Chartered Financial Analyst CFA White Paper Feb 2010, Understanding the Certification Value for a Company

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Chartered Financial Analyst (CFA)
Understanding the Certification and Value for a Company
CapitalWave Inc. | White Paper
February 2010
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Table of Contents:
What Is the CFA Designation? ……………………………………………………………………….…3
The CFA Curriculum ..………………………………………………………………………..4
Recognition and Standard ……………………………………………………………………………..6
CFA Competencies …………………….………………………………………………………..8
Organizational Benefits …………………………………………………………………………..….9
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3. What Is the CFA Designation? same level of knowledge and nearly the same
level of experience. In fact, some of the top
The CFA designation, or Chartered Financial financial organizations may prefer applicants for
Analyst, is a high‐level certification for various positions to have the CFA designation.
professionals in the areas of investment and
financial analysis. The program consists of self‐ In order to begin study for the CFA program, a
study, along with three exam levels that candidate must meet a minimum level of
measure almost every level of learning. experience, education, and competency in the
Professionals must also meet criteria for time in field. First, a candidate must have a Bachelor's
the profession, as well as a high level of degree or U.S. equivalent, or meet a variety of
competency and ethics. The CFA program, work‐related experience requirements. In other
offered by the CFA Institute, is global in its words, the candidate without a B.A. must have
reach and has been in existence since 1962. In at least four years qualified experience in the
the financial world, a CFA designation is field or a combination of education and
considered to be among the highest of experience that equals four years. Internships
professional designations. In view of these or part‐time assignments do not count toward
criteria, the CFA designation is beneficial for the experience levels. In addition, each
both the individual and the organization in candidate must understand and adhere to very
several ways, including the curriculum, the CFA strict rules of Professional Conduct and
standards and recognition, competencies, and Candidate Responsibility, and must re‐certify to
in an overall sense at the organizational level. the rules of Professional Conduct on an annual
Before we examine each piece, let's discuss in basis. Although it is not stated as a
more detail what the CFA designation means, requirement, a CFA candidate must understand
which professionals hold this designation, and enough English to study the program and take
what organizations look for CFA designated the exam in that language, as the program is
charterholders. not available in any other languages.
Chartered Financial Analysts own their own The question at this point is why is the
businesses and work in highly regarded financial designation important to individuals,
organizations around the world. The highest organizations, and consumers? We will discuss
concentration of CFA's is in world‐renowned each of these aspects during this series, but it's
financial organizations such as Deutsche Bank, a good idea to have an overall picture of the
ABN Amro, and Credit Suisse. Many benefits. An individual with the CFA designation
charterholders have worked in finance for most has a highly competitive edge for employment
of their professional careers, while some have in the financial industry, not only in his or her
been drawn to finance after a "first" career in own country, but around the world. And in a
another field. Because the designation is a period of financial uncertainty, it may very well
global one, CFA's around the world have the be that an organization will hold on to its CFA's
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4. during periods of contraction because they do board manner because of its preference for
not want to re‐hire those levels of competency professionals who hold the CFA designation.
and experience. Because of the broad based,
experiential curriculum, which we will also As we have mentioned, some of the world's top
discuss in the future, a CFA charterholder has investment banks and financial providers
knowledge that is applicable in every day choose to employ professionals with the CFA
situations. In addition, because of the network designation. These CFA's work with the public
of CFA charterholders, each individual has and also in internal roles related to investment,
access to up‐to‐date information regarding analysis, and financial forecasting. So consider
financial markets all over the world. this from the organizational point of view. If you
are attempting to topgrade your organization
At the organizational level, a CFA hire has and benchmark it in relation to the highest
already been held to an extremely high bar in performing financial institutions in the world,
terms of experience, education, ethics, and then the decision to begin sponsoring for the
professional standard. A hiring manager who is CFA designation and employing individuals with
looking at two candidates with equal education the designation will be a good one.
and experience may have an easier choice if
one of the candidates is a CFA because of this In our next article in this series, we will look at
level of professional standard. As we will see the CFA curriculum in order to show its benefits
with the curriculum structure and competency for both the individual and the organization.
