Chartered Financial Analyst (CFA

Discussion in 'Foreign MBA degree / GMAT discussion' started by Guest, Jan 8, 2007.

  1. Guest

    Guest Guest

    Traditionally, the Chartered Accountant degree has been considered the epitome of financial qualification in India. The reasons are much the same as why an MBA from an IIM is considered so good in the field of management education. But times are changing. The CA, although very relevant, is specific to India in much the same way as a CPA is to the US and leans more towards auditing. With India powering its way into the global finance arena, Indians can now be found in senior positions in the biggest investment banking companies of the world.

    And one rung of the ladder that takes them to those heights is having qualifications that are globally recognized rather than being specific to countries. The problem with most such qualifications till now has been the necessity for candidates to travel out of the country to take the exams. Added to this were the prohibitive costs involved and a lack of uniform recognition around the world.

    The Chartered Financial Analyst (CFA) designation offered by the CFA Institute, an organization based in the US of A addresses a few of these concerns if not all. For starters it is respected worldwide. The CFA Institute, on its website, calls the CFA as the “gold standard” in financial education. Not without reason too. A Russell Reynolds study quoted on the CFA Institute website talks about CFA-charter holding individuals out-earning their peers by over 50 pc across experience levels. It also mentions that between a CFA and an MBA it is the CFAs who demand a higher average salary. Another source, the Financial Times in an article published in June spoke about how the value of the charter is even higher in Asian economies like India and China.

    But all this excitement comes at a cost too. It takes an average of 20,000 rupees to take each of the three exams needed to be cleared to get the CFA designation. Add to this a one time registration of 18,000 and it becomes an exam where not passing can be an expensive proposition. So considering a market like India, how does this investment pay-off?

    To answer this question let us try and understand what the CFA Program actually involves in terms of content. Roughly speaking, the CFA is something like a Masters in Finance (or an MBA in Finance), although the CFA tends to be more investment banking focused. Post clearing the exams the market will consider you fairly adept at the intricacies of finance like Financial Statement Analysis, Investment Instruments etc. All this is relevant in the financial services industry and these are the people that will most probably pick you up once you are a CFA charter holder.

    The financial services industry in India is booming, breaking records every year for everything from foreign acquisitions to value added outsourcing. The sensex has its own tale to tell with markets booming. (The BSE Sensex of course has a way of reneging almost anything said about it in press so it might just have recorded a record crash by the time this article goes to press). In other words, the context has been set for India to become the financial services hub of the world not unlike London and New York.

    The primary employment opportunity is with Investment Banks, Private Equity firms, Equity Research and KPOs. Each seems to value the knowledge base that the CFA seems to bring to the table. The good news is that you do not need to clear all three levels to be considered for jobs. Every level leads to an enhanced career path. Organizations like JP Morgan Chase, Bank of America Corp., Citibank, etc. are not only keen to take CFAs but also encourage their employees to take the exam with some of them even financing the course for employees. Salaries easily start from 6 lakhs p.a. for a Level I Candidate and obviously it just gets better.

    The number of Indians going in for this exam is increasing at an incredible rate. Sample this: When the CFA Institute, based in Charlottesville, Virginia, first held its exams in India in 1993, there were two candidates who took the exam. This rose to 1,288 in December 2004 and close to 5,000 Indian students took the test on the 3rd of December this year.

    Who should go in for the CFA Exam?

    The qualification would make sense to people with a wide variety of profiles. The most interested might be BMS and BCom graduates looking to enter the financial industry with an international qualification or as an alternative (or even in addition) to the CA. MBAs looking to enhance their finance credentials almost always end up taking this route as an entry strategy in to I-Banks. And of course investment banking professionals still form the largest section of people taking this exam.

    So what does it take to become a CFA Charter Holder?

    Basic Requirements to appear for the Exam:

    Have a U.S. bachelor’s (or equivalent) degree, be in the final year of your bachelor's degree program, or have four years of qualified, professional work experience or a combination of work and college experience that totals at least four years
    Meet the professional conduct admission criteria (during the application process, you will be asked to sign statements of Professional Conduct and Candidate Responsibility)

    Examination Procedure:

    All three exams are administered on paper, on a single day; the Level I exam is administered twice a year (usually the first weekend of June and December). The Level II and III exams are administered once a year, usually the first weekend of June.
    Both Level I and Level II are entirely multiple choice with no negative marking, while Level III consists of a session of short-answer questions and a session that is multiple choice.
    Exams are challenging, with only 34% Indian pass rate for the Level I exam in June 2006.

    How much time, money?

    There are two parts to the designation. Firstly you have to clear the three levels sequentially. Secondly, you have to apply for the charter by supplying the 4 year relevant work experience along with the three level clearances. Clearing the three levels takes at least two years. If you do not have any work experience then the entire process can take 6 years. The good news is that you do not have to wait for even 2 years to apply to companies. Clearing one level leads to a considerable improvement in the employment prospects in the financial industry. And after completing all three levels, it becomes simply a matter of time before receiving the Charter.

    In the final scheme of things the CFA program has a few obvious advantages over the other degrees. The most important is that candidates can prepare and take this exam along with a full time job. With respect to the cost it is around one-fifth of the expenses of an MBA in India Add to all this the fact that it is a degree recognized all over the world and it all comes down to a pretty good option to consider when looking at financial markets as a career.
  2. Guest

    Guest Guest

    Great Article !

    Hi Nayar,

    I am B.E. in Electronics and telecom. Did it in 1996. I have 10 yrs exp in the IT field. I passed the CFA Level 1 in dec 2006, now planning to take the LEvel 2.

    I have no exp whatsoever in the financial industry. I have been trading in the capital market for couple of years. I work as Product manager in a software company.

    If I apply for an equity research analyst position with a IB or brokerage firm, what kind od package might they offer?

    Thanks for a wonderful article and helping me in advance.
  3. Guest

    Guest Guest

    Very good article

    Hey Nayar, amazing article. I wanted some perspective for freshers like me. I hav comepleted my CA in November 2007, and going to take level 2 in June, 2008. I hav worked in one of the Big four CA firm's, in tax department for a year {articleship}. What kind jobs/job profiles should i look at, if i clear my Level 2. What should be an ideal opening package?

    I was also thinking to take up CAT in november 2008. Do u think there is any value addition in doing an MBA from a good institute as of now, as in having no work experience?

    Thanks in advance. Have a lot more to ask and knw frm u.
  4. Guest

    Guest Guest

    I am also taking the exam this December and have purchased the Schweser level 1 notes from their website. The option I chose was a packet that consists of all five topic books and one book of practice exams, all for a little over three hundred dollars. I hope you plan on having time to study this stuff as I have been studying since May and honestly am becoming overwhelmed. There is just a lot of material, a lot of details. Even being a finance major in my last year of undergrad there is a ton of information on the financial statement analysis that I have never seen. You can definitely do it if you start now, but I suggest a strict study plan that would lead you to finishing the material a month or so before the exam so you have time to go back through and review. Overall, I have spoken with many people who all use Schweser and it seems the best material out there. The books provided by the CFA institute are around 5-600 pages each, yukkkk, I'm sticking with Schweser . Best of luck to you.

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