From Chemistry, to CFP, to CFA® Charter

Anyone who starts working toward the CFA charter has heard stories of people with a PhD in finance or even professors who fail the Level I exam. There are multiple reasons for this, in my opinion.

One is that the CFA exam covers many areas of study—10, to be exact—and a finance professor, most likely, is an expert in one, though he or she has probably had exposure to most of the other areas sometime during their career. Second is that one needs to actually learn the CFA material, which might be different from what was taught at university. Combined, this means that even a person who teaches finance needs to study the material to pass the exam.

Preparation for Non-Finance People

What does this mean for those who have minimal to no financial educational background? Before I took the exam, I did have some background in academic finance, as I had taken a few economics courses and had finished up the Certified Financial Planning program the year before. I also had worked in the field, first as a financial adviser and then at a large insurance company for a couple of years.

Even so, my undergraduate degree was not in finance. It was in chemistry, and I then got a master’s degree in soil and water science. After that, I spent four years working as a chemist at an environmental consulting firm. I had never taken a university-level statistics, accounting, or finance class, and my last economics class was 16 years before I embarked on the CFA path. As a financial adviser, I also never had to do the type of calculations that the CFA exam tests for in regard to derivatives, real estate, or fixed income.

So when it came time to start the CFA process, I had studied for the CFP exam, taken a few economics classes, and worked as a financial adviser. I already knew some of the material, especially in Level I,  including the basic investment material and ethics, as the CFP and CFA programs are similar in those areas. As a scientist, I also had plenty of exposure to statistics, even though I never took a statistics class. So I had some experience with about 54 percent of the topics in Level I, based on the weightings in Table 1. For the next two levels, the percentage was much lower.

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Based on surveys of CFA candidates, it seems the average time spent on each level is around 300 hours per exam. To put that in context, the expectation in college is that, in a three-credit course, one will spend 45 hours in class and an additional 90–135 hours studying outside of class. So each level of the CFA exam is the equivalent of 6 to 9 college credits.  

My experience was not that different. I’d say that I spent around 200 hours on Level I, though I probably spent 300 hours or more on each of Level II and III. I easily could have spent an additional 100 hours studying for Level II, since the material covered areas I had little to no background in.

Aim for Good, Not Perfect

The good thing about the CFA exam is there is no difference between a person who just passes and the one who aces every subject area. The joke about “what do you call the person who finished last in medical school” applies doubly for the CFA, since they only let you know how you did if you fail—there’s no ranking if you passed.  

Therefore, you can know nothing more than the easy stuff in one to two areas and still pass the exam! If you simply cannot memorize all the financial accounting rules and how a percentage of ownership affects them, then you can do some triage and move on.  

The one area where this approach may not apply is ethics, since that’s the area that, if one is borderline passing, becomes the deciding factor, distinguishing between those who barely pass and those who end up in band 10.

Scientific Method

For those who are taking the exam with a background in science, the material should be easy to pick up. You likely already know the basics of statistics, especially Gaussian distributions. Learning formulas and plugging in numbers should be easy, as throughout your science coursework you have been asked many questions where you need to rearrange the equation based on some variable missing.  

Memorizing many formulas is something I had to do in introductory science classes, and at the end of the day, there is not much difference between calculating alpha and figuring out the pH of a solution.  

All the material needed to pass is in the CFA books provided with the fee. I am unusual in that I never bought study guides from an outside source. I did, however, take the three-day cram class for Level I because I started studying on March 15 for a June exam.  

For Levels II and III, I signed up for an online course as much to keep me on track as for the material covered. For Level III, the biggest help is going through all the problems highlighted in blue in the CFA books. I do recommend getting and taking as many mock exams as possible, especially for Level II.

Seek Out Mentors

I was lucky in that a number of colleagues were taking the exam with me or were a year or two ahead, so I was able to get advice from them. Most of them had some sort of undergraduate finance major, and many had an MBA degree.

