CFA Payoff Elusive for Legions Crowding Into Its Grueling Exams

CFA Payoff Elusive for Legions Crowding Into Its Grueling Exams

  • Most job postings mentioning CFA offer less than $100,000
  • Designation’s value is ‘difficult to quantify,’ Institute says

By Jenny Surane

(Bloomberg) –

As financial workers from New Jersey to New Delhi sat this month for one of three grueling stages of the Chartered Financial Analyst exam, one question wasn’t on the test: Is it worth it?

The answer is elusive. Reliable estimates for how much the certification for valuing investments adds to a resume are virtually non-existent. While nobody’s saying it’s worthless, test-takers who typically pour more than 300 hours into studying for each level and spend thousands of dollars on fees and materials do it despite harrowing statistics. Four out of five who start the process drop out.

The odds of a big immediate payoff appear to be low. About 73 percent of job postings that specified compensation and included a reference to the CFA designation offered a salary below $100,000, according to research by recruiting company Phaidon International.

It’s the kind of information charter hopefuls are eager to find. Every year, hundreds flock to online forums to debate the payoff from adding CFA to their names, either in the form of compensation or a better job. Many responses argue the test’s rigor guarantees it adds cachet to a resume. Others cite anecdotal evidence.

One reason for the mystery is that the CFA Institute, which generates $260 million in annual revenue while running the tests, doesn’t track it.

The organization stopped asking applicants for data such as job titles and university degrees after the exam’s registration section reached 40 pages, taking candidates roughly 50 minutes to complete, said Steve Horan, managing director of credentialing for the Charlottesville, Virginia-based Institute.

“It’s definitely got a value proposition for both employers as well as employees,” he said. “It’s just that it’s difficult to quantify.”

Some job postings list the CFA designation as preferred or required, he said. And some outside studies have indicated that charter holders have improved earnings power.

One study conducted by a group of eight CFA Societies in the Midwest showed that, in Chicago, charter holders with a bachelor’s degree reported median income of about $154,000 – almost $70,000 more than college graduates without CFA alongside their names. For charter holders with graduate degrees, the median reported income was $215,500 – about $55,500 more than those lacking the CFA stamp.

The study is only meant to serve as a rough estimate. It doesn’t adjust its methodology for other variables, such as experience and duties. For example, CFA Institute members must log at least 48 months of work experience in investment decision-making to receive their membership. At many financial firms, employees routinely get significant raises after that initial period.

Another study conducted by InvestmentNews and the consulting firm Moss Adams found that lead financial advisers with the CFA charter earned about 24 percent more than those with the certified financial planner mark and 23 percent more than advisers who are certified public accountants.

The CFA Institute does track where charter holders and candidates are employed – a list dominated by the world’s biggest banks and topped by JPMorgan Chase & Co.

Six recruiters said in interviews that a CFA designation can lead to a raise or land a job, especially if the interviewer happens to hold one, too. But it’s rarely, if ever, necessary.

“Nobody ever says that they want to hire someone that’s a CFA – never,” saidRobin Judson, president of Robin Judson Partners, which helps alternative-investment firms with recruiting. “Nobody says, ‘I don’t want to see them if they have a CFA.’ It’s not a negative. It’s just nobody is asking for it.”

Exam Turnout

A record 172,682 candidates from 183 countries registered for this month’s exam, the Charlottesville, Virginia-based CFA Institute said last week. Asia accounted for 45 percent of registrants, with the Americas providing 33 percent and Europe, the Middle East and Africa 22 percent.

Global turnout for the CFA exam surged after the 2008 credit crisis, with young financiers looking to burnish resumes as banks slashed jobs. Almost 142,000 candidates were tested that year, a 30 percent increase from 2007. The charter’s popularity has helped sales at the Institute, where revenue climbed 34 percent from fiscal year 2010 to 2015.

“Career advancement/development” was the top motivation cited by candidates who took the June 2015 exams, drawing 37 percent of responses on the Institute’s survey. Another 11 percent said they hoped it would land them a job. Others said they wanted to hone skills, gain stature or “challenge myself.”

Standard registration fees for each level of the exam range from $825 to $860, which covers the curriculum, a study planner and practice tests. The real cost is the time spent studying, said Horan, the credentialing official. And that work ethic speaks to employers.

“I sort of think of it as the Statue of Liberty – ‘Give us your tired, your poor, your yearning to be free,’” Horan said. “And if I can make it there, I’ll make it anywhere.”

