A survey of how much CFA charter holders make offers some interesting insight into compensation and the designation
How much do CFA charter holders make? It’s one of the most asked questions here on the FinQuiz blog and one of the most popular among candidates.
Makes sense, why would you spend upwards of 1,000 hours studying and make other sacrifices without a little monetary compensation?
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The CFA Institute last ran its CFA Charter holder Compensation survey in 2015 and offers an interesting look into how much designation-holders earn.
Your preference for a particular sector of finance should play an important role in your job decisions but money is always a big motivator as well.
Let’s take a closer look at the compensation survey.
Do CFA Charter holders Make More Money?
The most recent charter holder compensation survey I found was for Canada, completed in August 2015.
There are also older surveys available for local societies in the USA and globally but the nationwide survey gives us a good overall look at how much CFA charter holders can make.
The 2,606 charter holder respondents were mostly men (83%) with an average age of 39.7 years and in their current position for 5.6 years. Total average career tenure was 15.1 years for respondents.
The range of employers was fairly large with asset/fund management firms employing nearly a third (27%) of respondents followed by investment counseling (11%), sell-side brokerage (7%), pension management (6%) and IB, insurance, financial services and commercial banking each accounting for 5% of responses.
More than three-quarters (77%) of respondents receive a performance bonus with 13% entitled to profit sharing and 22% receiving stock awards or options as part of their compensation.
Besides a base salary, other compensation included sales bonuses, multi-year incentives and consulting fees.
The average base compensation was $138,000 with performance bonuses adding another $77,000 for those that received them.
Total compensation averaged $280,000 across all recipients (base and bonuses do not add up to the average because of different pay structures).
Of course the average may not be the best measure (remember your quant methods?).
The median compensation of $147,550 suggests a large skew to those earning salaries much higher than the group. The top 25% of income earners make between $275,000 and up to $10 million annually.
Base salary accounts for a larger share of compensation for newer employees while bonuses and profit sharing grow as job tenure increases.
More than half of the respondents personally manage assets for employers, managing an average of $4.2 billion in AUM.
Portfolio managers made the most with an average compensation of over $600,000 while c-suite charter holders averaged just over $500,000 annually.
The roles bringing in lower compensation tended to be junior positions and those outside direct asset management like portfolio analysts ($98,906), compliance ($147,700) and marketing ($153,000).
Average compensation was reported higher by 20% from the prior year but up only 7% on an annualized basis over the four years from 2010.
Nearly a quarter (22%) of respondents also hold an MBA, followed by master’s degree (17%), CIM (7%), CA (6%), CFP (5%) and FRM (5%). A third of respondents held no other designation besides the CFA.
The full Canada CFA Compensation Survey is available here and offers a lot of information across 79 pages.
A lot of detail is provided for individual jobs and definitely worth a look. There are some obvious facts like the link between experience and tenure to compensation but there are also some not-so-obvious facts that will surprise you.
How to get the perfect job when there is not one available?
It’s a jungle out there! I get emails every week from candidates that continue frustrated in their job search, even after passing one or more levels of the CFA exam.
We’ve talked about the value of the curriculum and the need for networking in previous posts. I’ve recommended getting active in your local CFA society as well.
But there’s one tool that we haven’t talked about, one that I always avoided in my own search. I would go so far as to say that I even had a disgust for it when I was just out of school.
CFA Jobs – The Unpaid Internship!
I hated even seeing notices for these when I was looking for a job.
Are my skills really that worthless that a company would pay me nothing for my time or is the company just too cheap? Either way, do I really want to work for that type of company?
Maybe I’ve mellowed in my old age or maybe the difficult job environment for some has changed my concept of the value of time, but I am actually coming around to recommending these opportunities – for the right opportunity!
Let’s face it, if you’ve been without a paying job for the last few months and have no real leads, what could it hurt to spend a few months in an unpaid position? The trick is, make it on your terms and don’t be afraid to negotiate.
Start with what you want to do and where you want to do it. Is there a firm in your city that dominates the industry? Is there someone that you admire? What are your skills and what can you offer to that person, role or company?
CFA Jobs – The Game Plan
In most cases, the company will not formally have an internship program for exactly what you want.
Believe it or not, that works to your advantage. There won’t be other candidates applying for the opportunity!
Use the CFA member directory, your local CFA society or your existing contacts to find out who works in the company or the specific department.
