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What Is a Chartered Financial Analyst (CFA)?

Chartered financial analysts (CFAs) have significant education and experience in investment management. Learn more about them here.

It’s critical to seek out financial experts with recognized titles and credentials. One designation that stands above the rest is Chartered Financial Analyst (CFA). A globally recognized profession, these have extensive and earned experience in investment management and analysis.

This article will define CFAs. We’ll offer an overview of the curriculum they must pass to earn their title, as well as whether it’s worth it to hire one. You’ll also learn how much it costs to hire a charterholder and how to find one.

CFA Definition

Chartered financial analysts (CFAs) are capable experts who specialize in investment and portfolio management. They earn the designation after completing a rigorous curriculum through the CFA Institute. During the program, they gain a deep understanding of professional and ethical standards, economics, derivatives, probability, and investment analysis.

Per the CFA Institute, there are more than 190,000 CFAs around the world. People in the industry often describe them as holding the highest distinction among financial professionals. Besides their immense expertise, the main reason is that they agree to uphold the Institute’s Code of Ethics and Standards of Professional Conduct.

Ethical standards CFAs agree to include practicing integrity and a duty of care in many aspects of their profession. They must also keep a strong competency level in the investment industry.

The professional standards charterholders must abide by are substantial. Some key ones include following the law (e.g., not engaging in illegal activities like market manipulation or fraud) and being transparent, objective, and loyal to clients. They must also avoid all conflicts of interest and disclose information about any possible ones with clients, along with any compensation they receive for product or investment recommendations.

Since CFAs follow such a high standard, they act as fiduciary financial advisors. In other words, you can expect them to put your benefit first and steer clear of conflicts of interest. If they breach the Institute’s code, they risk losing their charter.

Becoming a CFA

Becoming a CFA charterholder isn’t a walk in the park. Candidates must complete over 900 hours of self-study. The curriculum includes a vast range of financial and business topics. Below are the steps to become one:

  1. Have one of the following:
    • A bachelor’s degree or completed education from an equivalent program.
    • 11 months left until graduation for your post-secondary education (college or equivalent) by the time you take the Level I exam.
    • A combination of 4,000 hours of work experience and/or college education within three consecutive years of signing up to take the Level I exam.
  2. Pay a $350 enrollment fee before registering for the program.
  3. Possess an international travel passport.
  4. Complete 4,000 hours of work experience in the investment decision-making field.
  5. Provide two to three professional references.

Students must take three exams, Levels I, II, and III. Each one takes place after about 300 hours of studying. CFA exams, however, are as grueling as it gets. For example, the average pass rate for the Level I exam was 41% over the last ten years. 300Hours.com, a third-party site that provides exam information, notes that pass rates have dipped even further since the COVID-19 pandemic.

Students must take each exam on a computer, in person, and under the supervision of a proctor. All three exams last for about four hours and vary in question format. Here’s a quick breakdown of each exam’s structure, according to the CFA Institute:

  • Level I includes 180 multiple-choice questions, split into two roughly 135-minute sessions. It has questions about all ten topics in the curriculum.
  • Level II includes 22 sets of vignettes, or scenarios, with 88 multiple-choice questions. It’s divided up into two roughly 132-minute sessions.
  • Level III is a blend of vignettes with multiple-choice questions and essay questions. Like the second exam, it’s broken up into two roughly 132-minute sessions.

Do I Need a CFA as a Financial Advisor?

As a result of their diligent training, CFAs are effective financial advisors. But they’re not for everyone. They specialize in investment and wealth management and excel at crunching numbers and using statistics to make informed decisions and forecasts.

So, if you’d like to hire an advisor to assemble and maintain a complex portfolio, a CFA would be an excellent solution. But keep in mind that you may need to have a minimum amount of assets to invest before working with wealth managers, both with individuals and firms. This makes these professionals more of a choice for those with substantial assets.

If you’re looking for planning or don’t have a lot of money to invest, it may be better to look elsewhere for help with your finances. There are many different types of advisors out there, like planners, robo-advisors, and more, all with varying skills. 

Cost to Hire One

Because they’re top-tier financial professionals, CFAs come at a premium. The exact price to hire one can vary, however. It’ll depend on factors like the payment structure they or their employer use and how much experience they have.

Investment and wealth managers commonly use the assets under management (AUM) fee structure. This is where an advisor charges you a percentage (often 1%) of the dollar amount of assets you have. For instance, if your portfolio is worth $2 million and your advisor charges a 1% AUM fee, you’d pay $20,000.

CFAs who act as advisors may also charge a flat or hourly fee for their services. This is especially the case if you need a single service, like choosing initial investments before deciding to take it from there.

How to Find One

As we mentioned, CFAs are great advisors for wealthy people with intricate portfolios. If this describes you, there are some good places to look for ones who practice as advisory professionals:

  • Financial Planning Association (FPA) lets you search for chapters of professionals near you. Members could be certified financial planners (CFPs), CFAs, or others.
  • The National Association of Personal Financial Advisors (NAPFA) allows you to find experts, including CFAs, in your area.
  • Word of mouth. It never hurts to ask around and see if you know someone who uses a CFA and has one to recommend.
  • Using matching tools, like this free one, can help you find up to three vetted financial advisors. Typically, you’ll answer some questions. Then, it’ll match you with someone with the expertise you need.

Frequently Asked Questions

Do CFAs have client confidentiality?

Yes, they do. As per section III.E. of the Institute’s Standards of Professional Conduct, CFAs must maintain confidentiality with all clients. There are, however, a few exceptions:

  • The client is or was engaged in “illegal activities.”
  • Governing authorities legally require them to disclose the information.
  • The client authorizes a CFA to disclose information.

How long does the CFA exam take?

CFA exams take around four hours to complete in total. Each exam consists of two roughly 132-minute sessions with an optional break in between.

What areas do CFAs have expertise in?

Chartered financial analysts often shine in investment analysis, managing large portfolios, and working with data. They study subjects such as economics, alternative investments, statistics, high-level analysis of portfolios, and more.

What ethical standards do CFAs follow?

CFAs follow the Institute’s Code of Ethics, which includes the following core principles:

  • Always maintain integrity, respect, and competency, whether it be with clients, co-workers, or employers.
  • Keep the integrity of their profession against their interests.
  • Always practice thoughtful, sound judgment.
  • In their work, ensure that the global capital markets keep up their integrity
  • Consistently maintain a high level of knowledge and competency in their profession and continue learning.

What’s the difference between a CFA and a CFP?

Both are different types of financial professionals. CFAs specialize in investment and wealth management and get their charter from the CFA Institute. CFPs help holistically plan clients’ finances, including taxes, retirement, and estates. CFPs earn their certification from the CFP Board.

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