How to Become a Chartered Financial Analyst
Updated August 30, 2024
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Financial analysts evaluate investment performances, forecast financial trends, and manage portfolios. These in-demand professionals report a median pay of nearly $100,000, according to the Bureau of Labor Statistics (BLS). Becoming a chartered financial analyst (CFA) can increase your earning potential.
Offered by the CFA Institute, the CFA credential demonstrates expertise in investment decision-making and strategy. It also requires a substantial time investment. Candidates spend more than 300 hours studying for each level of the three-part CFA exam, and fewer than half pass the CFA Level I or CFA Level II.
Learn how to become a CFA and everything you need to know before starting the CFA program.
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Why Get Chartered as a CFA?
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Showcase Your Skills
Becoming a CFA charterholder will showcase your expertise in portfolio management, financial statement analysis, and equity investments. Passing the three-part CFA exam and meeting the professional experience requirements demonstrates your commitment to your profession. -
Advance Your Career
With the CFA credential, you can pursue specialized roles in investment management, financial analysis, or financial planning. Prospective employers and clients know that the credential signals your expertise and dedication to maintaining current knowledge in the field. -
Boost Your Earning Potential
CFA charterholders earn 57% higher salaries than those without the credential, according to research from 300 Hours. Even passing one or two parts of the exam can increase your salary, with those who passed CFA Level I reporting a 32% increase and those who passed CFA Level II reporting a 39% increase.
How Do You Qualify for the CFA Credential?
Becoming a CPA takes several steps. You'll need to meet the educational requirements, pass the three-part CFA exam, and complete work experience requirements to receive the CFA credential.
While you'll need to fulfill the education requirement before entering the CFA program, you can gain work experience while passing the exams. In total, you must have a minimum of 4,000 hours of experience completed within at least 36 months.
After you meet the educational, exam, and experience requirements, you'll submit a membership application to become a regular member of the CFA Institute. You'll submit 2-3 professional references as part of your membership application. Your references must provide information on your work experience and professional character.
Educational Requirements
While many professional certifications require a degree, you can become a CFA without one. The CFA Institute offers three flexible options to meet the educational requirements. To join the CFA program and begin taking your exams, you'll need to meet one of the following:
- Hold a bachelor's degree
- Be within 23 months of finishing a bachelor's degree
- Hold 4,000 hours of professional experience and/or higher education accrued over a minimum of 36 months
Regardless of how you meet your educational requirements, you must have professional work experience and pass all three levels of the CFA exam to become a CFA.
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Professional Requirements
Candidates for the CFA credential need 4,000 hours of relevant work experience related to investing and finance. This experience can include paid internships, part-time work, and remote work. Your professional experience should demonstrate teamwork, critical thinking, problem-solving, and analytical skills related to the investment decision-making process.
You must accrue work experience over a minimum of 36 months, and you can gain experience before, during, and after taking the CFA exams.
What Does the CFA Exam Cover?
Candidates for the CFA credential must pass all three parts of the exam, which is only offered at proctored test centers during four testing windows each year.
The three parts of the CFA exam, which test-takers must complete in order, cover professional standards, economics, financial statement analysis, and equity investments. CFA Level I includes two sessions of 90 multiple choice questions each, with 2 hours and 15 minutes per session. Level I measures the candidate's knowledge of investment tools, portfolio management, and asset classes.
The CFA Level II and Level III use a slightly different format, where test-takers complete item sets with multiple questions for each vignette. Level III incorporates essay questions. Because the CFA Institute grades the essays by hand and determines the passing scores for each test round, it takes up to two months to receive your results after each section.
| Section | Format | Time |
|---|---|---|
| CFA Level I | 180 multiple-choice questions | 4 hours 30 minutes |
| CFA Level II | 88 multiple choice questions | 4 hours 24 minutes |
| CFA Level III | 44 multiple-choice questions and 11 essays | 4 hours 24 minutes |
Scoring the Exam
Test-takers must meet the Minimum Passing Score (MPS) to pass the CFA exam. However, the CFA Institute does not give you a numerical score. Instead, you'll receive an exam report that shows how you performed on each subsection of the exam. The report will include a line that represents the MPS.
