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Long Story Short - Do you really need a three-letter credential to follow your name?
An Alphabet Soup of Financial DesignationsLast Saturday, a record 250,000 people around the world sat to take one of the grueling 6-hour-long exams offered in the CFA® program, which is 11% more than last year. With a 10-year average pass rate of 44%, these exams are widely considered to be among the toughest in the industry. Worst of all, you need to pass three levels of exams before you’re eligible to hold the Chartered Financial Analyst® (CFA). The exams are offered only once (or twice for the first level) a year, so it can take the better half of a decade to get through all of them. But the CFA® designation is only one of the growing number of professional designations in the financial industry. The proliferation of professional designations has sparked a debate on the value that these programs bring to the industry. In some ways, the number and variety of designations have had a dilutive effect on the perception of their value. Many of the CFA® candidates last Saturday, who were sitting in their testing center staring down the barrel of a 120-question exam on a perfectly sunny summer weekend day, must have been wondering, “Is this really worth it?”
Designations promote ethical and professional standards. Generally, designation programs offer a way for financial professionals to expand their industry knowledge, but aside from the joy of learning about finance the majority participants are likely pursuing more selfish goals. For the most part, participants in these programs are probably just seeking for a way to impress employers or clients as they pursue higher salaries. That said, many of these programs have taken it upon themselves to be the stewards of the industry’s ethical and professional standards. By promoting the high standards for knowledge and integrity in the investment industry, these designations benefit both the participants and society as a whole.
Cheaper than an MBA. For those feeling stuck and looking for a career boost, a professional designation can be just the way to differentiate yourself from the pack without the need to go back to school. For the most part, professional designations are far cheaper than a degree, can be earned while holding a full-time job, and often provide similar professional connections to those in an MBA program. At the very least, like pledges in a fraternity, others who hold your designation will be able to relate to the hardships experienced in pursuit of the letters following your name.
Alphabet Soup. The proliferation of three letter titles in the financial industry has served to dilute the meaning of any of the titles. Here are just a few of these designations: CFA, CFP, CPA, CAIA, ChFC, CIPM, EA, CLU, CFC, FMVA, CEBC, AAMS, CMFC, LIFA, RFP, CMA, ChMC, CBV, CMT, and the list goes on. But, you get the idea. Despite all the hard work and sacrifice of the ambitious mid-career professionals in these programs, most industry outsiders will likely just be confused and ultimately not impressed by the trail of random letters behind their names.
There’s no substitute for experience. Many professional designations are not legally required to work in the industry. In the US, most financial professionals are legally required to pass one or two exams provided by FINRA, the self-regulatory organization, which are hard enough and are usually all you need. While professional designations are a plus, most employers value actual on-the-job experience above anything else.
So, you think you got what it takes? Maybe you’re an industry veteran and you think these financial designation exams are all a bunch of hooey, and they’re just some programs the millennials put together so they can get a gold star on their report cards. Well, if that’s the case, then you’re in luck. You can go ahead and prove it by taking this sample exam provided by the CFA Institute.
A Guide to Financial Designations, Mark Cussen, Investopedia, May 19, 2019
A record number of people sat for the CFA exams, Jacob Passy, MarketWatch, June 16, 2019
Record Number of Candidates Sit for CFA Exam This Weekend, Maria Jose Valero, Bloomberg, June 15, 2019Is becoming a full CFA Charterholder actually a waste of time?, Sarah Butcher, efinancialcareers, April 23, 2019