Send an email first but then follow it up with a call no more than a day later.
Explain that you are trying to decide in which part of the industry you want to pursue a career and would like to invite them to lunch to talk about what they do.
This is not the time to ask if there are any jobs available!
It’s just an informational interview, no pressure. If they don’t have time for lunch, a phone interview would also work.
Research everything you can about the company, the person and their role before your lunch. At the meeting, relax and don’t worry about getting that perfect opportunity.
Use the time to learn about the industry/role and decide whether it is truly something you would want to pursue.
Towards the end of the conversation, mention that you have been interested in the company for a while but that no job opportunities or internships have come up.
Ask if the person would be willing to work with you on an informal internship program.
Explain that it would be more of a mentoring role, a way for you to develop some real experience and a way for them to benefit from the enthusiastic help.
The biggest thing to remember is that every, “No,” or hesitation is not the end of the conversation but a topic to negotiate.
- They don’t think there would be enough for you to do 40 hours a week. OK, what about a 20 hour schedule.
- They wouldn’t feel comfortable not paying you for your time but do not have it in the budget. OK, what about a stipend for travel costs?
- They just don’t have time to put something like that together. OK, how about a floating role where you worked with multiple people within the department.
Don’t get frustrated if you have to talk to a lot of people and face a lot of rejection. Not everyone will be open to the idea of an informal program.
Just remember, just because you haven’t landed that six-figure salary yet doesn’t mean your skills and knowledge don’t have value. You just have to establish that value and sell it to your network.
The worst that could happen is that you add to your list of contacts in the area but do not find anything, which is still better that where you were.
On the flip side, there is a good chance that someone you talk to likes your enthusiasm and ability to think outside the box. They may decline your internship offer to put your name through to someone that is hiring for an actual job.
“No” may be a closed door but you can open it back up with the right key.
Is the cfa worth it?
A recent article on Bloomberg questions if the CFA is worth it but are they missing the bigger picture?
The CFA exams have come and gone and the financial media has been all over the story for the last week.
From describing the challenge for CFA candidates to one recent Bloomberg piece that questions the value of the CFA charter.
It’s a question often asked and without a clear answer but naysayers may be missing some key factors.
A record 172,682 candidates sat for one of the three CFA exams this month in just about every country on the globe.
If history is any indication, nearly half of those candidates will fail the exam and some may need to take each level multiple times.
On the hundreds of hours it takes to study the material and the money spent for registration, whether the CFA is worth the effort is a valid question.
Analytical people are drawn to the CFA through their career dreams so it’s natural they would want to place a value on their time and money spent.
CFA Not Worth It Crowd Misses the Bigger Picture
The Bloomberg article doesn’t come to a definite answer on the value of the CFA charter but the tone seems to suggest that it’s a high bar to set considering the costs.
Maybe I’m biased being a charterholder myself but besides some obvious problems with the analysis, the article misses a few key points that only a candidate or CFA charterholder would understand.
The article assumes candidates spend ‘thousands of dollars’ on fees and materials for each CFA exam.
While you can spend several thousand through the registration and some of the more expensive third-party study providers, ‘thousands of dollars’ is misleading and not the norm.
The standard registration fee to the CFA Institute is $860 and even the premium package on Finquiz is only $400 which leaves a lot of room to ‘thousands’.
Saying ‘thousands’ is a stretch considering many candidates study only the Institute materials and even the most expensive third-party providers cost less than a thousand dollars.
The biggest point to the article is based off a Phaidon survey of job opportunities on the LinkedIn platform mentioning the CFA in the description.
Nearly three-quarters (73%) of the jobs offer less than $100,000 annually which is supposed to sound low but sounds like a pretty good salary to me.
Assuming that jobs posted on LinkedIn are representative of all available, there’s a glaring problem with the survey in that no mention of geographic distribution is made.
A $100,000 offer in Mumbai is considerable different than the same salary in New York City where consumer prices are 250% higher and rent is five-times more expensive.
The article does mention a survey by CFA Societies in the Midwest U.S. showing a median salary for charterholders of $154,000 – almost $70,000 higher than their peer group.
If this is the median in the breadbasket, how much higher is it in the larger cities on the East Coast?
Another study by InvestmentNews is reported to show charterholders make nearly 25% more than their CFP and CPA peers.
