Finance and CFA

Supposed you're an American investment company, operating in China, and managing a pension fund on behave of your client in Russia. Do you...

  1. Follow American laws, and put your Russian client at a disadvantage?
  2. Follow Russian laws, and risk getting into legal trouble in China?
  3. Follow Chinese laws, and risk damaging your brand at home?


I can finally take a (temporary) break from my study! What started out as an intellectual curiosity eventually grew into long nights studying, weekend review course, six textbooks, proprietary study notes, practice exams, and many, many study groups. I have had the opportunity to interact with other students across the globe online and offline, and it will be this one word that will forever bind our comradory. This word is the 'CFA'.

The Charter Financial Analyst designation is generally considered amongst the most prestigious in the world of finance. To qualify as a charterholder, a candidate must pass three levels of exams and must have four years of investment work experience. Charterholders are also obliged to adhere to a strict Code of Ethics and Standards governing their professional conduct. The exam is rigorous and comprehensive, with 7 major areas ranging from quantitative methods to portfolio management. Each year the CFA Institute incorporates new materials and latest developments into the curriculum. Some consider the exams to be an equivalent of a Masters Degree in Finance. In 2005 worldwide pass rate of Level I, II, and III were 34%, 55%, and 56% respectively. It is no surprised that only one in five of the candidates who start the program actually completes it. Of the ones who complete the charter, it takes four years on average.

Boy, I better have a very good reason to do this horrible thing to myself! I'm doing this because 1) finance is useful, 2) I work with many business analysts, and 3) I like finance.

Finance is useful.
As I gain more responsibility professionally I will probably get into a situation where I have to manage a budget. Learning how to manage resources more effectively allows me to grow and become a better employee, and now that I have studied corporate governance, shall I say serve my shareholders better? In fact, finance is the language of business, which means no matter what you do (be it R&D, Marketing, or HR) you must have some concept of management of resources. There's no other way to create a sustainable enterprise.

Even if you don't care about gaining more responsibility at the enterprise level, finance is also useful at the personal level. Since I have graduated last year I have accumulated some (albeit small amount) of money, but I'm by no means conformable with my ability to manage my finances. I was thrown into a world of financial products and terminologies that I had to navigate through. The CFA experience will hopefully put some common sense into me or at least let me evaluate a financial advisor. Wouldn't the global financial market benefit from having more informed and educated participants? I'm doing this for world peace and doing it for myself :)

I know people who work in finance.
Okay this doesn't make a very good reason, after all I know many people who are doing many things...However, because of what I do by trade I get to know and work with many business analysts. Knowing a thing or two about finance lets me speak their language and communicate more effective with my coworkers. Sometimes I even consult them on my practice exam questions :)

I like finance.
Some would say that this is the only reason matters. When I first started reading the Economist a year ago I struggled with the finance and economics articles. I struggled, but I still enjoyed them. I have taken some (three to be precise) economics and finance classes while I was in college. I find macro-economics interesting. I find international finance interesting. I was drawn to the fact that economists always seem to have a way to convert seemingly endless philosophic debates into rational decision rules and optimization problems. They make hard problems easy, though sometimes at the risk of oversimplification. I didn't have the time to explore the field further back then because I already had a major (one that I'm also very passionate about). I want to learn more about finance now.

There's another explanation to my passion in finance.

There's something romantic (despite how naive it is) about trying to understand the world through mathematical relationships. With the explosion of data and ever increasing computational capability I believe we're still in the beginning of what we as a society can do with data. Financial tools combined with my other passion (data mining) will create new possibilities, a vision that is shared by many. I believe, like any good athlete, I must too engage in cross training.

Some friends asked what have I gained financially since I started studying for the CFA exam. Let’s see...

  • Exam Registration...........$735.00
  • CFA Curriculum..............$395.00
  • CFA Preliminary Readings....$152.00
  • Saturday Review Class.......$895.00
  • Proprietary Study Notes.....$410.27
  • Proprietary Practice Exams..$107.17
You don't need a CFA charter to see that I'm at -2700 right now. On the plus side, I'm starting to understand the Economist articles and I also made a few new friends from my study sessions. If I were on a visa cards commercial I would tell you that the experience so far has been "priceless".


Back to the original question: I'm not going to give away the CFA answer. It is actually one of the easier questions (although I changed the wording make it seem difficult), but no doubt it’s different when you have to make a decision in real life and when the stakes are high. Business Ethics requires more thoughts...wait for Part II of this post. :p


  1. philosophy, economy, society, empiricism definitely sumptuous

  2. Hi Ricky,

    I am definitely interested in knowing the answer to the CFA question at the beginning. Please post the answer. I am currently working on a ph.d. in another area (trying to write a dissertation) so dont have the time to search for the answer.

    Your blog is very informative. Congrats on such excellent work!


  3. The answer is C me thinks, always follow the rules of the locale you're operating in right, even when it conflicts with the CFA code of ethics!

    Cheers for the blog, very useful!

    Fellow CFA Level 1 exam taker..


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