levels of the program, your organization can
build its leadership bench with CFA The CFA Curriculum
charterholders. For example, the CFA will
probably have not only technical competency The CFA study program encompasses many
but also the ethical and leadership areas of the financial industry, as well as a
competencies that are needed to move your strong emphasis on ethics and professional
organization forward. responsibility. As we've discussed briefly, the
CFA candidate must pass three exam levels. The
In terms of the consumer, consider where your CFA Institute recommends that each candidate
organization is in regard to customer service. If spend at least 250 hours in preparation for each
you are a financial organization whose analysts level. The curriculum is self‐study, which means
and investment counselors touch the public, that the candidate can pace him or herself
then the CFA designation is a definite plus. according to his or her own comfort level.
Because of the CFA designation's high regard in However, as exams are only given on certain
the financial world, you can use it as a dates, the candidate must create the pace to fit
marketing tool to attract and retain new within those timelines. From the organizational
customers. You can point to the trust that the perspective, the fact that the program is self‐
consumer can have in your CFA's because of the paced is very important. The candidate that
high standard of ethics and professional completes all three levels successfully will prove
conduct required of them. You can show clients that he or she is dedicated, determined, and
that in today's uncertain financial world, your goal‐oriented. From an education perspective,
organization is acting in an ethical, above‐the‐ we know that any self‐paced program requires
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5. this dedication and determination, not to candidate to absorb topics in a way that keeps
mention the discipline to make study a part of them from being too product or market specific.
every day life. This approach also allows the organization to
create a talent pool with broad knowledge that
The next important aspect of the CFA can be applied in various settings, positions,
curriculum is who determines topic areas, how and projects.
those areas are chosen, and who writes the
content for those topics. First, the curriculum The CFA curriculum is broken down into
itself changes from year to year due to the multiple study sessions within the topic areas.
changes that constantly occur on a global scale Each of these sessions contains readings from
in the investment world. Major changes are Institute content, textbooks, professional
undertaken every five years ‐ and only after a journals, analyst reports, and case studies,
detailed analysis of the practice on a global along with problem sets that correlate with the
scale. In terms of curriculum development, a reading and require practical application of the
committee of active CFA charterholders information. In addition, each session and
determines content and the content is then reading contains specific learning objectives so
written under their tutelage by the CFI Institute that the candidate can understand what he or
staff. From a training and development she is going to be expected to do even before
perspective, many corporations would love to the lesson begins. The CFA Institute includes
have a committee of practicing professionals multiple additional resources, such as
who actively look at curriculum to keep it fresh. comprehensive outlines and indices, as well as a
And because of the changing nature of the glossary.
financial markets, the CFA curriculum must be
in constant change, as well. This combination of The exams are almost textbook‐perfect
practicing Subject Matter Experts as well as examples of Bloom's taxonomy in action.
