CFA Exam and Investment Banking. How to become an investment banker.

Finance professionals love to play with numbers. Their passion for understanding the complex equations, numerics, data, etc. is intriguing to some but beneficial to everyone. As you have also decided to step into the finance industry by pursuing the CFA course and making your way to an investment banker, read this guide. 

To earn the badge of a CFA, you first have to take the course and pass the exams. However, the course won’t be enough to reach higher levels in this career and take up work as an investment banker. You need to gain the required experience and expertise in your domain. 

A CFA’s primary occupation is not just taking care of investments, but they can take jobs in other related fields as well. So, after completing your exams you can start working in banks, insurance companies, brokerage firms, pension funds, etc. The core requirement here is the understanding of finance and its related concepts. 

Let’s get into the details of how to pursue the CFA course and build a career in investment banking. 

But First, is it Easy to Pass the CFA Exams?

We don’t think that the answer to this question is straightforward. Any exam can be easy or difficult based on your preparation and approach. For someone who understands the basic concepts, gives in everything to prepare, and learns holistically, any exam will appear easy. 

But if you are not prepared well and face issues with the basics, any exam may seem like a tough nut to crack. Preparing for the CFA can be made easier when you get in touch with IMS ProSchool. Our CFA exam preparation takes care of every concept in the course and helps you prepare holistically. As for the determination or dedication is required, the onus of developing that is on you. But our professionals and training coaches are here to help you prepare well. 

What is a CFA (Chartered Financial Analyst) and What Does a CFA Do?

CFA or Chartered Financial Analyst is a professional qualification and designation provided by the CFA institute. The CFA designation enjoys global recognition, and people with the CFA certificate are regarded as experts in the financial field, especially when it comes to financial analysis, investment, and ethics. 

The certification for CFA is awarded by the CFA Institute based in the USA. Those who pass the exam get the designation of CFA Charterholder and they are held in the highest of standards across the globe, especially in the financial world. 

This is not only because of passing a prestigious exam but also the ethical values and professional code, these individuals are taught and are supposed to uphold. Plus, anyone breaking the code or compromising on the ethics can be held in violation and invite industry sanctions or even the revocation of their membership. 

Everyone who passes the CFA exam gets their name listed in the CFA Institute Member’s Directory. This way, it becomes easier to contact them, which also means that the CFA Charterholders will get to explore several job opportunities. 

What’s the Work of a CFA Charterholder?

CFA Charterholders can fit into several domains in the financial industry. While investment is a wider term, they can bring their expertise to manage portfolios, conduct research, manage risks, run risk analysis, and also to provide financial consultation. 

The job profile and work of a CFA can vary across a broad spectrum because of the expertise they have and their knowledge base. In addition to the roles above, they can also work as data scientists, credit risk analysts, investment officers, auditors, and trading experts. 

Among all the jobs and roles, a CFA is primarily working on managing finances and money. Whose money and finances are they managing depends on the job role and the profession. But let this be clear that a CFA charterholder is held in the highest positions in the finance and investment world. 

They enjoy higher salaries, higher reputation, and higher scalability as compared to other jobs in this domain. 

How to Become a CFA Charterholder?

The ultimate goal is to pass the CFA exams, consisting of three levels;

  1. Level 1: This is the beginning level and includes the financial tools and input required by investment professionals. These tools pertain to financial reporting, analysis, portfolio management, etc. 
  1. Level 2: The second level is primarily about asset valuation. Here too, you will come across tools and inputs required in quantitative analysis, economics, financial reporting and analysis. 
  1. Level 3: The last level is mostly about portfolio management and the tools, concepts & methods required for the same. 

The subjects in some levels are repeating and this means that on every level the complexity of that subject increases. 

Before taking the exams, you have to prepare the subjects included in the same. The subjects and concepts included in the CFA are;

  • Quantitative Methods
  • Economics
  • Financial Statement Analysis
  • Ethical and Professional Standards
  • Corporate Issuers
  • Equity Investments
  • Fixed Income
  • Derivatives
  • Alternative Investments
  • Portfolio Management & Wealth Planning

To become a CFA Charterholder, you first need to get into the CFA Program and pass the exams. 

Entry Requirements for the CFA Program

To enroll into the CFA program, you must;

  • Have completed a bachelor’s degree course or you can apply while still in the final year of your bachelor’s degree. 
  • Have completed at least 36 months of professional acceptable work experience. 

