what's up everyone it's kenji here and today i'm joined by aj who's a cfa charterholder who also
has a youtube channel called straight talks so make sure you check it out and we'll discuss the
cfa designation short for the chartered financial analyst so we'll break this video down into four
main parts firstly we'll look at what the cfa is and what it covers secondly we'll go over who
should take it and whether it's going to help in your job hunt if you're in that situation
thirdly we'll go over the requirements and the costs and then lastly we'll get some studying
advice from aj who's managed to pass all three exams on the first try which is something quite
difficult to do all right let's get into it so aj just starting off with the basics what is the cfa
the cfa is an academic program it stands for the chartered financial analyst program
it's hosted by an independent academic institute the cfa institute and it's meant to set a standard
by which investment professionals have to clear before they can they can earn those three letters
and the standards are primarily based around academic knowledge base and ethical standards that
they have to abide by in their practices in the financial industry and it's widely considered kind
of the gold standard in the investment industry across the entire globe it's an international
designation as for the curriculum it's split into three levels very creatively named one two and
three and the questions will vary from multiple choice to essay like questions as you move up the
levels regarding the content covered it consists of 10 different topics ranging from general
subjects like economics and financial statement analysis to more specific ones like derivatives or
alternative investments who would you suggest take the cfa is it for people already in the industry
or those that are looking to enter it maybe i think it's beneficial for both really i tell folks
if they have any interest in investment decision making related work now or in the future the cfa
can be beneficial but it's not always necessary so i wouldn't tell everyone who works in finance
to pursue the cfa because it's such a difficult program it's not always going to be worth it and
we've kind of talked about that in the past but for folks who want to get positions in
the investment related field and are not already there so yeah kenji like you asked about you know
before people start working in the industry yeah for folks who are working in different fields
maybe engineering or medicine are interested in stock trading and they want to start working
and investing the cfa can be a great way to show hiring managers that they're serious about working
in finance and for those who have been working in finance already for five ten maybe even 20 years
and either want to put another feather in their cap to impress clients or specifically it can
be helpful if you're trying to get into another role get a promotion either within
your same firm or at another firm working in an investment decision making related tasks
then the cfa designation can be really helpful too would you say that even just having the level one
is that beneficial or you need to have all three levels for it to be something relevant in general
i would say no but just having the level one exam passed is not going to be all that helpful
in career advancement but in specific instances it will be kenji yeah and you're gonna have for it
to be relevant you'd have to be interviewing with someone who in my opinion is already a cfa charter
holder and places a lot of value and has a lot of respect for anyone who has gone through even one
level and is going through the next level because they're gonna say hey you've passed level one
you're serious about this you're already studying for level two maybe if you're in that boat someone
who's not a cfa charterholder themselves they're probably relatively familiar with the designation
but in most instances i don't think they're going to place much weight on seeing that someone has
passed just the level one exam you usually don't see significant pay raises the cfa institute
does give out surveys to candidates and charter holders and it's shown that there's on average a
slight increase in pay after passing the level one exam but it's typically not anything significant
and i don't think for the most part people can springboard into promotions or into new companies
just after passing the level one test i see that a lot of people seem to be debating between say
an mba a master's in finance and the cfa do you think those are comparable and if so how
in a lot of ways they are comparable but in some ways they're not the main ways that they
are comparable is that they are very prestigious academic designations and specifically if you're
doing an mba related to investing or some other financial corporate decision making
they might have a lot of overlapping content too the cfa exams might have over a lot of
overlapping content with certain mba programs in my opinion if you're in a top 10 to 20 mba program
that's probably a better boost to your resume than being a cfa charterholder but if you're going to a
college that's kind of middle to pack it's probably not as advantageous to you as if you were
to get the cfa charter now it might be a lot quicker because some nba programs only take
one year and the cfa program typically will take folks uh three to four and realistically a lot
of people spend more than that okay but an mba program costs a lot more money for the most part
too especially if you're in what i mentioned you know the top 10 to 20 the most prestigious mba
programs that can be very costly and you can spend a lot of years paying back those student loans
whereas the cfa program is relatively far cheaper so there are similarities they can both boost
your resume there's going to be some overlapping content but for things like asset management and
wealth management some hedge fund roles i think for the most part the cfa program is going to be
looked upon more highly and in maybe like managerial corporate type roles
the content thought throughout mba programs might be more helpful
when it comes to the actual content that you might learn in an mba versus a cfa do you think
those are comparable so kenji they are going to be pretty comparable i have to say i haven't done
an mba program myself so i can't say firsthand but i do have a few friends who have done it
and i have taken two mba level classes during my undergrad university studies and in my opinion the
breadth of information the amount of knowledge you'll learn throughout all three levels of
the cfa program is going to be significantly more than an mba program there's just so much
content what you can get out of an mba that you can't earn with the cfa charter or you can't
experience with the cfa charter is doing really cool case analysis projects so in a lot of in a
lot of mba programs you'll run real world case analysis on companies who are like contracting