Recruiters were generally less enthusiastic.

“It does have a mild signaling effect to me this one’s a hard worker and is disciplined,” said Adam Zoia, chief executive officer of financial-services recruiter Glocap Search. “I don’t read it as meaning that they are going to be a better investor.”

^ TLDR. However, there was an article in the WSJ yesterday or the day before noting that a prominent law firm announced it is raising first year associate pay to $180,000 per year (other firms are expected to follow suit). If you are currently pursuing your charter, quit now and go to law school instead.

Go to law school if you like crushing debt and 80 hour work weeks for years to pay it off.

Death, taxes and CFA alone won’t land you a job.

Just sticky this on the Career forum please.

Not to mention only a very small percentage of law students will get a job at one of the select law firms that pay those salaries.

law is the single most boring topic on earth. Who cares about $180,000?

It’s foolish to think that gaining the charter will all of a sudden land you a job at a top bank. It’s job experience, plain and simple. I always thought the charter was there to enhance your skills, and demonstrate at least a basic knowledge of basic financial topics; hell the CFA topics aren’t exactly rocket science.

I’ve also never seen a job posting that required a CFA, because it’s not a required designation to perform certain dutues, but there are many that a charterholder could apply for.

President Sanders will forgive that debt and make 80 hour work weeks illegal. Of course someone making $180k per year will probably have a 94% effective tax rate to pay for all of President Sanders’ policies, so maybe better to work at MCD for $15/hour and limitless government handouts.

Probably about 80% of AF posters.

Going into law is the worst thing to do right now. If people thought the ratio of people wanting to break into finance to number of jobs is bad…law is much worse

I’m done with the CFA.

This year +170,000 people sat for the exam (last year it was significantly lower I think).

Msc in finance is the way to go. Gmat requires less time and my chances of getting a dream job will actually improve.

Intellectual property law is quite interesting.

I wouldn’t count on that…

I can’t afford MBA.

So compared to the CFA - Msc in finance (LBS/LSE/Oxford) is an amazing alternative.

y u no like Msc?

Des Control

Like all investments, these degrees are just risky transactions with hopefully positive return. Like other investments, you can also use leverage if you don’t have the money on hand.

CFA has almost no risk. You don’t have to take time off, and it costs almost no money. The % return is probably highest of all potential degrees because of this; let’s say you make pitiful $15k extra over 5 years. You made 1000% return. Unfortunately, this investment is not scalable, nor is it repeatable.

Law School is a huge investment, but its return is the most certain. Your chance of making $180k after graduation (more like $200k after year end bonus and signing bonus), is much higher compared to MBA. I challenge itera or others to show that expected return is negative, if you go to a decent (let’s say Top 20) school. Some minority of people will of course still fail and end up worse than before. That is just the risk in the investment. And of course, being a lawyer sucks.

MBA is a smaller commitment than Law School, and thus, MBA graduates are on average less compensated at graduation. However, dispersion of outcomes is much larger at MBA. So, if you are a Top 1% person, maybe your payout will be higher. I don’t know if it is right to say you “cannot afford” a degree that most people borrow money to finance. Maybe you are just not willing to take as much risk, which is ok.

I wish I made $180k

LBS is normally ranked #1 or 2 globally for that program, so yes it would be a good alternative. But in general I’d say that a top MBA is still worth the investment vs. a masters in finance. But this is a discussion more for the Careers forum where we rehash this discussion every couple months.

This is one thing I don’t get when I read these anti-CFA articles. Why do they even bring up fees? They’re pennies on the dollar in the grand scheme, and that’s not even considering employers who reimburse you.

If you want to argue opportunity costs, that I can get behind a little bit more, but still barely. If you pass all 3 exams on the first try, you’re out… ~900 hours of your life. And I would imagine most people replace non-income generating activities with study time, like watching TV or reading for pleasure, etc. How many CFA Candidates have these huge dreams that they just put on hold to take the exams? 0.0001%? I really doubt studying is getting in the way for majority of candidates. If anything it’s teaching people how to develop better self-discipline, time management, etc.

It’s unfortunate that so many people make it so black and white. No-CFA and low-paying non-front office job vs. get my CFA and be vaulted into the magical realm of models and bottles. I’m not saying irrational people (especially based on some posts we see here) don’t think like this, but it’s weirder when you see Bloomberg or other sites question the benefit. Even if you want to go strictly based on salary, what did they quote, a 70,000k improvement between charterholders and non? That’s… pretty significant.