field analysis make the CFA curriculum strong, Exams, as we've discussed, are given in June
current, and in constant change with the and December in multiple locations. Each exam
financial world. is broken down into three levels that vary in
both testing method and taxonomy levels. For
The topics that are currently covered in the CFA example, Level One exam questions are
curriculum are varied, including ethical and generally multiple‐choice and cover knowledge,
professional standards, statistics, analysis, comprehension, and some analysis. Level Two
economics, financial reporting, corporate are case‐study questions that cover analysis and
finance, equity investment, fixed income application, and Level Three are both essay and
securities and markets, derivatives, alternative case‐based in nature, covering synthesis and
investments, portfolio management, and integration. From an adult education
wealth planning. Because practicing CFA's standpoint, the fact that each exam has three
develop the curriculum, the content tends to be levels that cover multiple testing methods and
on the practical side, versus more theoretical taxonomy levels is impressive. This shows us
knowledge that a person might obtain in a that the CFA Institute is dedicated to ensuring
university degree program. Plus, the broad‐ that each CFA leaves the program with not only
based, generalist approach allows the CFA knowledge but the skill necessary to apply that
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6. knowledge in multiple situations. Recognition and Standard
One of the other benefits from a learning Certifications and professional designations
standpoint is that the exams are given only in have a value to the organization and the
English. This may seem tough to some, but the individual only if they are recognized or
Institute maintains that this is a method for explainable in terms of the standards they
ensuring fairness and accuracy in both delivery uphold. In other words, both individual and
of exam material as well as grading. From a organization look for designations that can be
consistency standpoint, the English‐only exams used to market, lend credibility, and explain
also ensure a high level of learning and standards, education and experience. Many
application for candidates. organizations have internal certification or
designation programs and these are a great way
Before we move on, let's look at the CFA to get associates involved and retain them. But
curriculum and exam structure as it relates to what does an internal certification actually
organizational benefits. We've already prove? Everyone inside the organization knows
determined that a self‐study curriculum what the certification means, what the person
requires a dedication and discipline that some had to do to get it, and what standards he or
people simply do not possess. But in regard to she was held to. But outside of that
the content itself, a CFA candidate will be organization, what value is the certification to
receiving the most up‐to‐date content available shareholders, customers, or other
since practitioners compile it. This seems to organizations? The CFA designation is well
take the onus off of the organization for known throughout the world, and because of its
ensuring that the CFA is consistently up to date. structure, gives your organization and each
With the network of CFA professionals in individual the recognition and standard they
addition to the curriculum, your organization deserve. Let's find out how.
can concentrate on training in other functional
or behavioral areas. This is a definite benefit if First, The Economist ranked the CFA designation
you are planning to build a department as the "gold standard" in investment analysis
comprised of CFA's. Finally, the exam structure designations and certifications. This is a weighty
ensures that each professional has a detailed accolade and certainly puts the individual and
knowledge ‐ but is able to apply that the organization at a higher level. But what
knowledge. As organizational development other recognition and standard exists to place
professionals, we too often see that there is a the CFA at the "gold standard" level? There are
gap between knowledge and execution. In the several areas, including worldwide regulatory
case of the CFA, this gap is probably very recognition, community recognition, standards
narrow. related to the curriculum, and types of
companies that look for CFA charterholders.
Next, we will move from the curriculum to the
recognition and standard of the CFA program as Regulatory recognition is important in
a benefit to both the organization and the worldwide financial circles, especially if holders
individual. of a designation plan to work in global markets
or in countries other than their own. CFA
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7. charterholders reside in just about every companies, so the range of the network is wide.
country around the world, according to the CFA Since various types of organizations hire CFA's,
Institute. This is just one piece of the this recognition and standard is also important
recognition puzzle. Several countries' regulatory at both the group and individual levels. The CFA
bodies have waived some licensing and network is over 100,000 strong in countries
examination requirements for candidates who around the world. This is a large network, but
have passed Levels I or II or have already when you consider that the focus areas of CFA's
obtained their CFA designation. This means that are fairly narrow, the network becomes and
these charterholders are licensed to practice in even better organizational and individual tool.
multiple areas, such as Australia, the U.S., four
provinces in Canada, Greece, Hong Kong, We've discussed the nuts and bolts of the CFA
Singapore, and Turkey. If your organization is curriculum and content previously. But how
involved in investment operations in these does this have an effect on the recognition and
areas, your CFA charterholders can practice standards that come with the CFA designation?
without further licensing or examination. The The fact that the curriculum is updated annually
fact that the regulatory authorities of these and is completely overhauled every five years
countries have extended recognition of the CFA after heavy industry analysis creates a standard
designation provides a high standard of for both inside and outside the organization.
authority. This curriculum development process keeps the
organization from having to "push" the
The community within which an organization recognition on an educational level, because
operates is also an important source of marketing a changing, dynamic curriculum is
recognition and standards. For example, the easy. But the changes to the curriculum also
National Council for Interior Design indicate that any CFA charterholder will have
Qualification is a recognized standard within current knowledge about the global financial
that industry, but is most likely meaningless markets. On top of this, the tri‐level
outside of it. But keep in mind that the financial examination structure ensures that each person
industry in general is loaded with certifications has knowledge, comprehends that knowledge,
and degrees such as MBA's, Certified Public can apply it, and can go on to synthesize it as
Accountants, and Certified Investment part of his or her every day activities.
