Entry Requirements for the CFA® program
There are 5 key requirements to meet, before you can enroll in the CFA® Program and sit your first CFA® exam.
- You need to have either completed a Bachelor’s degree or equivalent program. You can sign up for CFA exam (level I), if you are in the final year of your degree, but you need to complete it before registering for level II.
- You need to have an international passport in order for you to sit your first exam.
- You need to be prepared to sit the exam in English.
- You need to meet the professional conduct admission criteria, and fill a form to attest you do.
- You need to live in a participating country.
The exams
Beyond the basic requirements, above, you need to allocate a lot of time to successfully complete the 3 tests. For most candidates the educational step is by far the toughest hurdle in order to become a CFA charterholder. The three exams encompass the candidate body of knowledge (CBOK), that the CFA Institute deems necessary for those working in the investment profession.
The curriculum spans the following topics: Ethics, Quantitative Methods, Economics, Corporate Finance, Financial Reporting and Analaysis, Security Analysis, Corporate Finance, Portfolio Management, Fixed Income, Derivatives and Alternatives.
Level I emphasises the foundational building blocks in financial reporting, statistics and economics that will be utilized later in the program for asset valuation and portfolio management.
Level II is centred on asset valuation, building on the foundation from level I.
Level III brings everything together focusing on aggregate portfolio management.
Ethics is emphasised at every level.
The minimum time required for completing the 3 exams is 1.5 years (excluding prep time for the first test). You can sit the level I exam in either June or December each year and the level II and III exams only in June each year. It is however estimated that it takes candidates 4 years on average to get through the program.
Each level typically requires around 300 hours of study and preparation from the candidate.
Each test is taken on paper during a single day and consists of two three-hour sessions. Level I exam questions are individual multiple-choice questions. The Level II test is made up of vignette questions: a vignette of information must be referred to in order to answer a subsequent series of six questions at a time. Level III questions require a combination of written answers and level II style vignette questions.
Pass Rates
The pass rates vary each year, but you can roughly expect half of candidates to fail each of the 3 subsequent tests.
The CFA Institute’s board of governors sets the minimum passing score (MPS) for each exam, and the June 2019 pass rates were:
Level 1: 41%
Level 2: 44%
Level 3: 56%
Study materials
You automatically receive the curriculum upon enrolment. The curriculum changes slightly each year, as new material is added and old material removed.
Study materials are also provided by various course providers like Wiley, but they are not officially endorsed by the CFA Institute. There is also a wide selection of online and in person course providers, some of them officially accredited, that can help you prepare for the test.
Joining the CFA institute
The moment you pay for your first CFA exam, you enter the CFA Program. You are now accepting the responsibilities that go hand in hand with being a CFA exam candidate. During your registration, you are asked to agree to the provisions of the Candidate Agreement. This document specifies relevant testing policies, possible exam violations, and, if need be, when your exam can be deferred. You must also submit your Professional Conduct Statement (disclosing relevant reprimands, investigations, litigations, etc.) When you register for each of the CFA exams and then annually thereafter.
Once you pass Level III, you still need to ensure you have accumulated 4 years of relevant experience before you can obtain the CFA charter. You can do this before, during or after the exams. Relevant experience are defined quite broadly:
Evaluating or applying financial, economic, and/or statistical data as part of the investment decision-making process with regards to securities, derivatives and/or other forms of investment. Teaching and/or supervising activities related to making investment decisions is however also in scope.
Click here for more details on the CFA program work experience requirements.
Upon completion of the third (Level III) exam, 4 years of relevant experience and other criteria listed at the beginning of this post, you will be invited to become a CFA charterholder.
You can actually become a regular member of your local society as soon as you pass the level I exam, if you meet the four-year work experience requirement, and if you are able to persuade your supervisor and a regular member to sign your application. You obviously need to pay the relevant society membership dues.
CFA charterholders are expected to update and improve their financial expertise by participating in continuing professional education (CPE) activities, to maintain their membership.
The cost
Beware of deadlines. The CFA exam fees are meaningfully cheaper if you plan ahead. There are 3 registration fee deadlines for each exam. If you meet the first one you get a meaningful discount, but it is very early. E.g. the exam fee for either of the 3 levels will be just $700 if you register for the June 2020 exam before 2 October 2019. If you miss this deadline the fee increases to $1,000, and if you leave it past 12 February 2020, you will have to pay $1,450. The final deadline is on 11 March 2020. So, it really pays to plan ahead. The deadlines are at 11:59 p.m. E.T. on the respective dates.
