CFA exam’s toughest question: What’s the payoff of the course?

One was just having a discussion with a friend over this issue of payoff from education. Being a purist the blog tend to argue that oen should just see payoffs from education. After all there are many education streams which may not lead to immediate payoffs like say arts etc. But then given today’s discourse anything and everything is seen from a payoff. Let everything else be damned.

So this bit on questioning payoffs of CFA (Chartered Financial Analyst) program is interesting. I mean questioning payoffs of say a history/liberal arts course is hardly a question to ask. But to see this question being posed of a finance program that too CFA is something. The turnaround of finance in the last 50 odd years as a supreme choice of profession is perhaps as big a story as any. So, one would imagine that a finance training program as globally recognised as CFA should be seen as a big positive payoyff.

Not really as this piece argues:

As financial workers from New Jersey to New Delhi sat this month for one of three grueling stages of the Chartered Financial Analyst exam, one question wasn’t on the test: Is it worth it?

The answer is elusive. Reliable estimates for how much the certification for valuing investments adds to a resume are virtually non-existent. While nobody’s saying it’s worthless, test-takers who typically pour more than 300 hours into studying for each level and spend thousands of dollars on fees and materials do it despite harrowing statistics. Four out of five who start the process drop out.

The odds of a big immediate payoff appear to be low. About 73 percent of job postings that specified compensation and included a reference to the CFA designation offered a salary below $100,000, according to research by recruiting company Phaidon International. 

It’s the kind of information charter hopefuls are eager to find. Every year, hundreds flock to online forums to debate the payoff from adding CFA to their names, either in the form of compensation or a better job. Many responses argue the test’s rigor guarantees it adds cachet to a resume. Others cite anecdotal evidence.

One reason for the mystery is that the CFA Institute, which generates $260 million in annual revenue while running the tests, doesn’t track it.  The organization stopped asking applicants for data such as job titles and university degrees after the exam’s registration section reached 40 pages, taking candidates roughly 50 minutes to complete, said Steve Horan, managing director of credentialing for the Charlottesville, Virginia-based Institute. “It’s definitely got a value proposition for both employers as well as employees,” he said. “It’s just that it’s difficult to quantify.”

I don’t know but I think we should differentiate between the two things. First, getting a formal education should just be seen as a learning device and not just an earning one as we see it today. Second, just because someone has a fancy degree/certification should not be seen equivalent to knowledge. What should matter is what the person knows and not just based on the degree/certificate of the person.

Coming back to CFA bit, this is interesting really. I know so many who leave post Level I seeing the exorbitant fees. With rupee steadily depreciating as well, it is getting increasingly costlier for Indian students. Most appreciate the syllabus but are not sure how will it help them in future. Another things is most people enrol into the program upon entering the industry mostly due to peer pressure. Then as they work they realise that experience matters much more than the certificate and end up quitting the program.

Looking at things even more broadly, things have really changed in education due to internet. One can just learn on his/her own by visiting so many of the free tutorials. It is flexible and far more fun to learn this way than the boring way of mugging your way into a classroom. Things like degrees, CFA etc look anachronistic in such an age.

It will be great to hear views of others on this topic..


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