While I do have an MBA from a top tier institution, I am not sure if I should or shouldn’t be embarrassed for not having a CFA charter. Years ago, I passed Level 1 but have not been able to find the time (read: I’ve been too lazy) to bone up for Levels 2 and 3.
As an investor, I’d say that a CFA is useful, but by no means required, to be successful in this industry. The same goes with an MBA, though it’s undoubtedly true that many business schools act as feeder institutions into various entry-level positions on the buyside.
The CFA is useful for a couple of reasons. First and most importantly, it gives you knowledge across a wide range of areas, including areas outside of your job’s domain. So for a public equity investor, you would not only gain knowledge about equity-related topics (valuation, market dynamics, business models, macro, portfolio management), but also knowledge about fixed income, alternative investments, currencies, derivatives, and on and on. It’s more than once or twice that I wished I knew more about bonds or put options while attending to my duties as an equity investor. Reading the Financial Times or Wall Street Journal helps gain broad financial literacy but newspapers will never go into the nitty gritty like the CFA program does. True understanding comes from knowing not only the broad brushes but also the specific mathematics behind them. Cost of capital is a good example: a newspaper article could define cost of capital generally as the opportunity cost of making a particular investment, but I’ve never seen an article bust out the equation for WACC — Cost of Equity * %Equity + Cost of Debt * %Debt * (1 – Tax Rate).
Second, a CFA will enhance your credibility as an investment professional. You can even put the CFA tag on your business card and no one would fault you for it. But for some reason if you should mention MBA on your business card, people would think of you as pretentious. I’m not entirely sure why it’s considered such a sin to put MBA on your card, but OK to write MD or PhD or RN or CFA or CPA. Best guess would be that an MBA gives you general skills but not expertise in a particular area — a CFA gives you specific expertise in things related to investing.
Having said that I don’t think any serious firm would hire someone just because he was a CFA. Actual on the job experience and a track record of performance, along with cultural fit, are the key barometers. The CFA is just icing on the cake, a nice to have.
