The investment credential with valuable assets
FOR THOSE with four years’ work experience in the investment profession, and with an undergraduate degree or equivalent, the Chartered Financial Analyst (CFA) credential is a serious opportunity. It’s a globally-recognised standard, a qualification meant to provide the practical skills, theoretical knowledge, and professional outlook to succeed in any relevant investment position. And it’s more popular than ever – according to the CFA Institute’s figures, the number of charterholders has increased from 37,366 in 2001 to 100,925 in 2012.
A recent survey of 182 wealth management professionals for Fund Fire discovered that CFA charterholders held the most respected credential in the industry. On a ranking of 0 to 5, the CFA was given 4.1, compared to only 3.2 for an MBA. When asked why it was so important, 51 per cent named greater client trust, 33 per cent general educational benefits, and 10 per cent increased career advancement.
Why is the source of this comparative respect? It’s an important question, especially for those deciding whether the CFA is appropriate educational route – all the more so when the programme takes four years of study, concurrent with full-time work, and there is a chance that you may be one of the four in five who doesn’t successfully finish.
When querying its value, there’s a number of broader questions that need answers. In what ways does the CFA provide benefits over and above an MBA? How can the CFA contribute towards career progression and become part of the wider mosaic of a good investment practitioner? How and why does the credential promise such a boon to credibility? Finally, why is it useful to have global recognition, an international standard of quality?
A BROAD EDUCATION
The core of the CFA’s value lies in its educational programme. A three-tiered course, the CFA teaches ethics, investment tools (from quantitative methods to corporate finance and economics), knowledge of asset classes, portfolio management and wealth planning. Ed Bace, head of education for Europe, Middle East and Africa at the CFA Institute, says that the programme’s “aim is to prepare the investment professional for any career in the sector.”
The curriculum is broad, and this is of specific design. It’s a “generalist course”, says Bace. The CFA Institute thinks that it’s important to give a practitioner the broadest possible view of the profession, rather than more specialist knowledge.
It’s this very breadth that has proven attractive to some charterholders. Dr Paul Kaplan, CFA, quantitative research director at Morningstar Europe, the investment research firm, calls the CFA programme “a good all-rounder and an appropriate foundation for a career in investment services.” He undertook the course because he wanted to go beyond his academic training, a PhD in economics. For Kaplan, the “CFA designation signifies that the holder has at least a basic knowledge of key investment topics and can accommodate a learning for key must-knows of the financial markets.” It provides a foundation, a basic standard that can be built on through practical experience in the workplace, and more specialised study outside of it.
Mark Tapley, CFA, former chief investment officer at West LB Asset Management, agrees. “When someone from a specialist silo – an economist or an accountant, for example – walks into a room, the CFA gives you enormous confidence because you’ve enough background to follow what they’re saying and challenge them.”
NOT JUST AN MBA EQUIVALENT
But how could the CFA prove more useful than an MBA? There are a host of courses or programmes that can provide similar fundamental knowledge.
One difference is the CFA’s practicality. Kaplan says that he felt it was important “to see investment concepts from the point of view of clients.” The purpose of the CFA charter, for him, was a route “to understand topics “that I already had an academic understanding of, from a practitioner’s point of view.”
Secondly, the CFA curriculum offers an evolving body of knowledge. One example is a recent, increased emphasis on financial reporting and analysis. The CFA Institute says this is partly in response to a need for professionals to have knowledge and awareness of new International Financial Reporting standards.
Although MBAs also respond to industry developments, to some extent the CFA Institute is different. To maintain the CFA designation, charterholders must continually and consistently engage with their qualification. Through membership of the CFA Institute, charterholders commit to a life-long investment education.
THE INVESTMENT PROFESSIONAL’S BODY
Behind the CFA exams sits the CFA Institute. The Institute is the Vatican to the CFA’s eminent priesthood. It designs the programme, upholds and disciplines the ethical behaviour of its members, and ensures that its standards are compliant with, or correspondent to regulatory requirements across the world.
The actions of the Institute are important in several ways. Firstly, it maintains the value of the CFA designation – by its commitment to continually updating the educational programme, and through ensuring that CFA members do not transgress professional boundaries. Secondly, it acts as a meeting place for the interchange of investment ideas. To date, it has 107,812 members globally, and its publications, lectures and events are a forum for the development of broader investment questions.
