The Fintech Rock Stars Are Chartered Financial Analysts (CFAs)

The professional credential CFA, or chartered financial analyst, is given by the CFA Institute to individuals who have demonstrated proficiency in wealth management and investment analysis.  

CFAs are the all-stars of the money management sector because they excel in the challenging field of financial analysis and have put in the extra effort necessary to achieve the highest certification available.

Definition of CFA

When someone's name includes CFA, it denotes the person has received extensive instruction in the fundamentals of sound investment strategy and sophisticated money management. Holders of the CFA charter must exhibit proficiency in financial research, portfolio management, investment consulting, risk analysis, and risk management in order to acquire the designation of CFA.

Earning a CFA is often a requirement for becoming a chief investment officer at an investment firm or public company; engaging in credit analysis, corporate accounting and auditing; or doing financial planning for high net-worth individuals. The CFA Institute awards the certification, which is widely considered the apex for professional development in investment management.

How to Earn a CFA

Becoming a chartered financial analyst is a complicated proposition, by design. It’s considered very tough to run the gauntlet of training and testing required to achieve CFA status.

To become a CFA charter holder, candidates must:

• Have a bachelor’s degree or a degree from an equivalent academic program or 11 months or fewer to graduation if they are still studying.
• Have 4,000 hours of relevant work experience acquired over at least three sequential years.
• Pass a series of three six-hour exams.
• Be able to travel worldwide, be fluent in English and reside in a country that recognizes CFAs.

The tests are famously rigorous and may require 900 hours or more of study in 10 topic areas to prepare for. Most CFA applicants don’t make the cut, for a variety of reasons.

Even after the exams and the prerequisites to take the exam are met, CFA’s still have some work to do. They need to pay annual dues and certify they remain in good standing with the CFA principles.

CFA vs CFP: Different Skills for Different Needs

The designations for certified financial planner (CFP) and CFA may seem somewhat similar at first glance. While both titles tread the same wealth management turf, a chartered financial analyst plays a very different role than a certified financial planner, and in most cases offers a very different skill set.

The primary distinction between a CFA and a certified financial planner is that the latter works closely with specific customers to help them reach their short- and long-term financial objectives. An accredited financial analyst deals with major business investment prospects and circumstances.

A CFP focuses on financial planning for individuals and families, and they benefit from having strong people skills. CFPs know a great deal about investing and personal finances, but their knowledge is oriented toward building and managing investment portfolios for clients.

Meanwhile, the skillset of a CFA is focused on high-level investment management, and they are trained in economics, financial reporting, corporate finance and complex equity investing strategies. CFAs often work at large organizations and handle research and analysis for investment companies.

For regular individuals who need help setting up a financial plan and managing personal investments, a CFP generally more than meets their needs.  

How Much Do CFAs Cost?

CFAs are well-paid financial professionals. According to Payscale.com, a chartered financial analyst typically earns a base salary of $90,000, plus bonuses of up to $50,000 annually, along with profit sharing, stock equity and other high-end employee benefits, in most cases.

If you’re working one-on-one with a chartered financial analyst, expect to pay the same fee structure most financial advisors use. For example, expect a common charge of $1,500 to $2,500 for a one-time portfolio construction fee.

Past that, you’ll probably pay around 1% of your total assets managed on an annual basis. That means if you have a portfolio of $3 million under CFA management, you’ll be paying a management fee of $30,000 per year.

How to Choose a CFA

If you’re a high net-worth individual, chances are you can access the services of a certified financial analyst via your bank’s private banking services, an investment management firm, a hedge fund company or any other high-end wealth management firm.

Or you can go it alone. You should do your homework on prospective CFAs in any case, but when flying solo, you need to be extra careful.

If a CFA isn’t the best professional for your roster, try aiming for other money management designations that align with your personal needs.  

You’ll also want to make sure any potential financial professionals in your life are fiduciaries, meaning they’re legally required to put your financial best interests above theirs.

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