You'll receive your scores within 5-8 weeks of taking the exam. While the CFA Institute immediately calculates your correct and incorrect scores on multiple-choice questions, experienced scorers evaluate the essays. Then, the CFA Institute sets standards to determine the minimum number of questions to pass the exam. Candidates will receive their scores after the CFA institute completes this process.
If you don't pass a level of the exam, you can use your exam report to improve your knowledge for retaking the exam.
| Section | 10-Year Average Pass Rate |
|---|---|
| CFA Level I | 41% |
| CFA Level II | 45% |
| CFA Level III | 52% |
How Do You Register for the CFA Exam?
Registering for the CFA exam starts with choosing your exam window and paying your registration fee. The CFA Institute offers exam windows each year in February, May, August, and November.
Once you pay the enrollment and registration fees, you can self-schedule the exact date to take your exam. You'll also qualify for an early registration discount if you register at least six months before the exam.
Once you sign up for the CFA Level I, you officially enter the CFA program. You'll sign a candidate agreement and submit a professional conduct statement. You may also need proof of education or work experience as a candidate.
Then, it's time to get serious about studying for the CFA exam. Register well before your exam date since you'll need 300 or more hours of studying for each exam.
Paying for the Exam
Before taking the CFA exam, you must pay enrollment and registration fees. CFA test-takers pay a one-time enrollment of $350. For each level of the test, you'll pay $1,250 for standard registration, with a discount of $940 for early registration. If you need to reschedule an exam, you'll pay a $250 fee.
That makes the total cost of the CFA exam between $3,170 and $4,100. On top of the exam fees, you'll also need to budget for study materials.
How Can You Prepare for the CFA Exam?
The CFA Institute recommends spending a minimum of 300 hours preparing for each exam level. Start early so you don't have to rush your study prep, and make sure you're following the best strategies to pass the exam.
Top Tips
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1
Create a Study Schedule
You'll need to fit 300+ hours of studying into your schedule for each CFA exam. And you'll need to study efficiently and effectively to maximize your study time. Assess your strengths and weaknesses by taking a practice exam early in the process. -
2
Learn the Test Format
The CFA exam uses a vignette model where you'll answer multiple questions based on a case or scenario. You'll also write essays in CFA Level III. Make sure you understand the format for the questions so you're not caught off guard. -
3
Identify Weaknesses
Personalize your study plan by identifying the areas where you'd benefit from extra study hours. Mock exams and practice questions are a great way to zero in on topics to emphasize. Many study tools provide personalized analysis of your answers to help you improve. -
4
Practice Pacing
Each level of the CFA exam takes over four hours. That means practicing your pacing and endurance is important so you'll stay strong throughout the exam. As you prepare, focus on speed and accuracy because leaving even a few questions blank can mean the difference between passing or failing. -
5
Take Practice Exams
Practice exams are an effective way to prepare for the CFA exam. Consider scheduling a mock exam at the beginning, middle, and end of your study plan so you can track your progress. The CFA Institute reports that test-takers who earn 70% or higher on one mock exam are three times more likely to pass.
Practice Exams and Study Resources
- CFA Program Mock Exam: The CFA Institute offers practice questions and a mock exam to prepare for the exam. Their curriculum aligns with the test and offers an exam-day experience. You can also take an adaptive placement test to identify your weakest areas and focus your study sessions.
- CFA Level 1 Mock Exam: Offered by 300 Hours, this free CFA Level 1 mock exam draws on the latest curriculum and gives you a 2-hour 15 minute, 90-question practice test. You can either take the test online or download a PDF, and you'll also receive answers, analysis, and a personalized test report.
- CFA Program Practice Pack: The CFA Institute's program practice pack includes practice questions and mock exams for Level I and Level II, with questions written by the authors of the official test. You can test your knowledge with 1,750 practice questions matching your experience on exam day.
What Is Needed to Stay a Charterholder?
Membership in the CFA Institute is a requirement for using the CFA credential. You'll need to renew your membership annually to keep your credential valid. In addition to the ability to use the CFA designation, members benefit from exclusive member content, professional learning resources, and networking opportunities.
The membership year runs from July 1-June 30. CFA charterholders pay a $299 annual membership fee.
Should You Get Multiple Certifications?
