Does Your Money Manager Have a CFA Charter?

Does Your Money Manager Have a CFA Charter?

What does “CFA” stand for? How do you get it?

CFA stands for Chartered Financial Analyst and is a prestigious financial designation. According to The Economist, “The Chartered Financial Analyst (CFA) qualification is roughly equivalent to a specialized postgraduate finance degree, including a mixture of economics, ethics, law and accountancy.”

CFA Institute, the organization that manages the designation, is a global association of investment professionals that traces its lineage back to the establishment of the Financial Analysts Federation in the 1940s. To receive the designation, a candidate must go through the CFA exam process, have four years of relevant work experience, and join the CFA Institute as a regular member. These requirements are designed, “To lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.”

What is the CFA exam experience?

The exams are in a grueling three level format offered in the summer of each year (only Level I is offered again in the winter). The CFA Institute estimates an average of 300 study hours are required for each level. Most candidates are working full time, leading to some long nights and weekends. Successful candidates start studying in the early part of the year (January/February) and turn up the heat in April and May. Each level is increasingly difficult. Level I is a river a mile wide and an inch deep. Level II is a river an inch wide and a mile deep. Level III is both rivers combined.

How is the CFA exam graded?

Exam grading contributes to the rigor. Each year the CFA Institute grades the exam, sees where the scores lie, assesses the difficulty of the exam, and then devises a minimum passing score that considers the difficulty of the exam. About two months after the test, candidates find out their results. Below are the 2015 pass rates along with the average pass rate over the last ten years.

  Level I Level II Level III
June 2015 Pass Rates 42% 46% 53%
10 Year Avg. Pass Rate 39% 43% 53%


Yes! You are reading those correctly! During the first two exams, a majority of people fail. Only at Level III do you have a 50/50 chance. As your odds increase, keep in mind that the field of candidates gets more and more competitive as only the best survived from the previous test.

Why is it so stressful?

When you take the CFA exam, you contemplate everything (i.e. your career, relationships, and life in general). Imagine this feeling: you have just studied ten hours a week for the last six months and you are about to take a test that on average a majority of the people will fail. Feeling confident yet? If you fail, you have to wait one year (or six months for Level I) and then spend additional time refreshing concepts before you re-take the exam. Still feeling confident? Now add on family life, friends, and a job.

Why take the CFA exam?

All CFA candidates have their reasons: some want to earn more money, some value the three letter acronym prestige, and some seek the knowledge. I’ve always had a passion for investments and helping people. The CFA charter adds trust and credibility to me and the financial system. Finance needs trust. Without trust no one is going to give you a dime. I endured the CFA process because it is a component in building trust.

Why should you pick a CFA charterholder to manage your finances?

A CFA charterholder has the investment tools, asset class knowledge, portfolio management talents, and wealth planning skills to be a good steward of your money. However, at the center of all the technical components, ethics is what makes a CFA charterholder so unique.

CFA level focus

In 2008, the financial industry lost some trust and credibility (which it is still trying to earn back). Having a consistent ethics component helps replenish that trust and credibility. CFA exams test candidates on specific ethical situations within the industry. Ethical situations vary, from allocating a limited number of new issue stock shares fairly among all clients, to always putting clients first and acting in their best interests. Ethical situations happen every day. Having a consistent ethical framework to work through these scenarios strengthens trust between clients and investment managers.

Managing your finances can be confusing, stressful and downright scary. Trusting someone to manage your finances can be equally unsettling. You can narrow the vast field of candidates by choosing CFA charterholders.

As Warren Buffet has said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

Zach Cole

Zach Cole is an analyst and trader at Colorado Financial Management. He is a CFA charterholder.

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