CFA Institute is a cash cow

CFA is a nonprofit, not a "Not profitable Organization."

NFL is a nonprofit too.

Nonprofit simply means the organization can only retain 4% of the earnings.

I think the pass rate is too high tbh. Pretty sure the number is higher than 35%. I just passed my lv 2 and I think the pass rate was like 45%. Also not quite sure why someone would be called a victim of topic selection. The risks of skipping topics are pretty clear imo.

I agree 100% with the OP. Pretty clear that it's basically a scam enabled by the financial industry's demand for prestige and for qualified professionals, which allow for an organization with enough brand recognition to charge pretty outrageous fees and to essentially charge people for nothing. It comes down to how much you're willing to pay for brand, because the education can be acquired elsewhere.

One of my professors in grad school, who was a CFA charterholder, said something very similar to OP. Pass rates have steadily declined, especially for Levels I and II. The CFA is a great program, but they seem to be manipulating pass rates to keep the exclusivity.

It started with Benjamin Graham. He wrote Security Analysis. Warren Buffet made this book notorious (in the financial communities) through his practical use of it and making billions from the concepts in Investment Management and use of value investing specifically through his margin of safety.

The CFAI largely took these concepts and made it into the CFA CBOK (Candidate Body of Knowledge).

If these executives only were responsible for guiding the future path of the CBOK, I'd say their pay was reasonable. But, they are responsible for many more technical aspects of the exams and the integrity of the charter itself. If we want to talk about brand value and recognition of the charter, they are the prime people responsible for it. I think their pay is reasonable.

I would probably venture to say that many of these people are taking a pay hit by being closer to the world of academia (they are kind of in the middle). But, what I hope they decide for the future is to make the exams more practical. As the poster said above, they mainly test minute details for a pass, rather than the main practical concepts found on the street.

But, really, look at their MD General Counsel at $440K. That seems pretty low. That person is definitely taking a hit by not being in securities law or something (I haven't read their bio, but likely in that position).

The pass rates are too high IMO and there's lack of rigor that goes into confirming the so-called 4 years of "relevant" experience. I've seen too many getting their irrelevant experiences qualified and became CFA charterholders. Some of these experiences include pure auditing work at Big 4, retail banking experiences, etc. Are you serious?

Drewjk:

If a candidate studied 300+ hours and was a victim of CFA question topic selection, don't they deserve another chance...

Link

You should have left this part out of your argument.

I caught a tough break on topic selection one year but the only thing I was a "victim" of was trying to get away with doing the bare minimum amount of studying needed to pass while gambling with the tail risk that that year's topic selection might not cater to my strong points. No candidate is ever a "victim" of CFA question selection, they're victims of their own lack of preparation.

I recently passed Level III and the topic selection definitely did not cater to my strengths this year. And a random maintenance issue at the Hilton Garden Inn Times Square woke me up at 3:00 AM so I had to go on 4.5 hours of sleep. Thankfully, this year, I studied more than 300 hours and gave myself a margin of safety so I still managed to pass under circumstances that were not ideal.

I'm not rejecting everything you said in your post, but the word "victim" and the insinuation that people who study 300 hours automatically deserve to pass irritated me.

Drewjk:

Both the absolute level of executive pay, and total firm wide compensation exceed what I would consider good corporate governance for any organization, much less a "non-profit" organization that purposely fails 65% of fee payers annually.

The fact is that over 32% of fees gathered (which was over $300m in 2017!) is paid as salary. Another 10% is travel and 10% is marketing. As an equity analyst I have not seen those percentages in any of my companies (however I am an industrials analyst, perhaps tech or another industry considers this normal?).

You should probably support your claims with statistics, regarding how the employees at CFAI are overpaid Also, the break down of expenses you reference for CFAI might be normal for this type of company (I do not know if it is or not). I do not think it makes much sense to compare them to industrial companies which probably have a much larger percentage of their expenses in COGS.

I think the CFAI program has lead to greater knowledge and more integrity across the investment industry. I worked hard to become a CFA charterholder. With that said, I would prefer that the fees would be lower.

Great post. CFA basically is cash cow for non target strivers, and a desperate offshore mass of Asians hoping to break in (agree that it seems like every CFA is Indian or Chinese).

Complete waste of time and cash. It's an absolute racket.

Drewjk:

No matter how well you score on practice exams provided by CFA, they dig into mundane factoids buried within thousands of pages of text to drill question sets on the exam. The exams have nothing to do with learning concepts or formulas. They are designed to offer the opportunity to fail the majority which continues their fee collection.

I have heard this argument for various exams. People often say, "I know the material. The problem I am having is regarding the way they write the questions."

My experience has been that people do not always know the material as well as needed to pass exams. Some people might do the same questions over and over again. Also , some people do not like to read and this is probably the main reason people do not pass tests.

The actual CFAI material is very good. The questions are DESIGNED to trip you up if you only sort-of know it from cheating by just doing Schwesser or the like. I'm one of those who would prefer that it was even tougher.

If you want an example of an organisation that will pull you over the coals, look no further than the CFP board. Exam fees and dues are about double CFAI's, plus they require 30 hours of CE every other year Honestly the cheapest way to get your CFP is to get your CFA Charter then have the classwork waived.

If you want to see real scams, however look at some of the lower level designations like the CETF. I can accurately describe the risks of trying to build a high turnover ETF that includes Indian securities, (India is a giant PITA to trade as a US based investor) and I fail to see the value in it.

As a charterholder from a non-English speaking country, I always make the same paralellism between CFA and speaking English:

When my parents were my age, speaking English guaranteed you a very good job in finance. Today, if you don't speak English you're out of the competition.

It seems that the charter has seen the same process. Years ago, the charter differentiated you in the AM industry. Today, with so many charterholders and candidates, it has become a must for young professionals that want a career in AM. It has transitioned from a differentiating charter to a must have.