CFA Institute

The CFA® Program

Philip J. Young, Ph.D., CFA

-----

College of Business & Public Affairs

Career Day

March 2005

CFA Institute

The CFA® Program

A self-study, distance learning-based program that takes a generalist approach to security analysis and portfolio management and emphasizes the highest ethical and professional standards.

CFA Institute

Member and Candidate Growth

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Member Candidate

Note: CFA Candidates as of 15 September 2004

CFA Institute

The CFA CharterGrowing Non-US Numbers

.

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1993 1998 2001 2004

Asia

Canada

Europe

Other

Other = Latin America, Africa, & Middle East

CFA Institute

The CFA® Program

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

Job Analysis

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

Job Analysis

Determines topics taught in the CFA Program

Conducted every five years: next in 2005-2006

Involves investment practitioners worldwide: Regional Expert Panels and member surveys

What knowledge and skills are expected of a candidate for an entry-level position?

CFA Institute

Body of Knowledge

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

Body of Knowledge

• Portfolio Management

InvestmentTools

Asset Valuation

• Ethical and Professional Standards• Quantitative Methods• Economics• Financial Statement Analysis• Corporate Finance

• Analysis of Equity Investments• Analysis of Debt Investments• Analysis of Derivatives• Analysis of Alternative Investments

CFA Institute

Curriculum

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

Curriculum Developed by Candidate Curriculum Committee CCC); over 130 people involved world wide; extensive review; each level consists of 18 study sessions in CFA Institute-produced study guides

Exam Topic Focus Learning Focus

I Tools, Inputs, and

Professional Standards

Knowledge and

Comprehension

II Asset Valuation and

Related Professional Standards

Analysis and

Application

III Portfolio Management

and Related Professional Standards

Synthesis and

Evaluation

CFA Institute

Curriculum Readings are drawn from a variety of materials,

both CFA Institute-developed and other Each reading has learning outcome statements

(LOS): “The candidate should be able to…” Each LOS has one or more command words,

which indicate type of learning expected: “discuss, calculate, contrast”

LOS are NOT a proxy for examination questions, but ARE the best guide for candidate study

CFA Institute

Curriculum

2003 Exam 2004 Exam

2005 Exam

CFA Institute

Study Requirements

Estimated minimum study time required per Level

Level I – 15 hrs per week for 18 weeks

Level II – 15 hrs per week for 18 weeks

Level III – 15 hrs per week for 18 weeks

Suggest one week of study per study session through late April to allow the final month for review.

CFA Institute

Examinations

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

Examinations

Based on assigned readings and LOS; over 50 people involved; each exam is six hours in length

Exam Format Development and Review

I 100% multiple Choice

• Written by professional staff and consultants

• Internal and external review

II 100% item set • Written by Council of Examiners (COE)

• Internal and external review, including global

III 50% item set50% essay

CFA Institute

Examinations

Level I onlyDecember 3December 4 - Eastern Asia & Oceania

2005 Examination dates

Level I, II & IIIJune 4June 5 - Eastern Asia & Oceania

CFA Institute

Grading

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

Grading

Exam Grading Process

I & II • Machine graded; extensive sampling

III

• Item Sets – Machine graded; extensive sampling

• Essays – Graded by teams of charterholders; structured and detailed process; about 350 graders in 2005; grading for content and knowledge, NOT language or style

Guiding philosophy – fairness and consistency

CFA Institute

Minimum Passing Score

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

Minimum Passing Score

MPS for each level established by CFA Institute Board of Governors

Multiple inputs (standard setting, candidate performance statistics, quality of candidate responses, etc.) used to set the MPS

Passing rate for each level is a residual determined by each level’s MPS

CFA Institute

Candidate Performance

Candidates 2004 (June + December)

Level I = 43,777

Level II = 23,896

Level III = 13,452

50% 52%68%

0%

20%

40%

60%

80%

100%

Level I

Level II

LevelIII

Pass Rates1963 - 2004

35% 32%

64%

0%

20%

40%

60%

80%

100%

Level I

Level ll

Level III

Pass Rates2004

CFA Institute

Declining Pass Rates – Why?Decline in candidate preparation – 57% of Level I

candidates studied < 200 hoursFewer candidates indicate they are using the assigned

curriculum – nearly 75% of candidates relied mainly on review courses or study notes and only 29% of Level I candidates purchased some or all of the assigned readings

Prep courses and study notes should be used as a supplement, not a substitute for the assigned readings

CFA Institute

Candidate Progress

For every 100 candidates that entered the CFA Program:

In 1985

27 candidates had earned their charters

within 5 years

In 1996

22 candidates had earned their charters

within 5 years

Successful candidates average 4 years in the program.

CFA Institute

The CFA® Program

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

JOB ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS)

CCC COE

Practitioners at every step of the process

CFA Institute

CFA® Charter Benefits

Knowledge across core areas of the investment industry

Respect and credibility in the investment community

Career opportunities in a competitive environment

Accepted global and portable standard of competence and integrity

CFA Institute

Earning Power - The CFA PremiumThe CFA Premium: US$40,000

Non-Charterholders

CFACharterholders

Median Total Compensation for CFA Institutemembers with 10+ years experienceSource: 2003 Compensation Survey

$163,000

$203,000

CFA Institute

Career OpportunitiesWHO HIRES CFA CHARTERHOLDERS?

14%

26%

14%18%

28%

Broker-Dealers/ InvestmentBanksCommercial Banks/ TrustCompaniesInvestment Companies/Mutual FundsInvestment ManagementCounseling FirmsOther

CFA Institute

CFA® Charter Requirements

Sequentially pass Level I, II, and III exams

Have 4 years of professional experience

Provide professional references (Level III)

Submit professional conduct statement

Apply for membership in CFA Institute and a local analysts’ society

CFA Institute

Online Registration

Candidates may now register online at www.cfainstitute.org/cfaprogram

CFA Institute

Estimated Basic Costs for Level I (all amounts USD)

*Assumes Registration and Enrollment received by 15 September 2004**Sharing textbooks can reduce costs

CFA® Program Costs

•Registration Fee to Enter CFA® Program $375•Enrollment Fee for Level I Examination $360

Required Fees $735*

•Study Materials for Level I:Study Guide Free

CFA Institute Publications $268 Primary Textbooks $427**

Approximate Total Costs for Level I $1,430

CFA Institute

2005 Registration Deadlines

Received by Required Fees*15 September 2004 $73515 February 2005 $81515 March 2005 $1,120

Final Deadline: All forms must be received by CFA Institute on or before 15 March 2005

*Includes registration fee that candidates pay only when first entering the CFA Program

May/June administration

CFA Institute

The CFA® Program

CFA Institute

The CFA® ProgramInformation Central

CFA Institute560 Ray C Hunt DrivePO Box 3668Charlottesville, VA 22903USA

Telephone: (434) 951-5499800-247-8132

Fax: (434) 951-5265E-mail: info@cfainstitute.org

Click on “CFA® Program”

www.cfainstitute.org