The Steps to Becoming a Financial Analyst and Taking the CFA Exams
So, you’re thinking about a career as a financial analyst.
Well, that’s awesome!
You are in good company. According to the Bureau of Labor Statistics, the financial analyst workforce is currently made up of 296,100 people in the United States.
And don’t worry, there is plenty of room for you to find a steady job. According to the Bureau of Labor Statistics, over 32,200 new financial analyst jobs are expected in the next few years.
Let us cover the initial steps on this exciting career path together so you can get a better understanding of what you’re getting into.
We are talking here about your career for possibly the next 10 years, at the very least, and even the rest of your life. That is exciting and nerve-racking at the same time.
Let’s get to it then.
How do you become a financial analyst?
Financial analysts typically must have a bachelor’s degree, usually in business administration, finance, economics, statistics, mathematics, or accounting. A master’s degree in business administration or finance can improve your employment prospects. Even if you have chosen other majors for your bachelor’s degree, courses in business, statistics, accounting, economics, and financial analysis can be helpful in preparing you for this career. Strong computer skills also prove very helpful in advancing your career as a financial analyst.
For more information, read How to Become a Financial Analyst.
What type of schooling does a financial analyst need?
Most positions require a bachelor’s degree. A number of fields of study provide appropriate preparation, including business administration, finance, economics, statistics, mathematics, and accounting.
What are the types of certifications and requirements needed to become a financial analyst?
The Financial Industry Regulatory Authority (FINRA) is the main licensing organization for the securities industry. A license is generally required to sell financial products, which may apply to some financial analyst positions. Because most of the licenses require sponsorship by an employer, companies do not expect individuals to have these licenses before starting a job.
Employers often recommend certification, which can improve the chances for advancement. The most widely recognized of these certifications is the Chartered Financial Analyst (CFA) certification from the CFA Institute. Financial analysts can become CFA certified if they have a bachelor’s degree, 4 years of qualified work experience, and pass three exams. Individual level exams may be taken prior to satisfying this requirement.
Financial analysts can also become certified in their field of specialty.
How long does it take to become a financial analyst?
The three CFA examinations can take between 2 and 5 years to complete. Before being granted the CFA designation, financial analysts must have earned at least 4 years of professional investment experience.
Most entry-level financial analyst positions require a bachelor’s degree (3-4 years), and advanced positions expect you to have a master’s degree in finance or business administration (1-2 years).
What are the CFA Exams?
The CFA Exams (Levels I, II, and III) are paper-based tests offered every year in June at test centers around the world by the US-based CFA Institute. The Level I exam is also offered in December. Each exam must be passed sequentially. The exams are offered in English only. A candidate who successfully completes the program and meets other professional requirements is awarded the “CFA charter” and becomes a “CFA charterholder.” As of October 2018, there are approximately 150,000 charterholders around the world in more than 165 countries.
How much does it cost to become a financial analyst?
The examination fees for each of the three levels of the CFA Program exam are as follows:
- Early registration fee – $650
- Standard registration fee – $950
- Late registration fee – $1,380
A one-time program enrollment fee of $450 is required when you register for your first Level I CFA Program exam.
The CFA Institute offers a few scholarships in different categories, and U.S. service members or veterans can receive tuition reimbursement for the CFA Program through the Department of Veterans’ Affairs.
Please note that the investment mentioned above is separate from the expense incurred by you in obtaining bachelor’s and master’s degrees in relevant fields of study.
How many questions are on the CFA Exams?
- The CFA Level 1 exam consists of 240 multiple choice questions, split equally between two sessions.
- The CFA Level 2 exam consists of 20 vignettes with 6 items each (a total of 120 items), split equally between two sessions.
- The CFA Level 3 exam consists of 8 to 12 constructed response (essay questions) in one session and 10 item set questions in the other session.
What are the Categories on the CFA Exams
The topic-wise weights for the three levels of CFA Exams are as follows:
- Ethical and professional standards – 15%; 10-15%; 10-15%
- Quantitative methods – 10%; 5-10%; 0%
- Economics – 10%; 5-10%; 5-10%
- Financial reporting and analysis – 15%; 10-15%; 0%
- Corporate finance – 10%; 5-10%; 0%
- Equity investments – 11%; 10-15%; 10-15%
- Fixed income – 11%; 10-15%; 15-20%
- Derivatives – 6%; 5-10%; 5-10%
- Alternative investments – 6%; 5-10%; 5-10%
- Portfolio management and wealth planning – 6%; 5-15%; 35-40%
These weights are intended to guide the curriculum and exam development processes. Actual exam weights may vary slightly from year to year.
How long do the CFA Exams typically last?
Each CFA Level exam consists of two three-hour sessions.
What is the passing grade needed for the CFA Exams?
There is no overall score for any level of the CFA exams, and only a pass/fail result is provided by the CFA Institute. The minimum passing score is set by the Board of Governors after each exam. The passing score for 2018 was 43% for Level 1, 45% for Level 2, and 56% for Level 3.
How many times can you take the CFA Exams?
There is no limit to the number of times you can take each exam. However, it is worth noting that the CFA Level I exam is conducted twice a year, in June and December, whereas the Levels II and III exams are conducted once a year, during the month of June. You also have to pay the examination fees every time you take a level.