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What is a 'Chartered Financial Analyst - CFA'

A Chartered Financial Analyst (CFA) is a professional designation given by the CFA Institute, formerly AIMR, that measures the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas such as accounting, economics, ethics, money management and security analysis.

BREAKING DOWN 'Chartered Financial Analyst - CFA'

Before you can become a CFA charterholder, you must have four years of investment/financial career experience. To enroll in the program, you must hold a bachelor's degree. The CFA charter is one of the most respected designations in finance, considered by many to be the gold standard in the field of investment analysis.

To become a CFA charterholder, a candidate must meet four requirements. First, a candidate must have 48 months of qualified work experience in the investment industry as determined by the CFA Institute. Second, a candidate must pass all three levels of the CFA Program in order. Each exam is six hours long. Third, a candidate must become a member of the CFA Institute and pay annual dues. Lastly, a candidate must sign off annually that he is following the CFA Institute Code of Ethics and Standards of Professional Conduct. Failure to adhere to the ethics and standards is grounds for possible lifetime revocation of the CFA charter.

Level One Exam

The CFA level one examination is administered only twice per year, on the first Saturday in June and December, as of 2016. It focuses on analysis using the tools of the 10 topic areas of the Candidate Body of Knowledge. These areas are ethical and professional standards, quantitative methods, economics, financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management and wealth planning. The 10-year historical pass rate for level one is 42%.

Level Two Exam

The level two exam is only offered once per year, on the first Saturday in June. It focuses on valuation of various assets and emphasizes the application of investment tools and concepts in contextual situations. The 10-year historical pass rate for level two is 39%. When looking at this pass rate, it is important to note all candidates taking level two have already passed level one.

Level Three Exam

The level three exam is only offered once per year, on the first Saturday in June. It focuses on effective wealth planning and portfolio management by requiring the candidate to synthesize all of the concepts and analytical methods in the entire curriculum. The 10-year historical pass rate for level three is 53%. When looking at this pass rate, it is important to note all candidates taking level three have already passed levels one and two.

Using these three pass rates, the probability of passing all three exams in a row is about 8.6%. Successful candidates take an average of four years to earn the designation. Topic weighting on each of the exams across all 10 areas of knowledge range from 0 to 55% depending on the level. The most current weightings can always be found at CFAInstitute.org.

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