PGP ’11 student, Pulkit Taluja, recently cleared the CFA Level 2 Exam. He shared his insight on need of CFA and approach that is required to clear it.
What is CFA Program and what is its scope in today’s context?
CFA Program is a globally recognized program which equips one with comprehensive knowledge in the field of investment analysis and portfolio management. CFA Program consists of 3 levels (exams) and passing all three would close you to the CFA Charter which additionally requires 4 years of investment related work experience.
While CFA Level 1 focuses on building the basics in all areas related to finance, Level 2 focuses on valuation and Level 3 on portfolio management. In today’s context CFA is a very good course from the perspective of learning and building your credibility in the eyes of prospective recruiters.
Who should pursue this programme? How does CFA add value to a regular MBA?
If you look at CFA Charter, it is specifically designed for people who want to enter portfolio management/ investment analysis. It is not delve deep into other fields of finance like investment banking, commercial banking etc. However, for someone who doesn’t have any prior knowledge in finance and wants to enter the field, CFA Level 1 is a very good course to start with. Level 1 curriculum covers basics of a wide variety of areas like quant, economics, fixed income, equity, derivatives, corporate finance, portfolio management etc. It provides an organized way of learning the basics which otherwise if we try to learn in a haphazard manner takes a lot of time.
In Indian context, for a person entering MBA wanting to specialize in finance, pursuing CFA becomes even more important especially if one is from a non-commerce background. It is because of two reasons. One is that an MBA courses cover topics in a very broad way. Till the students complete their first year, they are taught only about 3-4 course in finance. They are not exposed to the world of complex financial instruments, derivatives, their valuation etc. There is a wide gap between what’s covered and what one is required to know. The CFA curriculum fits into that gap very well. Therefore for those who wish to pursue finance in MBA, they apply for Level 1 exams as early as possible. It clearly gives an added advantage over someone who is only exposed to courses that are a part of curriculum. The advantage of an MBA is that the learning is case-based unlike CFA which is predominantly theory based especially Level 1 and Level 2. Thus both the courses complement each other very well.
Do you think the popularity of the CFA is growing? If yes, what advantage do students have in placements if there are already many people having cleared CFA exams?
The popularity of CFA is growing very fast in India especially amongst MBA students. Since most of the MBAs come from a non- finance background, it provides them an easy way to enhance their resume and express their interest to prospective recruiters. In good B-Schools, where competition is tough for both summer and final placements, taking CFA Level 1 exam has become a necessity for someone looking to specialize in finance. In the process, there are a lot of students who have cleared CFA L1 exam when the applications are sent to recruiter which doesn’t make it a differentiating factor. CFA L2 to some extent may be a differentiating factor.
As per my conversation with some recruiters and industry experts, what they look for is the application of what you have learned in the program. You could regularly publish equity research reports, start your own investment fund, provide financial consulting or engage in a live project with some corporate. That would be much more valuable even if you don’t pursue CFA but for getting to that level you need the understanding of concepts which are provided by the CFA curriculum.
How should candidates prepare for CFA considering academic rigor in MBA?
There is only one answer to this question- regular hard work and practice. Given the academic rigor and fast paced life in MBA, my suggestion is to start early and study a little every day. Also, many people recommend studying from reference books other than those provided by CFA as they contain much less content and can be finished fast. But according to me, they won’t provide you with as much learning and should be referred to if you have very little time for preparation. Apart from that, keep some leeway for your project submissions, mid-term and end-term exams and plan accordingly. Finally, the idea must be to learn and not just pass the exam as during a recruitment interview you would be expected to know what was there in the curriculum.