Management Analysts, to name only a few. So
when it comes to choosing a designation, it all Looking closer at the curriculum structure, the
depends on what kind of work the person does, CFA Institute provides a learning experience
what kinds of organizations will hire him or her, that is broad‐based, and, as we've discussed,
and what kind of network exists. CFA covers a wide variety of topics. The experience
charterholders are involved in investment, uses professional journals and practitioner
financial analysis, and corporate financial information as part of the curriculum. This type
planning in large and small companies of learning should also serve to add to the
everywhere. These CFA's are located in recognition and standards defined by the CFA
commercial banks, investment banks, program.
consulting firms, insurance companies, financial
research foundations, and mutual fund If your organization's jobs fit the CFA standards,
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8. you may want to consider looking for program has a list of technical competencies,
candidates with the CFA designation ‐ or putting including knowledge and application of various
your existing associates through the program. markets and financial instruments. But what
As you can see, the recognition and standards other competencies are expressed in the
set forth by the CFA program can benefit both program and how can those fit in with your
the organization and the individual. organization?
Next, we will look at competencies covered, One of the more obvious "soft" competency
both implied and expressed, in the CFA groups in the CFA program is related to ethics
program. and ethical behavior. Given the current financial
situation, high ethics are certainly going to be
CFA Competencies beneficial to your organization and its future. In
the CFA program, candidates are evaluated
An individual with a professional certification based on their ability to place integrity over
brings credibility and expertise to the their own interests. This competency obviously
organization. But when you look closer, you'll has a huge impact in today's environment, in
see that a certified individual brings a package which many financial professionals have fallen
of multiple competencies to the table. These because of self‐interest over integrity. Among
competencies are important both in terms of the other ethical competencies in the CFA
ability to the job as well as long term benefit to program are the improvement and
the organization. Many times, a professional maintenance of the candidate or
certification brings both expressed and implied charterholder's professional standing, through
competencies to your organization. If you are education, networking, and appropriate
looking to bring in more people with a special decision making.
designation or if you are considering sending
your brightest through the program, be sure to In relation to professional competency, the CFA
examine the expressed competencies and program expresses that duty is also a key
determine what competencies you can imply. attribute, next in importance to ethics. The
The CFA designation will provide your program stresses that each charterholder has a
organization with a long list of expressed and duty to his or her client as well as a duty to his
implied competencies. Let's discuss those in or her employers. This duty extends into making
detail so that you can determine if the CFA the correct choices, maintaining
designation competencies match those of your professionalism, and keeping every action
organization. above the board in terms of ethics. Between
ethics and duty, the expressed soft
First, let's look at expressed competencies in competencies of the CFA program are quite
terms of the CFA designation. Expressed strong.
competencies are those that we know are
covered in the certification curriculum and Once an individual as passed the three levels
process. These are easy to determine but it's and becomes a CFA charterholder, he or she
still a good idea to pick them out, both technical can apply for membership in the CFA Institute.
and soft skill competencies. Obviously the CFA The requirements for membership are almost
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9. as strong as the requirements for entrance to are study groups and assistance available; it's
the program, and bring another level of just a matter of determining when the time has
professional competency into play. To begin come to go those resources. In other words, the
with, each local society may have different self‐paced learner must utilize self reliance but
requirements. But on top of this, a person also be self‐aware enough to realize when it's
entering membership after obtaining the CFA time to reach out. Isn't that a great combination
designation must have two sponsors, one who in the field?
