What is a Chartered Financial Analyst (CFA)? – Councilor Forbes

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CFA stands for Chartered Financial Analyst, a professional designation bestowed by the CFA Institute to applicants with proven skills in investment analysis and wealth management.

Think of CFAs as the stars of the financial management industry: they excel in the competitive world of financial analysis and have provided the extra work needed to achieve the gold standard in their profession.

Definition of CFA

When you see CFA as part of someone’s designation, it means that they are a professional with extensive training in the basic skills of high-level investment strategy and fund management. . To obtain the CFA designation, charter holders must demonstrate expertise in financial research, portfolio management, investment advice, risk analysis and risk management.

Obtaining a CFA is often a requirement to become an investment manager in an investment firm or public company; engage in credit analysis, business accounting and auditing; or do some financial planning for the wealthy. The CFA Institute awards certification, which is widely regarded as the pinnacle of professional development in investment management.

“A CFA charterholder is someone who has achieved one of the highest accolades in the investment management profession,” says Jeremy Keil, CFA and financial planner at Keil Financial Partners in New Berlin, Wisc. “They are trained in in-depth investment analysis, far beyond the knowledge of a typical financial advisor.”

The only downside to hiring a CFA? “They are hard to find,” Keil says. “Most work for institutions that manage portfolios over $ 1 million and don’t work directly with regular financial consumers. “

How to earn a CFA

Becoming a chartered financial analyst is a complicated proposition, by design. It is considered very difficult to meet the challenge of training and testing required to obtain CFA status.

“The requirements to become a CFA are stringent and maintain an elite type of status, which is another reason CFAs can be costly for the financial consumer who hires them,” says Daniel Rodriguez, COO at Hill Wealth. Strategies, in Richmond, Virginia.

To become a CFA charter holder, applicants must:

  • Have a bachelor’s degree or diploma from an equivalent university program or 11 months or less until graduation if they are still studying.
  • Have 4000 hours of relevant work experience acquired over at least three consecutive years.
  • Take a series of three six-hour exams.
  • Be able to travel the world, speak fluent English, and live in a country that recognizes CFAs.

The tests are deemed rigorous and may require 900 hours or more of study in 10 thematic areas to prepare. Most CFA candidates fail for a variety of reasons.

“The exams assess the person’s knowledge of economics, personal and professional ethical situations, money management scenarios, as well as other topics related to money management and finance that must be expressed, depending on the test, whether it is quantifiable or qualitative, or both, ”says Rodriguez. “The pass rate for each section of the three exams is less than 40%. After all the exams, this represents a rate of less than one in five applicants receiving their CFA, according to the CFA Institute.

Even after completing the exams and exam prerequisites, CFAs still have work to do. They must pay an annual membership fee and certify that they remain in good standing with the principles of the CFA.

“From an educational point of view, having a CFA is equivalent to obtaining a master’s degree in one’s field,” explains Rodriguez.

CFA vs CFP: different skills for different needs

The designations of Certified Financial Planner (CFP) and CFA may seem somewhat similar at first glance. While both designations occupy the same wealth management ground, a Chartered Financial Analyst plays a very different role than a Certified Financial Planner and in most cases offers a very different skill set.

“The main difference between a CFA and a certified financial planner is that a certified financial planner works with individual clients to achieve short and long term personal financial goals,” says Rodriguez. “A chartered financial analyst works with opportunities and large-scale corporate investment situations. “

A CFP focuses on financial planning for individuals and families, and they benefit from strong people skills. CFPs know a lot about investing and personal finance, but their knowledge is geared towards creating and managing investment portfolios for clients.

Meanwhile, a CFA’s skills are focused on high-level investment management, and they are trained in economics, financial reporting, corporate finance, and complex equity investment strategies. CFAs often work in large organizations and handle research and analysis for investment firms.

For ordinary people who need help building a financial plan and managing their personal investments, a CFP usually does more than meet their needs. “Unless they have great financial wealth to manage,” says Rodriguez, in which case a CFA might make sense.

How much do CFAs cost?

CFAs are well paid finance professionals. According to Payscale.com, a chartered financial analyst typically earns a base salary of $ 90,000, plus bonuses of up to $ 50,000 per year, as well as premium profit sharing, stocks, and other benefits, in most of the cases.

“The cost of a CFA depends on the position they hold,” says David Wright, executive director of practice development at M&O Marketing in Southfield, Michigan, who works with investment advisers to develop their practices. “However, for the industry gold standard, we have seen a 7% pay increase per year since 2012.”

If you’re working one-on-one with a chartered financial analyst, expect to pay the same fee schedule as most financial advisers. For example, expect common fees of $ 1,500 to $ 2,500 for one-time portfolio building fees.

Beyond that, you’ll likely pay around 1% of your total assets under management on an annual basis. This means that if you have a portfolio of $ 3 million under CFA management, you will pay a management fee of $ 30,000 per year.

How to choose a CFA

If you are a high net worth person, you can probably access the services of a certified financial analyst through the private banking services of your bank, investment management company, hedge fund company or any other wealth management company. top of the line.

Or you can go it alone. You should do your homework on potential DWIs anyway, but when flying solo you need to be extra careful.

“To hire a CFA, go to the CFA Institute Career Center, which connects employers and recruiters with investment professionals associated with the institute,” says Wright. “Due diligence is important when selecting a member of your investment team. FINRA.gov and the CFA Institute allow you to search information on designated members and check their status. The CFA Institute also has a list of all CFA charter holders.

If a CFA isn’t the best professional for your roster, try aiming for other money management designations that suit your personal needs. “Some common alternatives can be a certified financial planner or an investment advisor,” he adds.

You’ll also want to make sure that all of the potential finance professionals in your life are trustees, which means they’re legally bound to put your best financial interests ahead of theirs.

In summary: does a CFA have meaning for you?

Whether you need to work with a CFA depends on two questions: the size of your investment portfolio and your unique investment management needs.

“Most clients need someone to answer their questions that aren’t related to stocks and bonds, and a certified financial professional is your best bet,” says Keil. Whether that professional is a CFA, CFP or something else entirely will depend on your personal financial situation.

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