The CFA: What Is It and How Important Is It For a Career in Investment Banking?
Wondering whether you should get the CFA qualification for your career in investment banking?
Competition in the investment banking industry is becoming more and more competitive as time goes on.
Across all levels within the industry too.
Beyond simply bachelor’s degrees, advanced qualifications such as the CFA (Chartered Financial Analyst) are becoming more and more common, especially at the higher ranks in an investment bank, such as at the vice president and director levels.
However, it’s also well known that an undergraduate or bachelor’s degree is all you need to be able to break into a career in investment banking.
This leads to many people asking the question: how important is the CFA really for a career in investment banking?
In this article, I’ll be breaking down what the CFA qualification is, how you can get it, why it’s important to have for a successful career in investment banking, and who should get it.
Let’s begin.
What is the CFA?
The globally recognized CFA designation, offered by the CFA Institute, is a a qualification that acts as testament to a working professional’s comprehensive understanding of finance and financial analysis.
The CFA qualification comes with knowledge of ethics, investment tools, and portfolio management.
Wherever you go in the world, if you’re looking for a job in finance and you have a CFA, employers will recognize it and immediately be able to ascertain your expertise in financial analysis.
The CFA designation involves a 3-stage exam process where candidates must be successful in all stages before they can gain the CFA qualification.
CFA Charter Requirements:
There are a few requirements that candidates must meet in order to be eligible to get a CFA designation and qualification.
Please note that you need to satisfy one of the following, not all of them.
Have a Bachelor’s Degree
Anyone who has a recognized bachelor’s degree at a tertiary college or university in any field of study, can apply for and sit the CFA exams and become a charterholder.
Be an Undergraduate Student
You can begin sitting your CFA exams during your undergraduate studies if you like, however you cannot pass the final Level III (stage 3) exam until you have fully completed your undergraduate degree and studies.
Have Completed 4,000 Hours of Professional Work Experience
Another pathway to eligibility for the CFA program is to have accrued 4,000 hours of work professional work experience over a minimum of 3 years.
This work experience doesn’t have to be finance or investment related, however it does need to be professional, paid, and be able to prepare you for the rigorous demands of the CFA candidacy process.
Even work under self-employment or in a family business will count, as long as you can prove it.
The CFA Institute is entitled to request documents of proof to show your educational background and work experience.
Attempting the CFA Exams
If you’re eligible to apply for the CFA program, once you enroll you’ll need to take time to study for the exams, where you’ll be rigorously tested on your expertise in financial analysis and portfolio management.
Note that if you fail an exam, you’ll need to allow 6 months before you can retake an exam window, so it’s best for you to study as much and be as prepared as possible.
Investment Banking and the CFA
In this section, I’ll be going over why the CFA is important and how it can benefit your career in investment banking.
Depth of Knowledge
CFA charterholders are all going to be well-equipped with a solid foundational understanding in financial analysis and valuation, which is essential to a successful career in investment banking.
Being good with numbers and being able to understand what they’re telling you, and knowing how to use this information to drive investment decisions is the basis of investment banking, and the CFA qualification is a qualification that proves exactly that.
Ethical Standards
Investment banking recruiting teams often look for professionals who possess both financial acumen, as well as a strong ethical focus, which makes the CFA designation such a valuable asset.
The CFA program rigorously tests your ethics in financial analysis, and employers will all know this.
Global Recognition
Investment banking is a global industry, and you’ll find people wanting to break into these careers in the USA, UK, Canada, Australia, and even in New Zealand!
Global recognition of the CFA designation is a distinct advantage in investment banking, as it can help you explore overseas career opportunities.
This credential opens doors internationally, establishing credibility wherever you go and sending strong signals to employers from all over the world that you mean business.
It’s also not like the university you attend, which investment banking is notorious for being too harsh on.
You won’t be disadvantaged just because you lived in a smaller job market like New Zealand when you got your CFA, and it’s not like going to a smaller college or university, where it would hurt your chances in getting a job in investment banking.
A CFA designation is a CFA designation, regardless of where you got it from, and it’ll demand the same level of respect wherever you go since the CFA Institute is a global agency.
Career Advancements
Similarly to the MBA, senior positions in investment banks such as vice president or director positions often prefer or require candidates with the CFA charter.
This is because employers know that the CFA represents deep financial knowledge and a commitment to excellence, which are certainly traits that they’ll want in the people leading their teams in these high-stakes projects.
So Who Should Get the CFA?
Well, I’ll quickly say, not everyone should get it.
Generally, if you’re at a more junior level (for example, you’re still a university student wanting to get into investment banking, or a recent graduate).
This is due to the fact that at junior levels or in the early stages of your career, getting that work experience is more important, and trying to study for the CFA likely is going to take up too much of your time.
Remember, you need to be cracking down on internships, extracurriculars, grades, and performing well in your graduate positions (where you’ll be heavily overworked, by the way).
Trying to study for the CFA program on the side isn’t going to work out well, as you’ll need to compromise in other areas of your professional life in order to account for it.
Those Who Want to Advance Their Careers to the Next Stage
Instead, the CFA is likely more suited for working professionals who are already quite deep into their careers (such as associates or senior associates at investment banks).
Remember, it’s good for advancing your career to the next stage and breaking into the higher ranks, when being more qualified actually does matter.
This is much like the MBA, where working professionals with years of experience will go back to gain more qualifications to advance to the next stage of their careers.
You’ll see that the average age of CFA and MBA students are around 27–35 years old, which is noticeably older than the average age of bachelor’s or undergraduate university student graduates (around 22 years old).
Final Thoughts
The CFA can be a significant factor that influences one’s success in a career in investment banking.
It’s a globally recognized qualification that sends off a strong signal to future employers that you mean business, and that you’re qualified to do the work in finance.
However, it’s not necessarily a qualification that everybody should be getting, and you should always take into account your goals and the stage of your career that you’re at before making any of these big decisions.
I hope this article has been helpful in delivering a good introduction into the CFA qualification and its benefits for investment banking.
If you’d like to learn more about excelling as a student and more tips on breaking into top business careers like investment banking, check out the rest of the Medium publication, Grad Excel!
