Apparently, the toughest question on the CFA Exam is, “What’s the Payoff?“.
As someone who has studied for hundreds, if not thousands of hours, over the past 3 years, I can assure you that this is far from the “toughest question of the CFA Exam”. You can watch Jennifer Surane from Bloomberg talk about what she learned while attempting to quantify what earning the CFA designation is worth.
I cringe every time they use “CFA” as a noun in this segment. The CFA designation is never supposed to be used as a noun. Seriously, this is a big deal in the ethics section of studying for the CFA Exams and the CFA Institute beats it into your head at all 3 levels. However, this is not the only problem with the report.
The Bloomberg reporters seem to think that the CFA Institute should do a better job of tracking the compensation of CFA Charterholders.
How exactly would this help anybody determine the value of earning the CFA designation?
The CFA Institute has over 120,000 Charterholders worldwide. The key word here is worldwide. Charterholders in Shanghai and Warsaw are probably not compensated exactly the same. What about exchange rates? Should comparisons be based on purchase power parity or do we just use the current exchange rates? How often should this be updated? The pound took a pretty big hit after Brexit; are CFA Charterholders in the United Kingdom really making 15% less than they were a few months ago? A Charterholder in London, England is probably compensated more than a Charterholder in Norwich, England, but does she really make more when you take the cost of living into account? Less than half of the charters awarded last year were to Americans. There is no geographic super-majority in a singular location. So, would it make sense to just lump the whole world together and say this is what it is worth? It is difficult to fit something global into a relevant local context. The CFA Institute probably does not track this better because an aggregate of all Charterholders would yield mostly useless data points. Jennifer Surane claims she asked several people and came up empty handed, but I managed to turn up some answers with just a few keystrokes into a Google search. Here are some excerpts from the CFA Society of Cincinnati’s 2015 Compensation Survey:
This is for the Cincinnati area, which would be different than what compensation might look like in Seoul, South Korea or Katmandu, Nepal. They also break compensation down by years of experience, the size of the firm, and a few other ways. Just about everything, the Bloomberg reporters were complaining about is available from several individual CFA Societies. I was able to find these CFA Society compensation surveys for Madison, Pittsburg, Cincinnati, Minnesota, Seattle, and Toronto within a few minutes of looking. I thought the Pittsburgh survey was especially informative. Here are some excerpts from it:
So, how much is that CFA designation worth?
It depends on where you live, what you do, how long you have been doing it, education level and many other things.
I think they missed a major point in attempting to quantify the value of the CFA charter. For me, I am not necessarily pursuing the CFA designation for increased compensation. I wanted to conquer what is considered by many the most challenging series of exams in the world of finance and most importantly, I wanted the knowledge that came with the process.