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Some people regard the chartered financial analyst (CFA) qualification as equivalent to a masters degree in finance, but Jeffrey Diermeier sees it differently. “I have an MBA and a lot of my fellow members have a masters in finance,” he says. “If you want to be the best in the field, they are complementary.”
Mr Diermeier is chief executive of the CFA Institute, a global association of investment professionals that administers the three-year, self-study CFA programme. He points out that 58 universities and business schools worldwide teach the programme alongside their finance degrees.
The institute estimates there are 20m people working in finance around the world, of whom 1m are involved in investment work.
With 82,000 charterholders, penetration is still quite low.
Currently there are 175,000 registered students, but on average, only 20 per cent complete the programme. Mr Diermeier says the scarcity element attaches a high level of value to the qualification.
“CFA-qualified candidates are becoming increasingly sought-after,” says Hakan Enver, a manager at Morgan McKinley, the specialist financial services recruiter. “They have well-developed product knowledge across asset classes and a good understanding of calculating the risk and return on various products, In some cases, earning potential can be increased by up to 10 per cent, or even more.”
One criticism sometimes levelled at the CFA is that it is geared towards North America, which accounts for 68 per cent of its membership.
However, at the student level, the picture is different: 42 per cent come from Asia, compared with 37 per cent from North America and 20 per cent from Europe, the Middle East and Africa. In response to this growing internationalisation the institute is building up staff levels in its London and Hong Kong offices and has recruited a specialist in Islamic finance.
Mr Diermeier points out that capital flows rapidly across international boundaries, so there is particular interest from emerging markets, where governments want more financial services employees to be knowledgeable about global markets. This is partly so those running pension and social security schemes can deal effectively with people in London or New York. They also want to attract capital and lower their cost of capital.
Steven Kirkpatrick, managing director of Jonathan Wren, finance recruitment specialists, says the CFA remains something of a “showpiece” qualification that holders want on their CV, rather than something they use on a daily basis. “It is very rare for employers to look for a CFA as a necessity, except in investor relations or posts with a very high level of mathematical capability,” he says. “Thus, the CFA sits on their CV gathering metaphorical dust.”
Mr Diermeier recognises this and is rueful that the institute waited so long before developing support for members who have completed the CFA charter.
It has now established a series of one-week programmes.
These include private equity at the University of Oxford’s Saïd Business School, hedge funds at London Business School, private wealth at the Wharton School of the University of Pennsylvania, asset allocation at Edhec Business School in France and valuation at Amsterdam Institute of Finance.
“We are trying to help our members become more competitive in very challenging markets,” he says.“Employers no longer demand just a very deep understanding of a particular area, but an incredible breadth, because of the tremendous variety of investment products and client situations.”
Historically, charter holders have worked predominantly in the “buy-side” (55 per cent) as in-house analysts or investment managers. This compares with 29 per cent in consultancy, government/regulator, university/college or research firms.Only 16 per cent work on the “sell-side”, as investment bankers or broker-dealers.
“The buy-side is where research is done,” says Mr Diermeier, “whereas, the sell-side is as much about networking as research.
“For a while it was difficult for people on the sell-side to honour our code of ethics when they were being paid by an investment bank, which conflicted with their independence. Now that researchers can no longer be paid by the investment bank our challenge is to attract more people from the sell-side.”
He points out that the past two decades have revealed the tremendous benefits of the global marketplace and moves towards a more widespread market economy. The institute has defined its members in terms of “ethics, tenacity, rigour and analytics”.
“They are spread throughout the world and, as a result, we have a fairer, more efficient capital market,” concludes Mr Diermeier. “People compete on the basis of merit, not through short-cuts or bending the rules, making a very free and open market.”