Is the CFA Worth It?
- January 13, 2018
- Posted by: evansontraining
- Category: CFA
The CFA exams have come and gone and the financial media has been all over the story for the last week. From describing the challenge for CFA candidates to one recent Bloomberg piece that questions the value of the CFA charter. It’s a question often asked and without a clear answer but naysayers may be missing some key factors.
A record 172,682 candidates sat for one of the three CFA exams this month in just about every country on the globe. If history is any indication, nearly half of those candidates will fail the exam and some may need to take each level multiple times.
On the hundreds of hours it takes to study the material and the money spent for registration, whether the CFA is worth the effort is a valid question. Analytical people are drawn to the CFA through their career dreams so it’s natural they would want to place a value on their time and money spent.
CFA Not Worth It Crowd Misses the Bigger Picture
The Bloomberg article doesn’t come to a definite answer on the value of the CFA charter but the tone seems to suggest that it’s a high bar to set considering the costs. Maybe I’m biased being a charterholder myself but besides some obvious problems with the analysis, the article misses a few key points that only a candidate or CFA charterholder would understand.
The article assumes candidates spend ‘thousands of dollars’ on fees and materials for each CFA exam. While you can spend several thousand through the registration and some of the more expensive third-party study providers, ‘thousands of dollars’ is misleading and not the norm. The standard registration fee to the CFA Institute is $860 and even the premium package on Finquiz is only $400 which leaves a lot of room to ‘thousands’. Saying ‘thousands’ is a stretch considering many candidates study only the Institute materials and even the most expensive third-party providers cost less than a thousand dollars.
The biggest point to the article is based off a Phaidon survey of job opportunities on the LinkedIn platform mentioning the CFA in the description. Nearly three-quarters (73%) of the jobs offer less than $100,000 annually which is supposed to sound low but sounds like a pretty good salary to me.
Assuming that jobs posted on LinkedIn are representative of all available, there’s a glaring problem with the survey in that no mention of geographic distribution is made. A $100,000 offer in Mumbai is considerable different than the same salary in New York City where consumer prices are 250% higher and rent is five-times more expensive.
The article does mention a survey by CFA Societies in the Midwest U.S. showing a median salary for charterholders of $154,000 – almost $70,000 higher than their peer group. If this is the median in the breadbasket, how much higher is it in the larger cities on the East Coast? Another study by InvestmentNews is reported to show charterholders make nearly 25% more than their CFP and CPA peers.
The article also downplays the credibility one gets from holding the charter. It’s hard to quantify and you can certainly find recruiters that don’t care about the CFA on a resume…if that’s what you’re looking for in a quote. I would disagree from my own experience as a freelance analyst after multiple clients have told me I was selected on the basis of having the charter.
The real benefit to the CFA charter, and just the grueling process of obtaining the charter, goes way beyond all this. The financial industry is uber-competitive and few sectors are as uncertain in outcome. In an industry where being exceptional means beating your index by a few percent, how much is it worth to have all the tools possible?
A lot of potential CFA candidates are turned off by the amount of time it takes to prepare for the exam. Upwards of 300 hours over four or five months times three might seem like a big commitment…but is it really?
Put that 900 hours into perspective against the roughly 744,600 hours you have on this earth (assuming 85 years lifespan). What else are you going to be doing with most of that 900 hours? Watching TV, surfing the internet? Is 900 hours too much to make you the professional you could be and to open the door to more opportunities?
The CFA is a crucible for the best investment and asset professionals. It’s an extremely tough process that weeds out those not committed to the highest standards and forges others into professionals ready with the tools they need to make the best decisions for their clients.
If this sounds like something that is important to you, then welcome to the challenge. If you don’t think the highest standard of professionalism is important, then we don’t want you anyway. Good luck.
‘til next time, happy studyin’
Joseph Hogue, CFA
Article Source: Finquiz