The CFA Institute, the global association that administers the Chartered Financial Analyst designation, recently announced what the organization says are the most significant changes to the testing program in 60 years.
They include a specialized path for private wealth advisors, reducing the volume of study materials, increasing the opportunities for practice exams, and elevating the formal acknowledgment of completing Levels I and II exams.
Chris Wiese, managing director of credentialing with CFA Institute, said the changes were made to raise the CFA’s relevance in the eyes of both candidates and employers, including those working in wealth management and private markets.
Only about one in seven people who start the program eventually become charterholders. Wiese said the program will maintain its high standards, yet widen the opportunities for individuals to meet the criteria.
“Given that I don't want to change the rigor of the program, the only other lever I have is for us to do more to help lift people up to that same rigorous standard, and that's some of what's behind bringing in instructional designers and offering more practical hands-on learning,” he said.
Starting in 2025, candidates will be able to choose one of three specialized paths at the third, and highest, level of examination: the traditional portfolio management path, as well as concentrations in private wealth and private markets. All three will include a common core of study, with additional components tailored around each focus. Approximately 10,000 of the current 190,000 CFA charterholders work in the private wealth industry.
The private wealth path, for instance, will cover topics like client management, wealth structuring, investment planning and ethical issues such as the fiduciary duty of care.
“We're acknowledging that private markets and private wealth management in particular are two growing segments where we're seeing a larger number of people come into the program anyway, and we want to make sure we're doing a better job preparing them,” Wiese said.
Wiese does not view the changes as encroaching on the Certified Financial Planner designation, the largest professional designation applicable to financial planners.
“This is us doing a better job with our audience on the investment decision-making process and better preparing them to work in private wealth. We are, by our nature, a global credential, and so we’ll talk about taxes, for example, from a global perspective and from an investment management perspective, but local tax regulation," is not an area the group will cover.
The CFA will also introduce modules to teach candidates on-the-job, practical applications, including financial modeling for Level 1, analyst skills for Level 1, Python programming at both Level I or Level II, along with data science and artificial intelligence. Those modules will begin to be rolled out next year for Level I and Level II, but they won't be graded on the exam. Additional modules will be added for Level III in 2025, including modules created around practical applications in private wealth.
“Our sense was in the past that we taught the concept, but we never took that very last step to giving people practice with actually applying it in the workplace,” Wiese said. “So we're attempting to take that last step, so when they show up in the workplace, they're that much better prepared.”
The organization's internal metrics show that candidates are spending significantly more than 300 hours to prepare for each exam, a time commitment that has grown over the years.
To streamline the study requirements, the institute has taken out of the core curriculum introductory material most candidates with a business degree have already learned, such as introductory economics, financial statement analysis and introductory statistics. Only about 10% or so of CFA candidates come with a background in science or engineering, and the economics and financial content will still be available for those who need it.
Starting in February 2024, Level I candidates will have access to a new CFA Program Practice Book, for a fee, which includes 1,000 new practice questions and six additional mock exams. Currently, candidates receive two mock exams at no additional charge eight weeks before their exam window. While candidates will have to pay for the additional practice exams, the questions are written by the same people who write the live exam questions, so they’re of similar quality, format and difficulty level.
While the pinnacle remains getting the CFA itself, the institute has introduced a refreshed badging strategy, as a way for candidates to have formal acknowledgment of completing Levels I and II of the exam. That can help them in their search for internships and full-time positions.
The last change, which went into effect last November, is that the Level I CFA exam eligibility has been extended by a year, allowing people into the program when they’re two years from graduation, compared with the traditional one year.
“Letting them in a little earlier puts them in a position where they can effectively compete for their first internship and then hopefully pick up Level II while they're still in school,” Wiese said.
As of Aug. 31, 2022, there were about 202,000 members of the CFA Institute, up from about 191,000 in 2021, and 120,785 in 2013.
In 2021, the CFA pass rate declined to a record low of 42% for the Level III exam in May and June of that year, due to the impact of the COVID-19 pandemic, according to Bloomberg. But as the impacts of the pandemic subsided, pass rates increased in 2022.