If you believe you might be eligible and plan to apply for a CFA program Access Scholarship or Women’s Scholarship, you will need to register at the CFA Institute website as early as possible to allow time for your scholarship application to be processed. You can read more about these options here.
Additionally, if you register for your first CFA exam ever you will need to pay a one-time enrollment fee of $450 at registration (as of the time of writing this). The enrolment fee is the same regardless of which registration deadline you meet.
The curriculum for levels I, II, and III is available only through the CFA Institute and only on a self-study basis. Once a candidate registers for an exam, the curriculum for that level is delivered in electronic format, including one mock exam. If you prefer to receive print books as well the CFA Institute is charging $150+shipping at time of writing this.
At current rates, your minimum charge to get through the program will be $450 + 3 * $700 =$2,550. However, most CFA program candidates should expect to retake at least one exam which means paying that exam’s registration fee twice. (There is no limit on how many times you can retake each exam), and unless you are extremely organized the extra cost associated with missing the earliest registration deadline each year is material.
If supplemental study programs are elected via other vendors, they will further add to the cost of enrollment. Considering the CFA Institute’s early fees plus the cost to retake one exam and supplemental exam prep at $1,000 per level, a candidate could easily spend upwards of $6,000 to pass the 3 levels. Some will spend meaningfully more than that.
Exam prep courses are offered in self-study and live classroom formats; costs range from a few $100s to a few $1,000s per level depending on the provider, the format, and how comprehensive the course is. We generally recommend Wiley’s programs which are also amongst the most popular options.
Membership dues are $275 per year and local societies will charge additional membership dues. Continuous membership is required to retain the title of CFA charterholder.
The benefits
Now that we have covered the significant time commitment and the monetary expense required to become a CFA charterholder, let’s talk about the benefits.
The CFA Institute provides many tangible perks to its members, such as live educational and networking opportunities, exclusive investment publications, and many other sources of information/research that can be accessed either online, in print, or by podcast. Members are provided with their own personal website that allows for further networking, educational opportunities and an exclusive job portal for CFA charterholders amongst many other things.
However, the main motivation is likely going to be the global respect and recognition enjoyed by CFA charterholders. The CFA Program is recognised as the gold standard in virtually every financial hub in the world, opening up job opportunities globally, and the potential to meaningfully increase your lifetime income. Depending on your current career situation, obtaining the CFA charter might help you progress within your current company or pursue attractive opportunities elsewhere. Many employers will use the CFA charter to screen serious candidates for key investment related roles. If you are on an investment related career track, these considerations makes studying towards the CFA designation the default choice.
Typical careers
CFA charterholders are highly sought after by many types of employers including banks, mutual fund companies and insurance companies.
The biggest employers of CFA charterholders globally include banks like JP Morgan Chase, RBC, Bank of America ML, UBS and HSBC.
Nearly a quarter of CFA charterholders end up as portfolio managers, but research analysts, CEOs and consultants are also very common job roles for CFA charterholders.
Globally recognised
The CFA designation is globally considered to be the premier investment management designation in the financial industry. The CFA designation originated in the United States in 1963 and has since spread across Europe, Asia, and the Pacific Rim. Today, there are more than 154,000 CFA charterholders located across 165+ countries and regions.
The few missing jurisdictions include residents of Syria, Cuba, North Korea and the Crimea region of the Ukraine, as well as Specially Designated Nationals that are all prohibited from participating in the CFA Program in accordance with the OFAC Compliance Policy.
The CFA Charter is recognised by a long list of institutions, and counts towards various designations. This is by no means an exhaustive list, but some examples include:
The CFP Board (Certified Financial Planner) recognises the CFA charter as fulfilling most of the education coursework requirements for CFP® certification, as a result CFA charterholders are eligible to follow the so-called accelerated path.
CFA charterholders are also exempted by the Professional Risk Managers’ International Association (PRMIA) from the first two required exams for the PRM exam.
The New York Stock Exchange (NYSE) grants those that have passed the level I CFA exam, to take only the portion of the supervisory analyst exam that deals with exchange rules, research standards and related matters.
The U.S. Securities and Exchange Commission (SEC) may grant exemption of the Series 86 testing requirements to financial analysts passing the level II CFA exam, who also meet other requirements of the Financial Industry Regulatory Authority.
If you have read all the way to the bottom, I hope this article helped improve your understanding of the path towards the CFA charter.
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