The amount I needed to study was not that different. Interestingly, people who had an MBA stated that the CFA was harder than business school coursework! Based on my experience with Level I, where some of the material overlapped with my CFP, it would have been easier if I’d had exposure to more of the areas.  

That’s a double-edged sword, though: to my surprise, I often did the worst in economics sections, where I had some academic exposure. The reason for this might have been overconfidence, because I assumed I knew that material.  

But the main reason, I suspect, is that one needs to know “CFA economics,” which is likely different from the economics studied in school. It is sometimes easier to learn something correctly from the start than to re-learn something when what you know is “wrong” in terms of how the subject is tested on the CFA exam.

Career Move

The reason one takes the exam, especially if you’re not a finance major or working for a finance company, is to get a job (and a leg up) in the finance industry. I already worked in finance, but I did take the exam with the expectation that it would help me get promoted or assist in getting me a better job at another firm.

Based on the numbers from CFA Institute, there are definitely plenty of CFA charterholders at large finance firms. There are also plenty of people without one. As shown in Table 2, JPMorgan Chase alone has close to 1,800 charterholders, but the company also employs approximately a quarter-million people, making the proportion of charterholders less than 1 percent of the entire JPMorgan workforce. Many of those 99 percent were likely not finance majors—and some of them, I am sure, hold senior-level positions and even work in areas where one would expect a CFA to help. This is especially the case today, as many firms are actively hiring people with advanced degrees in science based on their quantitative skills.

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Based on my experience, passing the three CFA exams has not allowed me to enter a new field in finance. A quick look at any job board for jobs that mention CFA will confirm that most also require some sort of work experience in the same field. Thus, the designation is more something that a potential future employer might prefer or that will differentiate between multiple candidates.  

Honestly, it helped me the most at the firm where I already worked, as I was able to move over from a financial planning job to one doing portfolio attribution, which is a subject covered in Level III. It’s possible I could have made that switch anyway, since my superiors knew that I was analytical and picked things up quickly.  

If my goal were to get a job as a quantitative analyst, then spending the 800 hours that I dedicated to studying for the CFA exams on learning MATLAB, VBA, Python, and R2 instead would likely have helped me more. That’s the thing about the exam material: it teaches you the information, but not how it is actually used in the workplace. No one is hand-calculating the duration of a bond. At the same time, finance firms do need someone who knows how to program software that can do such calculations, and the coder probably either looked it up or was given the formula to program.

Was It Worth It?

It has been seven years since I first started to study for the CFA exam, and for the most part, I do not regret the time and effort it took. I was lucky, since the company I worked for paid for all the fees if I passed, which I did on the first attempt for each level. If you’re not working for a finance firm, then the USD 8,000 cost of the exam and study materials needs to be considered alongside the possibility of taking coursework in the specific area of finance you’re interested in.   

Also, prospective CFA candidates need to realize that unless you already have a job in finance, or have advanced quantitative or programming language skills, the exam by itself will not get you a job. Once you have that first job in finance, being a CFA charterholder can—and likely will—help with promotions or getting better jobs in that area.

It will also help make you more well rounded and knowledgeable. If I were evaluating multiple candidates, I would consider the one with the CFA designation to be better suited to the job, as much for the material that person had to learn as for the fact that the person was able to manage his or her time well enough to spend 20 hours a week for 15 weeks each year over a three-year period to pass the exam.

About the Author

Though Bryan Corbitt has spent the last 12 years in finance, his undergraduate and graduate education and his first career were in the field of science. He switched over to finance in 2005, becoming a financial adviser. After getting his CFP in 2009, Bryan still felt he needed to learn more about finance that he’d missed as an undergrad. Six years ago, he started the CFA program and passed each exam on the first attempt. Bryan is no longer a financial adviser, having moved into the home office to work on money manager review, compliance, and financial planning support.

Bryan Corbitt