Earning multiple certifications can position you as an expert in your field. However, CFAs understand that professional certification requires a significant investment. If you're interested in other certifications, ensure they align with your personal and professional goals.
CFAs can also consider becoming certified financial planners, certified public accountants, or certified financial risk managers. These credentials require meeting education, experience, and examination requirements, much like the CFA credential.
Before investing in multiple certifications, consider your alternatives for career advancement, such as educational programs and professional experience.
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Career Spotlight: Lou Haverty, CFA
Why did you decide to pursue a career as a CFA?
I graduated college during the dot-com crash. The year before I graduated, the job market was really strong, and most students were receiving multiple job offers with signing bonuses. The following year, the market turned, job offers were drying up, and some companies even rescinded their offers.
It was very clear to me that I needed to figure out how to stand out in a very crowded job market. After talking with other professionals in the industry, I realized that the chartered financial analyst designation was most often referenced as being the most prestigious but the most difficult financial designation to earn.
The challenging nature of the job market was what gave me the motivation to get through all three levels of the CFA exam. The designation has been extremely valuable for me in terms of getting more difficult interviews as well as being more effective as a financial analyst. The irony is that if the job market had been better when I graduated, I might not have had the motivation to earn the CFA charter.
Did you earn a degree in accounting?
No. I earned a bachelor of science in business administration with a major in finance. I came close to getting a minor in accounting, but I didn't complete the necessary classes.
At the time, I made the decision to major in finance because I knew I wanted to be a financial analyst. However, what I didn't fully appreciate was that successful financial analysts really needed a very strong understanding of accounting fundamentals in order to be effective.
I should have taken more accounting in college. The CFA exam was very heavily weighted toward accounting material, particularly with the material on the Level II exam. So by making it through the CFA exam, I ended up with a very strong accounting background even though I didn't get it in school.
How much time do you spend on continuing education, either as a requirement for your profession or for your own personal growth in the field?
I try to attend investment conferences a few times each year. It really comes down to how intense my work schedule happens to be. The conferences are really great opportunities to network with other industry professionals as well as keep up to date with the most relevant trends and topics.
The CFA Institute currently has optional continuing education credits that can be self-reported. However, right now, those continuing education credits are not mandatory, like what is required for CPAs. It's always possible that it could change in the future.
What are some essential skills someone working as a CFA charterholder must have?
The most important skill is understanding how to spend your time in the most valuable ways. When you are analyzing the financials for a company, there are so many different sources of information available. You need to understand how to prioritize your time in a way where you are focusing only on the most important information and filtering out the noise.
What advice would you give to students who are considering pursuing a career as a financial analyst with a CFA charter?
Working as a financial analyst on either the buy side or sell side of the industry is very competitive. You need to find as many ways to stand out from the crowd as possible. Pursuing the CFA charter is one of the best ways to stand out and let employers know you have a strong understanding of the fundamentals as well as a disciplined work ethic.
Just make sure you prepare yourself for a major commitment if you want to pass all three levels of the exam. Only roughly one out of five people make it through all three levels of the exam. The secret to passing the exam is starting your studying early (6-8 months before your exam date) and pacing yourself until exam day. That means spending a few hours each night reading and taking practice questions.
Lou Haverty, CFA
Lou Haverty, CFA, has decades of experience in various areas of commercial banking, including middle-market capital markets and portfolio management. He is the founder of Financial Analyst Insider, a resource for aspiring finance and accounting professionals to advance their careers.
Questions About How to Become a CFA
How long does it take to become a CFA?
It takes several years to become a CFA. Many candidates hold a bachelor's degree. You must pass three challenging exams and complete 4,000 of relevant work experience to become a CFA.
Do CFAs make a lot of money?
CFAs report above-average salaries, with an average pay of $105,000, according to July 2024 Payscale data. The study resource 300 Hours found that CFA charterholders earn 57% higher salaries than professionals without the credential.
Is the CFA exam hard?
Yes, the CFA exam is hard. Only 41% of test-takers pass CFA Level I, with a 45% pass rate for CFA Level II and a 52% pass rate for CFA Level III.
Is CFA harder than CPA?
The CFA and CPA credentials are both challenging, but in general, you'll need to meet higher educational requirements to become a CPA, while becoming a CFA requires a longer testing process.
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