What Does "CFA" Mean?

The Chartered Financial Analyst® (CFA®) designation is regarded by most to be the key certification for investment professionals, especially in the areas of research and portfolio management. It is, however, one of many designations used today, which may cause some confusion. This article will define what the CFA designation signifies and what this means to investors.

CFA Defined
The CFA designation is given to investment professionals who have successfully completed the requirements set by the globally recognized CFA Institute (formerly the Association for Investment Management and Research®, or AIMR). To be eligible for the CFA designation, candidates must attain the following:

1. Have at least three years of professional investment experience.
2. Pass three rigorous six-hour exams over at least three years.
3. Commit to abiding by CFA Institute's Code of Ethics and Standards of Professional Conduct.

The exams test the candidates' knowledge of investment theory, ethics, financial accounting and portfolio management. This course of study was formed in 1962 and is constantly updated to ensure that the curriculum meets the demands of the global investment decision-making practice. This graduate-level curriculum generally entails six months of study prior to each exam date. Pass rates vary from year to year, but since the first exam was given in 1963, the overall rate is 59%; fewer than 20% of the candidates pass all three tests within three years.

Believe me, this is not an easy test. I studied on average 19-20 hours each week from the end of December to the end of May. The concentrated study, however, was a better education than graduate school because of its total focus on investment management and practice.

CFA Institute is a global non-profit professional organization of more than 58,000 financial analysts, portfolio managers and other financial professionals in 112 countries. In addition to administering the CFA Program, the institute is also recognized around the world for its investment performance standards, code of ethics and standards of professional conduct.

More information on the CFA Institute and the CFA program is available at www.aimr.org.

What the CFA Designation Means to Investors
To investors, the CFA designation means the following:

• A CFA charter-holder has demonstrated a commitment to become better at his or her craft, whether it is security analysis, portfolio management, business reporter or broker.
• CFA charter-holders and candidates alike strive to maintain a higher level of integrity by committing to following CFA Institute's Code of Ethics and Standards of Professional Conduct.

In other words, CFA charter-holders are investment professionals who have striven to better their skills and knowledge on behalf of their clients and who committee to adhere to a high standard of ethical conduct.

Having the CFA charter does not automatically make one a better stock picker, but it does distinguish the charter holder from other practitioners. There are some very well-known investment professionals who hold the CFA charter: Abby Joseph Cohen, Gary Brinson and Sir John Marks Templeton. The reasons why these famous names pursued the CFA designation may vary, but I believe it is safe to say they all have one thing in common: the desire to be the best.

by Rick Wayman, (Contact Author | Biography)