Now the question here is what is “Acceptable” at CFA Institute. Fortunately for you, the CFA has quite a broad definition for acceptable. So, your work experience in trading, economics, corporate finance, investment, etc. will qualify as “Acceptable Work Experience.”

For work experience, the potential members are also judged on their capabilities of leadership, teamwork, business communication, time management, professional judgment, analytical skills, adaptability, and critical thinking. 

Another set of conditions includes that you must have a passport to travel across international borders. Plus, you must be able to take the exams in English and meet the professional conduct standards of the admission criteria. Lastly, to enroll in the CFA Institute, you must live in partner countries. 

Finally, to earn the certification, you must also become a member with the CFA. The membership is paid, but it brings several benefits, like voting rights, continued learning, and access to the latest research. 

CFA Exam Levels 1, 2, & 3

Let’s talk about the CFA Exam Levels in detail. But before going ahead, note that all the subjects we have listed above will come in all the three Levels. 

  1. Level I: To give the Level 1 exam, you must pass the enrollment requirements we have shared above. The exam will have Multiple Choice Questions and is completed in two sessions. 
  • Session 1 has 90 MCQs and must be completed in 2 hours and 15 minutes. The subjects covered here are; ethics & professional standards, quantitative methods, economics, and financial statement analysis .
  • Session 2 also has 90 MCQs and has a time limit of 2 hours and 15 minutes. The subjects covered here are corporate issuers, equity, fixed income, derivatives, alternative investments and portfolio management.

The 10-year Average Pass Rate for the Level 1 Exams is 42%. 

  1. Level II: To give the Level II exams, you need to pass Level I. This exam has Vignette-Supported MCQs. It has 22 item sets of Vignettes and accompanying questions. This exam is also held in two sessions, of 2 hours and 12 minutes each. 

The exam covers all the topics mentioned in the syllabus and the 10-year average passing rate is 45%. 

  1. Level III: The Level III questions have a similar structure of Level II (Vignette item sets with MCQs). In addition, it also has essay questions. The answers to the questions must be given from the item sets provided in the exam. 

Plus, note that here the topics are randomly chosen. So, it is essential to cover all the topics thoroughly in Level I and Level II. Here too, the exam will be held in two sessions of 2 hours and 12 minutes each. 

The average pass rate for Level III exams is 54%.

Only after passing all three levels of exams can you obtain the CFA Certification and be added to the list. From here, your career can see an amazing journey in the upward direction. You will find better job opportunities, higher salary, and reputation in the industry. 

However, to finally obtain the certificate of a CFA Charterholder, you also need to show professional experience. Plus, obtain the membership after paying the fees and submitting reference letters. 

Yes, reference letters are required for the membership. You need to submit at least 2 to 3 professional references. These references must showcase your work talent, experience, and professional character. 

Post the approval of your application to become a member; you will get the recognition of a CFA Charterholder. 

The Journey to Become an Investment Banker

To become an investment banker, you need to have the basic qualifications like a bachelor’s degree. It will be better if you also have a master’s degree. You can do the degree course in finance, accounting, math, banking-related courses, etc.

Let us make it clear that you can become an investment banker without getting the CFA Charter. However, with the CFA Charter, you will be able to explore and discover several new opportunities and also get a higher salary. 

So, if you don’t have a CFA Charter or don’t want to get one, you can start working in a small position in an investment firm, bank, insurance company, etc. Right after completing your degree, firms hire people in internship positions. From here, you can move forward, gain experience, and get promoted. 

Generally, you will start working as an investment banking analyst and grow with the in-house training. You can also take up other advanced degrees like an MBA to further improve your credentials and get access to better opportunities. 

This is the longer way to start working as an investment banker. The shorter and better way is to gain the CFA Charter. After passing all three levels and gaining the right experience, you will be listed among the top investment and finance professionals in the world. 

At present, there are only a handful of 160,000 CFA Charterholders in the world. So, passing this exam and then pursuing your career in investment banking lands you in an exclusive club of professionals. 

These people are masters of their craft, have deep set understanding and knowledge of the field, and can do wonders with their work. Plus, with the CFA Charter you will gain access to better companies, higher salaries, and a wide range of opportunities. 

Conclusion

Taking the CFA exams to earn the CFA Charter and certification is going to become the key driver of your career’s upward trajectory. You can have all the degrees and qualifications in the world, but the impact a CFA Certificate will have on your career is unmatched. 
To pursue your dream of becoming an investment banker, you must attempt the CFA exams and obtain the certification. At IMS ProSchool, we can guide you in the right direction and help you prepare for the CFA exams as well.