How the coronavirus pandemic made the CFA test more difficult


When the pandemic hit, Irene Zhu decided to consider switching from tourism to finance. A lifelong enthusiast of mathematics, Ms. Zhu, 37, has set herself the goal of becoming a Chartered Financial Analyst, a highly coveted professional qualification in the investment world. But to do that, she would have to pass three notoriously difficult tests, including the first she took in February – after staying awake well past 1 a.m. for many nights of study.

She failed.

“I have to say it was quite messy,” Ms. Zhu said in a video recounting her experience. “What made the CFA exam really difficult for me was the time and effort I had to put into it,” she said.

The process of obtaining a CFA after its name has always been exhausting: Applicants must master 3,000 pages of documents and demonstrate the ability to analyze companies’ financial statements, predict the profits of investments, and manage conflict. interests, as well as a wide range of concepts and scenarios.

The pandemic has made this job more difficult. Ms Zhu, based in Melbourne, Australia, was among some 140,000 people who took one of three qualifying exams required for a CFA this year. Only 35 percent were successful. Among those who took their first exam during the last session in July, the success rate was 22% – the lowest on record since the nonprofit CFA Institute began administering the tests in 1963. On average, less than half of CFA test takers at all levels pass.

The lowest records have reignited a long-standing debate among financial industry veterans: How useful are references for success on Wall Street? And how does it stack up against the most popular graduate degree in the industry – the MBA or Masters of Business Administration? These questions – MBA vs CFA vs nothing at all – appear periodically in the industry, but this time around they are more pressing, especially with enrollments in the CFA program down from their peak in 2019. In the middle of The pandemic, Wall Street’s biggest companies have also been forced to rethink some of the rites of passage that have long gone unchallenged – like long hours at the mercy of bosses or button-down outfits.

CFA candidates whose exams were canceled or postponed due to deadlocks and difficulties during the pandemic performed worse, according to the institute noted after auditing the data for the last two sets of below-average scores. While testing is typically offered twice a year, it has been offered multiple times this year due to the pandemic.

“People have had their lives turned upside down in a lot of cases – we know they are virtually working from home, there is fatigue that sets in,” said Margaret Franklin, CEO of the Charlottesville-based CFA Institute. , Virginia. “There is sort of the optimal study conditions, and then there is the reality of Covid,” she said.

Many of today’s top CFOs hold CFA titles, including Marty Flanagan, managing director of Invesco, which manages $ 1.5 trillion, and Heather Brilliant, managing director of Diamond Hill Capital Management. Other leading executives in asset management, including BlackRock chief Laurence D. Fink, are not.

Howard Marks, billionaire investor and co-chair of Oaktree Capital Management, a distressed debt fund, holds both a CFA designation and an MBA. A strong supporter of the CFA program, Mr. Marks said the title was valuable because it was the closest thing fund management firms had to an industry qualification.

“The CFA doesn’t tell anyone if this or that is a good investor – it’s just a matter of academic preparation, but that’s clearly a plus,” Marks said. “You can take an MBA and not take an investment course, so an MBA is clearly not enough,” he added.

A recent spate of poor results prompted Jared Dillian, author of an investing newsletter, to write an essay last month with a sharp headline: “The Wall Street CFA program is a colossal waste of time. “ Mr. Dillian was castigated by CFAs who were quick to defend the merits of their hard-won title. But he said he also received numerous private messages that matched his assessment.

Early in his career, Mr. Dillian passed the first level CFA exam, but subsequently failed the second level. He considers his MBA from the University of San Francisco more valuable because it allowed him to network and learn from business leaders during his studies.

“It’s better than sitting at your desk at home, banging your head against the wall, memorizing formulas,” Mr. Dillian said.

The CFA Institute first offered exams in the 1960s to set professional standards for financial analysts who manage client investments. During this decade, an average of 1,500 people took the tests each year. Of these, 73-94% were successful.

Over time, the CFA program became foundational knowledge for analysts and portfolio managers who were willing to scour the material to gain an advantage. But as the designation has grown in popularity, success rates have plummeted. The number of applicants peaked above 270,000 in 2019, and an average of 44.2% passed.

While exam registrations are down from their peak in 2019 – exacerbated by the pandemic – around 1.7 million people remain enrolled in the program, of which 236,000 people are booked for upcoming tests. Each exam takes place at half past four. Registration, exams, and materials cost around $ 3,000 – far less than the average cost of an MBA program. Holders of the CFA designation must pay an annual membership fee to maintain their titles.

“It’s a great certification to have, but given the time and requirements to get it, it makes sense to plan appropriately,” said Paul Sorbera, president of the Wall Street Alliance executive search firm. Consulting. Advanced skills can increase an employee’s earning capacity, but higher pay is not guaranteed, Mr Sorbera said.

Michael Lin, a 28-year-old amateur boxer who received the CFA title in August after passing all of his exams on the first try, compared the effort to training for a sports tournament. Mr. Lin, who at the time worked in the Wealth Management division of Wells Fargo, began studying several hours a day outside of work, then added weekends and took one to two weeks off. before each exam to study full time. The pandemic lockdown allowed Mr. Lin to squat down and hit the books, unlike some of his colleagues and friends who had bigger disruptions.

“The mentality is an integral part of it,” Mr. Lin said. While a CFA is highly specialized for fund managers and analysts, it is also a solid degree that pays much more money than a master’s degree, he said. Now that he’s a chartered financial analyst, “I absolutely don’t want to waste a few hundred thousand dollars on an MBA,” Lin said.

Florian Campuzan, an independent stock trader in Versailles, France, was not so lucky. Mr. Campuzan is pursuing a CFA in the hope that the knowledge and prestige gained through accreditation will strengthen his consulting jobs, such as advising companies on their raw material coverage. But he didn’t pass his final exam because the busy stock markets took up more of his time in the first quarter.

Mr. Campuzan seemed to take the news with good humor, Twitter post: “CFA Level 3 Failure”, with a thumbs-up emoji. In a later interview, he was more of a philosopher. “Business is the school of hard knocks and it teaches you to be humble – it teaches you to be a hardworking person and it teaches you to accept failure as part of the journey,” Campuzan said. “This time I failed, but next time I will succeed.”

Ms. Zhu, who took her first CFA test in February in hopes of a career change, was disheartened. “Anyone who wants to take the CFA really needs the mental and physical time to devote to the exam,” she said. Towards the end of the six-month period she had allowed herself to prepare for the exam – with two children at home and a husband also working remotely during the pandemic – Ms. Zhu said she felt that ‘she was running out of time.

After learning that she was unsuccessful, Ms. Zhu decided that pursuing the DWI was not worth it. “I was a little disappointed, but again, even though I passed level one, it seems like a long journey to pass level two and level three and the charter.”

Instead, she plans to pursue a career in finance in part by making YouTube videos where she shares her ideas on investing.

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