What is 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.
What Is A CFA?
Breaking Down the Chartered Financial Analyst (CFA)
Before becoming a CFA charter holder, a candidate must meet one of the following educational requirements. He/she must have four years of professional work experience, a bachelor's degree or be in the final year of the bachelor's degree program, or a combination of professional work experience and education totaling four years. For the undergraduate qualification, the bachelor's program must be completed before registering for the Level II exam. In addition to the educational requirement, the candidate must have an international passport, complete the assessment in English, meet the professional conduct admission criteria, and live in a participating country. The CFA charter is one of the most respected designations in finance and is widely considered to be the gold standard in the field of investment analysis.
After meeting the enrollment requirements, the candidate must pass all three levels of the CFA program in sequential order. He/she must then become a member of the CFA Institute and pay annual dues. Finally, he/she must sign off annually that he/she 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 twice per year in June and December. 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 exam format is 240 multiple choice exams to be completed within 6 hours. The June 2018 Level I exam pass rate was 43%.
Level Two Exam
The level 2 exam is only offered once per year in June. It focuses on the valuation of various assets and emphasizes the application of investment tools and concepts in contextual situations. Exam questions referring to Financial Reporting and Analysis are typically based on International Financing Reporting Standards (IFRS). The exam format is 20 item sets (mini case studies) with 6 multiple choice questions for each set (120 questions total).The June 2018 Level II exam pass rate was 45%.
Level Three Exam
The level 3 exam is only offered once per year in June. It focuses on effective wealth planning and portfolio management by requiring the candidate to synthesize all the concepts and analytical methods in the entire curriculum. The exam format is between 10-15 multi-part structured essay questions to be completed within 6 hours. The Level 3 exam is not multiple choice, and hand-written answers are also graded by hand. The June 2018 Level 3 exam pass rate was 56%.
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 are available at www.cfainstitute.org.