Daniel Yates, CFA, associate director, emerging markets trading at West LB, says that the CFA Institute, and its network of CFA Societies, is useful in itself. “The social and networking aspects are very valuable,” he says. It is an opportunity for a young investment practitioner to have access to the expertise of the broader profession, the benefit of the experience and knowledge of its more senior members.
Similarly, involvement in CFA Societies can itself be a business education. Yates sits on the UK Society’s membership committee, and calls it a “fantastic exposure to sitting on a board-like structure.” He certainly credits his continued involvement with contributing towards his career’s development.
CAREER VARIATION, CAREER PROGRESSION
It’s all very well to receive a rounded education, and have access to useful networking facilities. But these are only valuable or useful insofar as they can contribute to a investment career and its progression.
The reputation of the CFA designation among some wealth managers has already been referenced. But do CFA charterholders really have a competitive advantage when compared to holders of other business qualifications?
Evidence of where charterholders are working goes some way to answering this. Statistics from the CFA Institute show that UK charterholders work in a array of positions within the investment profession. 6 per cent are in accountancy or audit, for example. 20 per cent are research analysts, 6 per cent are consultants and 1 per cent are private bankers.
When taken in isolation, these figures are meaningless. But as a patchwork mosaic, they point to the relevance of the qualification across most areas of the investment industry, and certainly don’t suggest a credential only useful to certain investment practitioners.
Tom Forrest, director of financial services at Ranstad Financial and Professional, the specialist recruitment firm, says that the CFA’s value to a career lies in the signal it sends to employers. “It’s a sign of intellectual rigour, and a sign that the charterholder is very much dedicated to his or her career.”
It won’t necessarily give immediate career benefits in itself. “It doesn’t open doors on its own – it won’t magic anyone into a front office role,” says Forrest. But, it is a sign to employers that the individual is committed to the profession in the broadest sense.
REPUTATION AND CREDIBILITY
Forrest’s comments, the breadth of the CFA curriculum (and its emphasis on ethics), the activity and the membership of the Institute, all of these point to a central benefit of the CFA. As the Fund Fire survey shows, reputation and credibility are essential to a career in investment. Trust, openness, the ability to inspire confidence in clients and colleagues are all prerequisites to becoming an effective investment professional. The CFA has value as a credential that is seen and believed to be rigorous.
Mark Parsonson, executive director at Liongate Capital Management, says that he decided to undertake the CFA because of “the credibility it gives me with both clients and the investment professionals that I deal with.” The CFA “carries a lot of integrity in the industry.”
Integrity and credibility imply ability and knowledge, and ethical, professional conduct. Parsonson certainly believes that the CFA has improved his career progression in all these regards. “It’s been very helpful in opening up the right doors,” he says. It’s been a recipe for improved job security and progression – the credibility boost it gave him “helps you to stand out from the crowd.”
AN EVOLVING VALUE
The CFA Institute is this year celebrating its fiftieth anniversary. Originally a qualification designed for and predominant in North America, particularly the US, the Institute and its credential has ambitions to grow.
To some degree it has already managed to fulfill these ambitions. As of February 2012, the CFA Societies in Europe had 17,178 members out of a global membership of 107,812. 15 per cent of members were in Asia Pacific.
The movement towards a globally-recognised investment credential has useful implications for charterholders. A single, unified investment standard presents an opportunity for professionals to gain firm, and constantly updated recognition of their abilities and their professionalism, wherever they are in the world.
There is therefore good reason to see the CFA as a valuable qualification for anyone in the investment professional. But this shouldn’t make the decision to take the exams any easier. The CFA is seen as rigorous because its exams are hard. It has credibility because the CFA Institute is firm in upholding its standards. Its potential usefulness to career progression is large because it is a sign of lifetime commitment.
The CFA, like any business qualification, is not an easy, immediate route to success. It is useful only insofar as it is used well. A strong grasp of the fundamentals will, however, give any investment professional a firm background from which to flourish.
CFA SOCIETY MEMBERSHIP WORLDWIDE (FEBRUARY 2012)
Central Africa: 181
North Africa: 116
Southern Africa: 1,244
Eastern Europe: 1,547
Western Europe: 15,631
Middle East: 1,184
Rest of the World: 87,909
CFA CANDIDATE NUMBERS WORLDWIDE (FEBRUARY 2012)
Africa: 6,336
Europe: 33,505
Middle East: 5,240
Rest of the World: 164,768
CFA SOCIETY STATISTICS (FEBRUARY 2012)
Number of
societies globally: 135
Number of
countries with a society: 58
Number of societies in
Europe, Middle East and Africa: 34