Schmoozing won’t get you anywhere in the CFA program.
To earn the chartered financial analyst certification, Wall Street’s aspiring asset managers need to have a stone-cold mastery of skills like valuing stocks and analyzing financial statements—not after-hours networking drinks that are hallmarks of an expensive MBA program, an alternative path to getting a job.
The CFA route has been held up as a no-nonsense, low-cost path to getting a foot in the door of the otherwise still-clubby world of high finance. The only catch? It’s never been tougher to succeed on the trio of exams.
Pass rates have plunged during the pandemic, reigniting a debate over which designation is the smartest to try to achieve to snag a Wall Street job. Only 25% of test takers passed May’s Level I exam—the lowest since testing began in 1963—whereas at top MBA programs, graduation rates are above 90%.
It’s enough to make some question whether all the positive attributes of the CFA program—the meritocracy, the accessibility, the affordability—are outweighed by the strains on candidates’ time and effort. Especially when the majority are told they’ve failed, sometimes many times over.
“It’s an enormous sunk cost if you don’t pass,” said Paul Hoenck, an investment analyst at Parkview Advisors in London who completed the CFA program in 2017. “It’s not something you can afford to take on if it’s not where your heart is.”
Hoenck knows from experience: He failed and had to retake the Level II exam, considered by many to be the most challenging. CFA candidates on average take four to five years to get their charter, spending more than 300 hours studying for each level.
Still, the difference in cost is enormous. A candidate can pass all three exams and earn the CFA charter for less than $3,000 and study around their work schedule. Tuition for a full-time Master of Business Administration degree is upwards of $140,000 at top universities, to say nothing of potential room and board, books and lost wages for two years spent going to classes.
Both the CFA Institute and business schools dangle the prospect of high salaries to those who go through their curriculum.
The self-reported statistics don’t point to a clear winner. According to a CFA Society Chicago survey, more than one-fifth of charterholders are portfolio managers, with bond traders boasting a median total compensation of $213,000 and those in equities earning $251,500. The highest average combined salary and bonus among 2020 graduates of top MBA programs was upwards of $170,000, according to an annual survey from U.S. News. An MBA, which includes classes on leadership or marketing, also typically offers a wider potential career path than the CFA.
Some people get both. Tammy Neff originally completed her MBA, from the University of Pittsburgh, in 1994. That helped her get a job as the director of operations for a physician’s practice, but then she realized she wanted to do something more “fiscal and tangible.” So she started making her way through the CFA exams, passing level 1 in 2001 and finishing in 2006. She’s now an equity strategist at Hefren-Tillotson Inc., where she builds portfolios of stocks that she thinks will perform well.