is already a member and another who is a
supervisor. Obviously the requirement for Revisiting the CFA curriculum, we see that
sponsors will provide another view of the CFA technical and financial acumen are tested
charterholders professional and ethical routinely, and in multiple levels of learning
competency. In addition, the prospective taxonomy. This will require that a candidate
member must be involved on a daily basis in the have the ability to move knowledge through
evaluation and application of financial data, those levels. For example, a less‐disciplined
specifically related to securities and adult learner may learn enough to "get by", but
investments. The potential member must also not enough to synthesize the knowledge he or
supervise this type of activity effectively and she has obtained in the course of study. This
may also have taught this activity. Plus, at least probably wouldn't work in terms of the CFA
50% of the prospective member's time must be program. The currency of the CFA curriculum
devoted to investment decision‐making and the combined with the analysis and synthesis of
creation of added value through those knowledge will also require a candidate to
decisions. These are not only technical possess leadership and technical decision
competencies but are also leadership and making skill. On top of all of this, these
management competencies. competencies will prepare a potential CFA
charterholder to make the decisions that drive
Let's take a look at the competencies we can your organization forward.
imply from the CFA program. First and
foremost, the program is self‐paced, with only Clearly the CFA designation tests the
the exam schedule as a final deadline for the competencies of potential charterholders. And
candidate. As training and development because the CFA will come to you with those
professionals know, a self‐paced program of competencies, the benefits to the organization
any kind takes a specific type of adult learner, will be impressive.
someone who has the drive and ambition to see
the project through to the end. Plus, the person In our final discussion, we will look at the CFA
will probably have weighed the pros and cons of designation and the overall benefits at the
entering the program pretty heavily by the time organizational level.
he or she makes the decision to enter the
program. This in itself shows a high level of Organizational Benefits
analysis and decision making skill. A self‐paced
There are numerous benefits to both the
learner must also possess a high level of self‐
organization and the individual in relation to
reliance and focus in order to complete a course
the CFA designation. We have discussed many
of study. In the case of the CFA program, there
of these benefits, but let's take a look at the
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10. benefits that the organization can gain and need for your leadership pool. Not only this,
utilize if you are looking to bring in CFA you can look at your CFA charterholder pool
charterholders. Keep in mind that you may also and choose the high potentials for grooming
be considering moving some of your existing into leadership positions in other areas of the
associates through the CFA designation, so all of organization, as well as your high professional
the organizational benefits we are discussing leaders who can lead the areas they are already
would apply in either situation. in.
First, let's examine the overall organizational The leadership bench is important, but let's
benefit, the level playing field. Every discuss retention of those associates. First,
organization looks for this leveling in terms of when you hire and top grade to the CFA level,
departments or individuals. Where it's you're getting employees who are ready to do
applicable, the CFA designation serves as a the work and most likely are ready to be
"leveler". For example, you may place the promoted. This in itself is a retention tool. But
designation as a preference in hiring. As other in addition to this, the people who are hired in
associates begin to leave the applicable areas, as CFA's and the people who obtain their CFA
the new hires with CFA designations will take designation from within the organization will be
their places. On the other hand, you may want the ones who are in the right positions. These
to place existing employees into the CFA associates know what types of positions they
program in order to topgrade them. In the are interested in and you know that you can
process of topgrading, you may even weed out utilize them in those positions. With a high‐
"B" or "C" level players within the organization. grade certification like the CFA, there won't be
When you achieve the ultimate goal of having much doubt from the organization or the
all applicable positions filled with CFA's, you'll individual when it comes to taking positions,
have the people with the highest level of staying in them, and getting promoted.
knowledge and competency.