The article also downplays the credibility one gets from holding the charter.
It’s hard to quantify and you can certainly find recruiters that don’t care about the CFA on a resume…if that’s what you’re looking for in a quote.
I would disagree from my own experience as a freelance analyst after multiple clients have told me I was selected on the basis of having the charter.
The real benefit to the CFA charter, and just the grueling process of obtaining the charter, goes way beyond all this. The financial industry is uber-competitive and few sectors are as uncertain in outcome.
In an industry where being exceptional means beating your index by a few percent, how much is it worth to have all the tools possible?
A lot of potential CFA candidates are turned off by the amount of time it takes to prepare for the exam. Upwards of 300 hours over four or five months times three might seem like a big commitment…but is it really?
Put that 900 hours into perspective against the roughly 744,600 hours you have on this earth (assuming 85 years lifespan).
What else are you going to be doing with most of that 900 hours? Watching TV, surfing the internet?
Is 900 hours too much to make you the professional you could be and to open the door to more opportunities?
The CFA is a crucible for the best investment and asset professionals.
It’s an extremely tough process that weeds out those not committed to the highest standards and forges others into professionals ready with the tools they need to make the best decisions for their clients.
If this sounds like something that is important to you, then welcome to the challenge.
If you don’t think the highest standard of professionalism is important, then we don’t want you anyway.
Most Candidates Don’t Expect More Money, So Why Take the CFA Exams?
A recent poll on the LinkedIn Group asked whether respondents saw an increase in salary after earning the CFA designation.
The results showed that more than half (51%) of respondents did not receive or expect to receive a jump in their salary after the process.
The poll might have been confounded by those answering what they expect to receive and those answering what they actually received and the sample only covered 31 respondents, but the fact that half answered with no additional pay is interesting.
So, why subject yourself to hundreds of hours of studying and three grueling tests?
A seat at the table
I can tell you that one of the biggest benefits since I earned the designation has been implied credibility and increased opportunities.
Just having the charter does not make you a market guru with prophetic knowledge, but given the work and commitment it takes to earn the charter, it is often assumed that you have a valuable insight.
I have been invited to speak on more panels and have been offered more projects since I earned the charter and several clients have told me that their decision was based partly on my status as a charterholder.
While the implied credibility you may see from the charter would certainly be a benefit, the trick is to continuously validate that credibility.
Don’t think that the hard work ends with the receipt of your letter allowing you to use the designation.
Putting it in perspective
Candidates report spending around 300 hours studying for each level, bringing the time commitment for the charter to somewhere around 900 hours.
This is a pretty formidable task when crammed into three or four years but not so much if you consider the time spent on education throughout your life and career.
The standard bachelor’s degree requires close to 1,600 hours for eight semesters, and this doesn’t include any secondary education or master’s level education.
The process of learning is a commitment to yourself as a professional. It provides much more than job security and a regular paycheck.
In an industry where 50 basis points may separate the best and worst money managers, isn’t it nice to know that you have done everything you can to be a fiduciary of other people’s money?
The self-satisfaction from having committed myself and earning the CFA charter has been one of the most valuable benefits.
Don’t kid yourself, the money is good too – CFA Salary
The Bureau of Labor Statistics puts out median salaries for occupations with estimated 2011 salaries for financial advisors ($66,580), financial analysts ($75,650) and financial managers ($107,160).
By comparison, the Institute’s most recent survey (2007) shows that charterholders are not getting in line for the soup kitchen any time soon.
The median total compensation for various positions includes: financial advisors ($175,000), research analysts ($200,000) and portfolio managers (between $158,000 and $456,000).
Now, let me qualify this before I get sanctioned for saying that you WILL make more money as a charterholder.
There are several obvious problems with comparing the BLS data directly with the Institute’s survey results.
The occupations are not a direct match and there are differences in survey methodology. By virtue of the charter requirements, CFA charterholders will have more experience than the average and this will skew the results.
That said, I would bet that your commitment to the charter will pay off in higher compensation throughout your career.
Stick with it
Earning the charter is a difficult process and one that many have tried and failed.
Its tough to weigh the full costs and benefits until you have already made the commitment and earned the charter.
As a charter-holder, I can tell you that it is one of the best decisions I have made and would gladly do it again.
It will all be worth it.
Don’t give up!
Joseph Hogue, CFA