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How to Become a CFA: A Step-by-Step Guide

February 4, 2020

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The finance industry offers a variety of career paths that can be rewarding for those who want to help individuals, businesses or other organizations succeed financially. One career path that can provide a wide range of opportunities for finance professionals is the certified financial analyst (CFA). These individuals help guide businesses and individuals in making the right investments.

If you are a finance professional who is interested in furthering your investment knowledge while gaining access to new work opportunities with higher earning potential, this may be a good career choice for you. In this article, we'll discuss what a CFA does, their average salary and how to become a CFA, while also answering some frequently asked questions about this career.

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What is a CFA?

A CFA is a certified financial analyst who has earned the certification provided by the CFA Institute, a global non-profit professional organization. The CFA designation is recognized around the world as the leading credential for investment professionals due to its focus on analysis, investment knowledge and ethics.

All professionals who have been accepted into the CFA charter are listed in the CFA Institute's member directory along with their contact information, making it easy for individuals, corporations and other institutions to contact them. Some additional benefits of being a CFA charterholder include better job opportunities, higher earning potential and distinction among peers in the finance industry.

Though this career path may not be for everyone, it is worthwhile for those who want to set themselves apart from others in their field and network with other professionals and potential employers.

Related: Your Guide to Careers in Finance

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What does a CFA do?

A CFA is a certified investment professional who provides investment guidance and portfolio management for individuals, businesses and other organizations. These professionals can work at institutional investment firms, broker-dealers, insurance companies, pension funds, banks and universities. The CFA designation is only given to investment professionals who have completed the requirements set by the CFA Institute. CFA members can be found at some of the world's largest investment institutions, including JP Morgan, Goldman Sachs, UBS and Morgan Stanley.

Related: Learn About Being a Financial Analyst

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Average salary

According to the CFA society, the average salary for a CFA in the U.S. is approximately $180,000 per year before cash bonuses and equity or profit-sharing. The average salary for a financial analyst in the U.S. is $69,271 per year.

When comparing these two average salaries, you can see that having the CFA designation can lead to much higher-paying job opportunities. In fact, as the gold standard in the financial industry, the CFA charter can help financial analysts get access to better job prospects with increased earning potential throughout their careers.

Related: 12 High-Paying Jobs in Finance

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How to become a chartered financial analyst

Though every professional's path toward becoming a chartered financial analyst may be different, here are the most common steps you can take to become one:

  1. Enroll in the CFA program.
  2. Pass CFA exams.
  3. Obtain qualified work experience.
  4. Submit reference letters.
  5. Apply to become a charterholder.

1. Enroll in the CFA program

To become a CFA candidate, you have to first enroll in the CFA program before registering for the Level I exam. To enroll in the program, you need to meet one of the following requirements:

  • Have a bachelor's degree
  • In the final year of bachelor's degree program
  • Completed a combination of four years of full-time work experience and higher education

In addition to these requirements, candidates must also own an international travel passport, be able to take the exams in English, meet the professional conduct admission criteria and live in a participating country.

2. Pass CFA exams

The next step to becoming a CFA is to pass all three levels of the CFA exams in succession. The main subjects and topics covered in these exams include ethical and professional standards, economics, equity investments, fixed income and portfolio management. Each exam focuses on a specific aspect of investment:

  • Level I: Focuses on investment tools, testing your knowledge of ethical and professional standards
  • Level II: Focuses on asset valuation, testing your ability to apply standards to situations that analysts face
  • Level III: Focuses on portfolio management, testing your ability to apply standards in regard to portfolio management and compliance

Passing the CFA exams is a requirement of obtaining the CFA charter. These exams require a significant time investment, as they are not easy. While some professionals can study for the exams while working in the field, others find concentrated study to be a more successful strategy. The CFA Institute estimates that the average candidate spends 322 hours preparing for each exam—304 average hours for Level I, 329 hours for Level II and 334 hours for Level III.

2. Obtain qualified work experience

To progress toward becoming a CFA charterholder, you'll need to acquire 48 months of “acceptable work experience” which can be achieved before, during or after taking the exams. The CFA Institute considers acceptable work experience to be a broad range of financial and investment experience covering areas like trading, economic and corporate finance. However, at least 50% of this work experience must be directly involved in the investment decision-making process or in the production of a product that impacts this process.

3. Submit reference letters

After you have passed the three exams and acquired the necessary work experience, you will need to start preparing reference letters to submit to the CFA Institute. These references should attest to your abilities and professional character as well as explain why you should be awarded a charter. References that come from supervisors or current CFA charterholders will be more impactful than others.

4. Apply to become a charterholder

Once you have met all of the above requirements, you can apply to become a CFA charterholder. This requires you to submit a payment as well as your prerequisites for review. The CFA Institute may take up to 10 business days to review regular membership applications and up to 4 weeks for affiliate membership applications. Candidates will receive an email once their application has been reviewed. Once you are approved, you are officially a CFA charterholder.

Related: Top 11 Finance Certifications to Highlight Your Expertise

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Frequently asked questions about CFAs

You may still have some questions about certified financial analysts, the CFA exams and the requirements to become a charterholder. Here are the answers to some of the most commonly asked questions about CFAs:

  • How long does it take to become a CFA?
  • How much does the CFA exam cost?
  • Where are the CFA exams offered?
  • When are the CFA exams offered?
  • How do I study for the CFA exams?
  • What are the CFA pass rates?
  • Should I become a CFA?

How long does it take to become a CFA?

The average time commitment is four or more years. This includes time spent preparing for the exams, acquiring the necessary work experience and applying to the charter. According to the CFA Institute, the average CFA spends 300 hours per exam level studying and preparing for the tests.

How much does the CFA exam cost?

Exam registration costs will vary depending on when you register for the exam. The early registration fee is $700, the standard registration fee is $1,000 and the late registration fee is $1,450. In addition to exam registration fees, there is also an additional one-time enrollment fee of $450 when you register for the Level I exam.

Where are the CFA exams offered?

The CFA examinations are offered in over 170 different cities across the globe. To find the location closest to you, visit the CFA Institute's website.

When are the CFA exams offered?

The Level I exam is offered twice per year—once in December and once in June. Level II and Level III exams are offered only once per year in June. For exact exam dates or to register for a testing date, visit the CFA Institute's website.

How do I study for the CFA exams?

Instead of a formalized education program, the CFA exams are designed for self-study. There are a variety of organizations that offer CFA test preparation and courses, both online and in-person. After you register for the CFA exam, the CFA Institute will provide you with a variety of free resources, such as online learning, personalized study plans, flashcards, practice questions and mock exams.

What are the CFA pass rates?

The CFA pass rates vary from year to year. Most recently, the pass rates were 41% for Level I, 44% for Level II and 56% for Level III. It is also important to note that fewer than 20% of candidates will pass all three tests in the first three attempts. Candidates should not be discouraged if they have to take the exams more than once.

Should I become a CFA?

You should consider becoming a CFA if you want to learn more about investment and portfolio management. Those who want to have access to more employment opportunities and higher earning potential may also consider a career as a CFA, as this designation may help you surpass applicants without the credential. However, it's important to note that the CFA charter is not a guaranteed path to success. Before you commit to earning the certification, consider the pros and cons while doing a cost-benefit analysis to see if it's the right option for you.

Related: 6 Types of Finance Jobs

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