We have already discussed competencies in
As a natural segue from the level playing field, great detail in this series. But remember on an
you can also consider building your leadership organizational level that the CFA designation
bench in relation to CFA charterholders. will ensure leadership competencies. It does not
Financial organizations are probably running at seem possible that a CFA charterholder could
a very lean level at this point in time. In view of make the decision to enter the program, stick to
that situation, organizational development it, and move into an organizational position
leaders are looking for candidates who combine without applying his or her leadership
leadership with functional and technical competency. On top of that, the curriculum and
competency. In other words, why hire for "or" if the network that comes with the CFA
you can hire for both? With this need for designation will ensure that technical and
leadership, we can look back at the expressed functional competencies are introduced to the
and implied competencies of the CFA program. organization ‐ and remain there in the form of
Associates who are hired with the CFA retention, knowledge, and up‐to‐date
designation or successfully complete the information from around the world.
program have the competencies that are in
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11. One of the issues we haven't discussed is designation. Because there is a certain level of
marketing in relation to the CFA designation. regulatory approval involved with the CFA
From and organizational standpoint, think program, oversight agencies may be inclined to
about all of the areas we have to market: believe that your organization is interested and
customers, employees, new employees. Think concerned about its level of ethics,
about who we have to satisfy: employees, professionalism, and technical ability.
regulators, shareholders, customers. In terms of Marketing with the CFA designation can be very
marketing, showing one or two professional powerful for the organization on many fronts if
designations is probably not enough in any it is used properly.
organization. But what if you can say that a
certain percentage of your organization's In this series we've looked at the benefits of the
associates hold a "gold standard" financial CFA designation from both the organizational
designation? From customer perspective, this and individual levels. We began by defining the
will create credibility at a time when credibility CFA designation and determining what
is much in doubt in the financial world. But qualifications are key for entering the program.
what about employees and potential We have analyzed the advanced curriculum and
employees? The fact that the CFA designation is learning methods put forth by the CFA Institute,
sought after will show them that the as well as the recognition and standards of the
organization is concerned about knowledge, CFA program in relation to the financial
ability, and ethics on every level. Plus, consider industry. We have also defined competencies
the increased performance that may come with required by the CFA program, both at the
the knowledge level of CFA designees. This can expressed and implied levels. Because of all of
only serve to satisfy the organization's these benefits, we can see clearly that bringing
stakeholders and shareholders. in CFA charterholders or putting existing
associates through the CFA program where
We usually don't think in terms of marketing applicable is a good move in many different
when it comes to regulators, but it's also ways.
something to consider in regard to the CFA
© Copyright 2010 CapitalWave Inc. All Rights Reserved.
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12. Bryant Nieelson – Strategiic Alliance & Ac
cquisitions Director at Financ
cial Training So
olutions a divis
sion
of CapitalW
Wave Inc – offe ers 20+ years o
of training and talent manage ement for exec cutives, busineess
owners, annd top perform ming sales execcutives in taking the leap from
m the ordinary y to extraordinaary.
Bryant is a trainer, business & leadershhip coach, and strategic plannner for many sa ales
organizatioons. Bryant’s 27 year busines ss career has been based on his results‐orieented style of
empowerin ng.
Finaancial Training Solution (FTS), the instructor-
ns e -led division of CapitalW Wave Inc,
is a firm made of up industry profes
e ssionals having a repu utation for providing
first-
-rate training and cons
g sultancy to b
banks and other financ cial institutio
ons. FTS
offer professionals who ha extensiv knowledg experien and exp
rs ave ve ge, nce pertise in
the aareas of ban nking and fin
nance.
Blennded learning is the p philosophy o which th company was found
on he y ded. Our
train
ning methodology, integrating theory with practice using ou own very powerful
y ur
ning tools, creates a uniquely exciti
train ing and effe
ective learnin environm
ng ment. The
resu pays imm
ult mediate dividdends in the retention of newly-learned concepts and
pplication in the financia marketplac
their practical ap
r al ce.
Cap lWav Inc.
pital ve
Delivering Innovative Training S
g Solutions
For further informa
ation, please contact:
e
Finan
ncial Training Solutions is a division of CapitalW
g Wave Inc.
Bryant Nielson, Direc
B ctor
http
p://www.Ca
apitalWave
e.com
http://wwww.FinancialTrainingS
Solutions.c
com
http://
/www.Your rTrainingEdge.com
Tele US: +1 (917) 477-3
T 3221
Te UK: + 44 (20) 3356 9
ele 4 9935
bryant.nie
elson@financialtrainings
solutions.com
m
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