When you think of Wall Street, you probably conjure up thoughts of highly-educated, affluent bankers – money managers with MBAs, CFAs and a host of other credentials. But the truth is, only around 10% of those working at large banks are directly involved in managing securities. The other 90% work in compliance, human resources, legal, marketing and other mid-and back-office roles. These are people who aren’t trained to manage money, but whose job touches all the ancillary parts of investing.
The end result is that the majority of people who work in banking don’t necessarily have a full understanding of the financial instruments that drive the industry. In likelihood, they're HR managers who can’t conceptualize fixed income, or compliance officers who don’t understand the intricacies of the derivatives market. The CFA Institute, the organization that administers the Chartered Financial Analyst (CFA) program, is out to change all that.
Tomorrow, the Institute will launch the Claritas Investment Certificate, a global program designed to give employees who work with or around financial decision makers a basic understanding of the industry. It’s the diet CFA, so to speak.
The program is, in part, intended to respond to the lack of trust investors have in Wall Street following the financial collapse. Knowledge and clarity are the best ways to restore confidence in the capital markets space, says CFA Institute chief John Rogers.
Bank of New York Mellon, one of the 68 organizations to take part in the Investment Certificate pilot program, was one of the first to express interest when the concept began circulating in 2011.
“We heard directly from our employees,” said Steve Krantz, a member of BNY Mellon’s learning and development team. “There is a real need out there to provide knowledge about the investment industry and how it all fits together.”
Krantz expected around 25 people to step up and take part in the program. More than 200 employees came forward. Other organizations who took part in the pilot include CalPERS, Merrill Lynch Wealth Management, BlackRock and UBS.
The initiative is made up of seven self-study modules: industry, tools, instruments, structure, controls, client needs and, perhaps most importantly, ethics and regulations. “We’re trying to broaden the standard for ethics in financial services,” said Tom Robinson, managing director of Americas operations for CFA Institute.
The certificate is no cupcake. “The initial reaction as people started to see the content was: ‘this thing is for real. This is a time commitment. You have to take this thing seriously,’” Krantz said.
The program demands around 100 hours of study, compared to the roughly 300 hours needed to prepare for the CFA Level 1. As with the CFA, the exam is taken in-person. It’s two hours long and made up of 120 questions.
The results of the pilot program aren’t back yet, but the typical pass rate for an exam at this level is between 70% and 80%, Robinson said. By comparison, the CFA Level 1 has a 38% pass rate.
The CFA Institute believes the program will become the industry standard for mid- and back-office employees at banks, asset management firms and other financial institutions. They expect that, eventually, roughly 10,000 candidates will take the exam each year.
Most participants will enroll through their company, but the exam can be taken by an individual as well. With compliance and ethics a major priority for large banks, the certificate is at worst a nice resume stuffer for job seekers. Nearly nine out of 10 financial services executives said they find it a challenge to recruit financial services employees with a strong compliance background, according to a recent study.
The program costs $685 for an individual. A company can push the cost down to $485 per employee if enough people sign up.