CFA Program

THE Indian financial sector has gone through a sea change in the past two decades thanks to economic liberalisation and globalisation. This has brought in a host of advanced services in the arena including money market operations, merchant banking, international banking, portfolio management, lease financing, mergers, acquisitions that were little heard of a few years back.

Though the recent slow down has tempered expectations, the need for professionals who understand these domains is still very high and would only grow as the economic conditions improve. Ashok Verma, working as a SAP FICO Consultant with JKT Consulting and a CFA level II candidate, says, 'CFA is the only course available which gives the holder 'upper hand' in financial management and analytical skills as compared to other courses.'

The charter is considered by employers worldwide as a differentiator when it comes to recruiting people in the core areas of corporate finance, investment management, international finance and financial services. While earlier many MBA's were being recruited by the investment industry, given the specialized curriculum provided by the CFA, most companies involved in making or managing investments insist on having the CFA for senior positions.

The CFA Program
It was instituted by the CFA Institute in USA, a global association of investment professionals with nearly 100,000 members. This includes 84,000 CFA charterholders worldwide as well as 136 affiliated professional societies in 57 countries and territories. For those pursuing the CFA Program in the US, a four-year Bachelor's degree is the minimum requirement. However, in India, the course is open to graduates (with three years of education) and even those in their final year can enrol. Contrary to perception, it's not only those with a commerce background who are jumping the bandwagon.

'Engineers, doctors, English Honours graduates and even life science graduates enrolled for the exam come to us for coaching. Most of the IT professionals want to work on the finance side of their company and hence find CFA an attractive option,' says Sushant Suri, Director and Lead Trainer at Finguru, a Delhi-based CFA coaching institute. Those with a finance background might have an edge over others while studying for the Level I exam that tests the basics of finance. But over time, the subjects can be mastered by people from different streams as well, adds Sushant.

Levels of study
CFA Program is a self-study course that tests your knowledge in different areas over three levels of exams. With a pass rate of 35-40 percent for Level I exam and 45-50 percent for Level II, it's not easy though. Shweta Chamria, a CFA level II candidate currently working with the RPG group in Kolkata says, 'The CFA is a very competitive exam. People who clear all the three levels are held in high regard by the industry.' 

Level I is about learning investment applications.
Level II is about applying them.
Level III focuses on using different applications for defining investment strategy and performing portfolio management.

Program curriculum
It is based on a Candidate Body of Knowledge (CBOK) that has a total of 10 topics grouped into four functional areas: Ethical and Professional Standards, Investment Tools, Asset Valuation, Portfolio Management & Wealth Planning. (see figure on next page). Passing these rigorous tests requires a comprehensive understanding of accounting, economics, and portfolio management, as well as successful demonstration of a high level of proficiency in the valuation and analysis of both equity and fixed-income securities.

Level I exams are conducted twice a year (in June and December).

Level IIand Level IIIare conducted annually, only in June.

 

Registration
It starts 11 months before exam. For instance, if you are planning to sit for the June 2011 exam, you can start registering yourself by July 2010. The earlier you register, the lesser the fees you have to pay (see table for fee structure):

Level I candidates must pay a one-time enrolment fee plus exam registration fee.
Level II and III candidates need pay only the exam registration fee.
All payments are done online.

Hall tickets are posted online in late April for the June exam and late October for the December exam. The results are declared online in the last week of July and January, for the Level I June and December exams, respectively. Results of Level II and III exams (conducted only in June) are declared in the second week of August every year.

Depending on how the students clear the exam and time their papers, they can finish all the three levels in a minimum span of 18 months (Eg: Level I- Dec 2009, Level 2 - June 2010, Level 3 -June 2011), provided all levels are cleared in one go. According to the CFA Institute, the average time taken by a student is four years.

Clearing the exams is just one of the requirements to become a CFA charterholder. A person also needs to have at least four years of professional investment experience, be a regular member of CFA Institute and commit to abiding by the Institute's Code of Ethics and Standards of Professional Conduct.

Where they can work
Broadly speaking, CFA Charterholders study markets, trends and stocks, and analyse them to provide insightful opinions on buying or selling companies/stocks and even make investment decisions. Sameer Bakhru, Managing Partner, Pan Venture Consultants gives us more insight. 'Essentially they can work on the buy side or sell side, valuing, selling or creating investments for companies or investors,' he says.

Buy side refers to a group of people who buy into investments. They include Mutual Funds (such as Fidelity, Franklin Templeton), which buy into listed companies and Private Equity funds (such as Chrys Capital, Baring) that buy into unlisted companies.

Sell side refers to companies that sell investments to other companies or individuals, or manage client accounts. These may typically be investment management companies or brokerage outfits (that sell stocks to investors) such as HDFC Securities, ICICI Securities or India Bulls.

Core finance division/ treasury departments of MNCs also hire CFAs who would manage the company's existing cash assets via short and medium-term investments in the treasury. In the M&A division, he/she would evaluate acquisition/takeover targets, and manage them during the M&A process.

(click on table to understand CFA Program structure)

One could be working as an Analyst researching companies in a particular sector (say telecoms), valuing them and zeroing in on the target share price of the companies. An analyst's role revolves around valuation of the companies he targets - higher the expected share price viz. the current price, greater are the returns expected out of investing in that company, Bakhru adds.

Investment managers study listed companies (if they work in a mutual fund) or unlisted companies (if they work in a PE fund). They manage a certain sum of money on a regular basis and take buy and sell decisions in the stock market. Wealth managers/relationship managers guide investors on what investments to make and operate independently or work with large private banks such as Citibank or HSBC.

Conclusion
There are only about 400-500 CFA (USA) charterholders in India. The number looks set to rise with 5,500 students registered for the December Level I exam. The qualification is being increasingly sought for its credibility, specialisation and the global recognition that comes with it, though it is tough to attain it. With the global economic downturn receding, market sentiments picking up and the financial sector set to regain its momentum, the future surely looks bright for CFAs in India.

Dr Ashvin P Vibhakar Managing Director, Asia Pacific Operations CFA Institute   Q. How many Indian students apply for the CFA Program every year? Has it increased/ decreased over the past few years? A. In fiscal year 2009, India ranked 4th with the number of registrations for the CFA® exam rising to nearly 14,500 (including those who gave Level I exams in December and Level I,II and III students in June 2009). A record 5500 students are registered for the Level I CFA exam to be held in Mumbai on December 6, 2009. Despite the uncertainty for Indian candidates seeking the CFA designation over the last few years, the number of registrations from India has increased steadily. This growth shows how determined Indian candidates are to pursue the CFA charter. Q. What are the CFA Institute's plans in India? A. Currently, the CFA Institute has 108 CFA Program Partners worldwide, with 25 in the APAC Region. Once the legal situation in India is resolved, we look forward to partnering with strong Indian finance programs. We have signed a MoU with the Securities and Exchange Board of India's National Institute of Securities Markets (NISM) in June 2009 to jointly organize financial and investment educational training programs and research in India. We have already held a journalist training, exam development training, and a workshop on derivatives. We also hope that, barring legal constraint, we can establish an office in India to support our candidates and members on the ground in the future. Q. How do you see the role of the CFA evolving in today's dynamic world? A. While the skill and knowledge base of CFA charterholders, the investment tools and applications they use, may be evolving according to the changing market needs and new financial innovations, their primary role has not and will not change. It is essentially to act at all times in the best interest of investors, placing investors' interests before their firms', and before their own