  39. Lots of my friends are taking CFA exams, but they ALL heavily struggled on the second one. Seems it’s miles harder than the first one. Anyone think CFA should address that?

  40. @Topman (or bottom man!)
    Now, if equity researchers and equity managers are the only ACTIVE players in the market, how can the majority underperform?! Active management and equity research is needed to set the market and make it efficient.

    One last point. With all the research and other securities scandals over the last 3 decades, show me one who was CFA qualified? If CFA’s do underperform the market, it might be cos everyone else is unethical!

  41. @C-otwa. The figures don’t support your argument. Pass rates for 2 higher generally (could be cos candidates passed one and are better). It is a harder exam, but completely different from L1. L1 = Tools vs L2 = using the tools. Shouldn’t a higher level reflect a harder exam anyway? CFA is also marked using modified Angoff method.

    Pass rates for all levels:
    Year Level 1 Level 2 Level 3
    2009 34% 41% 49%
    2008 35% 46% 53%
    2007 39% 40% 50%
    2006 40% 48% 76%
    2005 35% 56% 55%
    2004 35% 32% 64%
    2003 41% 47% 68%
    2002 44% 47% 58%

  42. This is very funny, the article and the bias.
    In my opinion (and I am an M&A associate from a top-tier bank, if it matters), the most valuable thing you get via passing the programme is…contrary to everything said in the article… additional knowledge. CFA programme gives you more insight in various aspects of investment world and make you a more all-round professional, strengthening certain skills.

    The CFA charter does help you get the job due to two main reasons: firstly – and this is obvious – it’s something that distinguish you from the others on the resumje stage, and secondly, you will simply perform better in the interviews thanks to the knowledge you obtained.

    On the other hand, considering the 48months FT relevant work experience requirement in order to be considered eligible for a CFA charter, it’s clearly not something that helps during the very first career stage. By the time you get the cahrter, you usually have quite a lot of experience, and it’s either means of becoming a post-MBA associate without an MBA (effectively saving you several hundred thousand USD in tuition consts and unearned income for two years), or helping you to amke a ood lateral move.

  43. Ricky Roma – thanks for your comment. I didn’t spend three years in audit, but qualified within corporate recovery/insolvency – it is branded as a specialist area hence the difficulty in breaking into investments.

    lsegrad1 – if your end goal is IBD, suggest you look into CF or TS within advisory rather than audit. But audit might be your best bet if you think you may want to go into industry at some point. Also, audit is the easiest to get into, since they hire the largest number of people. Recruiters seem to prefer auditors for equity research positions. My comment doesn’t apply if you want to get into M&A etc.

  44. @C-otwa: I don’t think they should make it easier, then it will just dumb down the brand that some of us worked so hard to get. Do the work & have the smarts, get the designation…
    @ Ricky Roma: I definitely picked up skills through the CFA program that have made me better at my job.
    @Donkey: I agree with C-otwa, I found Level 2 the hardest & that is what I heard from most people (although the year I sat L2 I see was the lowest pass rate out of your data set so maybe my experience was biased by a tough exam). I agree the stats don’t obviously support the view L2 is harder than L1, but as you suggested, I think that is because the failures from the previous level weed out the weaker candidates, which would explain why you generally see a trend to higher pass rates across the 3 levels.

  45. i am currently reading for CFA level 2, and i can say that for someone who has not a deep background in finance, i find this qualification very useful to have a general knowledge of all areas in the financial industry. I would say that people who are in IBD/PE would say that this qualification is tupide, the same case for people who work in trading, but for me, i found many jobs (outside the UK mainly) where they require either CFA or MBA…

  46. Can any one advise how relevent is a CFA for a creer in project finance ?

  47. i dont like any of the comments on this page. and i dont like any of the people writing the comments.

  48. In particular, if you’re going into risk mgmt and think you will stay there, don’t waste your time with the CFA. Get the FRM, PRM, ERM instead.

    PrivateCitizen Reply
     
  49. I agree with part of Fatcat’s comment. In PE sector, people management skills and operational experience are more important than a pure superb financial modelling skill. The ability to understand integrity of the promoters, and how financial market works as well as its implication to various sectors help in making investment and divestment decisions. I think CFA program is still applicable to certain extend to the PE sector.

  50. Individuals should really study CFA to improve their knowledge base, not just to have the ‘CFA’ designation after their name.

    If you know your industry/client/product & perform well at interview you’ll get the job… It is disappointing how many candidates I interview still lack product knowledge. A thin veneer of details crammed at the last-minute from Wikipedia quickly falls apart under scrutiny.

    If this is a candidate’s honorable motivation then the 6 points above are not relevant.

  51. I agree with the 6 points, I passed level 1 1st time after registering 2 months before the Dec09 exam and I have no financial background (I am a Engineer). I’m writing level 2 in june and I hope after passing level 2 I will be taken seriously…lots of people have level 1 by luck because most of it is entry level finance they did in their BCom etc.

  52. I am a Level III candidate this year. I have learned far more from the CFA than I ever expected to. It’s been very difficult and very rewarding at the same time, as the best things in life are. I would highly recommend the curriculum to anyone with interest in financial markets. Now that I know what it takes to pass, when it comes to hiring, I would far rather hire someone who has completed even Level I than someone who hasn’t tried at all.

    If you can’t handle the discipline that real learning requires, then CFA is not for you. No use whining about it. Just accept that there are some things in life that you won’t be able to do.

  53. It strikes me that the idiot who wrote this article failed his CFA and is bitter about it

  54. I am sitting LV 1 in June of this Year. I believe the most important advantage of CFA is that it makes you stand out. Out of the thousands of resume that are sent for a job openning all with relevant degrees, what makes a few special? this is the reason why I registered.

  55. I’m towards completing my CIMA, and im considering doing CFA, is it useful for me if I want to work in trading

  56. If you didn’t even make it into Oxbridge/Imperial/Ivy league etc., what even makes you think you are good enough to work in this industry? the evidence suggests that you are tier 2 (or worse) in an industry where tier 1 struggles to make it. You haven’t earned even an interview against 10,000+ other applicants who have the academic credentials. Go and do something else.

  57. Having a non-technical background (B.Com Finance), I see no future in the role I am playing now. I work in a software firm and its been 3+ years as a Project Manager. Prior to this I was a Business Analyst and did sales for 2 years in the same software firm. I do not want to continue in project management (so am not going to do PMi certification for sure), and am planning to move to Finance Industry as I strongly feel I have a flair for Finance (people say I have a calculative mind). To break through from project management to Finance, I thought CFA could be the best option, but it may take few years (3-4yrs) to make that switch. What can I do to immediately switch to a Finance job? FYI, I shall start studying in Aug-Sep 2016, so that I could write and pass Dec 2016 CFA-L1.

  58. I am engineer graduate but looking to break into the finance industry, is taking CFA a good first step for me?

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