the business school that you're to have all their students work on something for one month or three
months or some long period of time like that and you'll run through a real world case that can be
super interesting because sometimes they're not even like public knowledge and you are providing
consulting services to a company or organization trying to make a major decision not to mention
mba programs are taught by real people professors and the cfa program is all self-study so you could
meet some really awesome professors and work on some really cool cases in an mba program that
you're just not going to get with the cfa can you walk us through the requirements to become
a cfa charterholder the requirements are really straightforward they're just pass all three exams
and have three years of investment decision making related work experience and when it comes to the
finances how much can you reasonably expect to spend on it i guess it depends on things like
if you hire a tutor and so on but do you have an estimate sure and you make a really good point
kenji first i'll say if you are not hiring a tutor because most cfa candidates don't hire a tutor
you typically will spend uh 800 to 1200 u.s dollars to register for the exam
um actually there's an initial sign up fee i think that's three or four hundred
and then around 800 to a thousand or 1200 for each exam and then i recommend folks also
probably pay for a third party test provider you can pay anywhere between a couple hundred bucks
to maybe a thousand bucks per year for that so on the high end earning the cfa charter
is going to cost you six to eight thousand dollars but a lot of candidates also get their
exam costs uh subsidized by their employers or covered completely and that's the scenario i was
in so it didn't cost me a dime which i'm pretty fortunate to be able to say and when it comes to
the actual exams i mean they're notoriously higher the pass rate is is pretty low it's less than 50
for all exams can you walk us through how you actually went about passing all of them on the
first try which is something fairly rare yeah i do think that i have a really good formula
for studying effectively for making sure you study enough for and then passing the cfa exams and i've
talked about that in the past but to your point kenji the pass rates are is historically low right
now so i feel a little bit lucky because i was taking the exams five four and three years ago
and the pass rates were higher when i was doing it candidates doing these exams today at least
in the past 18 months have had to hurdle some of the highest passing scores actually the highest
passing scores that the cfa program has has ever had so it's becoming more and more difficult
the most important factor in a candidate's ability to pass the exam is spending enough time studying
it's easy to not spend enough time studying since like i've talked about it's a self-study
program you don't go to a class and there's no one giving you a quiz every three weeks
you are totally responsible for progressing through the material learning it all quizzing
yourself going back to the old material making sure you're still familiar with all that
and then in the past in the final four weeks or so really preparing to be able to pass that exam
so i think a very useful tool is to count your hours i did about 400 hours for level one and
then about 600 hours total study for levels two and level three that's more than the average the
common notion is to do 300 hours of study for each cfa exam i feel like that's not usually enough and
the candidates who are passing these exams they're probably studying more than the average
since the average candidate fails and so you really should be doing more than 300 so getting in
enough hours reviewing the content thoroughly and answering a ton of practice questions making sure
you're doing more mock exams in the final month and then specifically memorizing all the formulas
that you're going to need to know for the exam you know i'm making it sound very easy but if you do
each of those five things really effectively then the chance of passing in my mind goes to like 75
rather than you know 25 for a given exam for uh for the people who are checking all those boxes
and is it beneficial to already be working in the industry in terms of knowledge for the exam
if you're working at a bank say or a well punishment firm it can be slightly beneficial
especially in my opinion if you're working in accounting some of the more obscure topics that
people who already work in finance have to learn when they enter the cfa program is
around united states gaap accounting standards and ifrs international accounting standards
so if you're already an accountant you're going to have a leg up over other people
if you're already just working in general finance you'll know some things that the exam
kind of gives us an introduction and if you're not working in the finance field at all i do think
it is more difficult to fully prepare for the exams it's not impossible tons of people do it who
don't work in the finance field now it's not like if you work in finance you're going to know the
answers to all the questions it's just more like you'll have been relatively familiar with some of
the terms and concepts that they introduced to you you're still going to have to study the math and
the the problem solving behind all those terms and concepts that go into the exam yeah and just one
final question when it comes to students that are currently in university do you think there's any
particular coursework that would be beneficial for them towards the cfa yeah that's a great question
i definitely believe there are a few classes you can take in university or undergrad college
as it's called the united states that can help you out if you're someone who's planning to take cfa
level one that is going to be as many accounting classes as you can personal tax accounting
corporate tax accounting auditing because there's a good amount of what the cfa program calls fra
financial reporting and analysis so the more accounting background you can get is going
to be extremely beneficial and not just for the cfa program if anyone's watching this video and
is working in finance but probably isn't going to do the cfa accounting classes are i think really
beneficial to building a knowledge base for almost any role in the business industry in any business
i should say outside of accounting the next place i would link to is economics if you take micro and
macro economics courses you're going to get a lot of introduction to many of the concepts that are
covered throughout the economics corporate finance and equity sections of the cfa curriculum so those
can all be beneficial yeah big thank you to aj for making this video possible make sure you check out
his channel for more on the cfa and other finance related topics i'll leave it in the description
if you have any questions for me or for him feel free to put them down in the comments
hit that like hit that subscribe if you enjoyed it and i'll catch you in the next one