After efinancial careers posted an article claiming CFA was "not a profitable organization", I asked them to review the proxy and CFA tax returns. What they found may be shocking to many (the link is at the bottom of this article). 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.
Some have argued that you need to pay talent to deliver value, and there is some truth to that. However, I encourage you to review the striking number of employees that make high six figures and hundreds of employees that make $100k plus. 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?).
Others have argued that the CFA Institute delivers unparalleled content to the industry. There is some truth here too, however most of that content comes from its members who do not share in the $300m scheme.
The CFA process is grueling and probably useful. I have taken all levels, failed both level II and III before advancing. What I learned through the process is that CFA adheres to a 20/80 exam formula. 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.
Approximately 40% of the material will be directly useful to you as an equity analyst, and another 10% may be interesting. If you appreciate education but also appreciate holding onto the $5000 it may take to sit for the exams, you can always buy used texts online and learn at your own pace. (Which brings up another question - why offer the exam only annually? If a candidate studied 300+ hours and was a victim of CFA question topic selection, don't they deserve another chance to demonstrate their knowledge before moving on to their day job for another 364 days??)
I believe CFA Institute started with good intentions and has contributed to the financial community. However, one only need look at the pass rates over time to see when they realized they had a marketing machine capable of amassing $450m of assets on the balance sheet and $300m+ annual fees.
Average salaries for experienced charterholders justify the salaries we pay to CFAI staff. I don't want a bunch of schmucks running an organization that justifies my own pay.
Actually, I'd prefer the charter be even harder to get. Too many candidates who think it will take them from some admin back-office job in a forgotten country to front office in the developed world. It won't, and CFAI is doing them a bit of a disservice.
>I'd prefer the charter be even harder to get. Too many candidates who think it will take them from some admin back-office job in a forgotten country to front office in the developed world. It won't, and CFAI is doing them a bit of a disservice.
Of course not; that's their biggest growth market! I looked into the pass-rates for the exam, as they've decreased significantly since the start of the program. CFAI is big on expanding into emerging markets (mainly China and India); non-English speakers represent a growing segment of the candidate pool. The fact that the test is only offered in English no doubt contributes to the lower pass rate. Expensive exam fees + prep materials + candidates' continued persistence to retake exams = $$$$$$
No non-profit is ever completely "not for profit"
Every single back office schmuck at my firm has a CFA now. The designation is watered down. I no longer take it seriously.
Is the new CFA not having a CFA?
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.
The same can be said of b-school and education in general...
Are you comparing CFA and B-school? CFA is 5k B school is close to 200k nowadays...
Also they don't have much in common. CFA is to learn (some useful some useless) B school is for networking and to be honest... Networking is everything in finance if you're able to perform.
edited to make it clear
lol and what about unis like Cambridge Judge Business School? they openly say “the MFin curriculum incorporates a large part of the CFA level 1 curriculum“.
So if you put things in perspective, for like $1k per level you get education that is probably worth $50k from a university. Do you use all CFA material in your job? no way. Do you use all undergrad/grad knowledge in your job? no way.
The pass rates are ok at about 43% & its a valuable professional exam to have because its hard/time consuming.
i dont understand rants like this.
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.
I think this is due to more non-native English speakers taking the exam. CFAI has been marketing the charter as a golden ticket outside of the US to expand the candidate pool. Being fluent in English is a major advantage, and I think it’d be interesting to see the pass rate just for native English speakers.
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).
Are these body of knowledge books any good? CFA? Turnaround Management? They charge a ton for each book.
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?
Yeah, because CFAI wants those yearly fees.
I've definitely lived in the Southeast long enough now that my first reaction was "Who the fuck thinks that Chick-fil-A isn't a profitable organization? That company makes billions every year."
Eat mor chikin
Now I want Chick-fil-a for lunch.. thanks for that. I'm expensing my trainer costs to you.
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.
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.
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.
I would not say, it is a must have in AM for everyone. I would say it is a must have if you did not go to an IVY or similar school in undergrad or graduate.
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