by Brian DeChesare Comments (8)

The CFA for Investment Banking: Do the New Changes Make It Worthwhile?

CFA for Investment Banking

I’ve now been writing about finance careers for almost 20 years, and the topic of the CFA for investment banking never seems to die.

I first criticized the CFA in a 2009 article, which generated a lot of angry comments.

Not much has changed since then.

People online still argue about the merits of the CFA, whether they “need it” to win various roles, and its usefulness compared with an MBA, high grades, additional internships, or becoming a Twitch gaming superstar.

I got so tired of these debates that I never planned to cover this topic again.

But earlier in 2023, the CFA Institute announced the biggest changes to the program since it started.

The website 300 Hours has a detailed analysis, but here’s my quick summary:

  • Expanded Eligibility: You can now register if you have 2 years remaining in university (rather than 1 year previously).
  • Financial Modeling or Python / Data Science / AI: Starting in 2024, you must complete a “Practical Skill Module” on one of these topics for Levels I and II of the exam.
  • Reduced Study Volume: They’re reducing the amount of material, so you “only” study for 300 hours per level. And they’re moving to shorter online Learning Modules with spreadsheets and videos rather than lengthy readings.
  • Specialized Pathways: For the Level III exam, you can focus on portfolio management, private wealth, or private markets.

On the surface, these changes address some big problems with the CFA:

  1. The lack of relevance to many finance careers and the limited practical skills tested.
  2. The huge time commitment required to pass the exams.
  3. The timing – The CFA is not very helpful in your last year of university due to the IB recruiting timeline.

So, should you make the CFA part of your recruiting strategy?

The TL;DR About the CFA for Investment Banking

I’ll go into “consultant mode” so I can sum up the traditional problem with the CFA via a 2×2 matrix:

CFA for Investment Banking: Old Version

The additions of financial modeling, Python, or data science/AI and the reduction in study materials shift it in a more positive direction:

CFA for Investment Banking: New Version

But it’s an incremental shift because you’re still looking at 300 hours just for Level I.

Your time is still better spent on everything else in the “High Potential Benefit” column.

A total study time of 300-400 hours is approximately 10-15 hours per week for 6 months.

In that same time, you could:

  1. Contact 100 bankers and conduct informational interviews with at least 10-15 of them.
  2. Complete an Excel or financial modeling course or the most relevant parts of one (see our 10- and 20-hour study plans). Don’t spend 100+ hours on this, but 10-20 is fine, especially since you’ll learn technical questions simultaneously.
  3. Significantly improve your resume through several drafts.
  4. Complete a part-time internship at a local private equity firm, venture capital firm, or search fund.

Even with the announced changes, the CFA is still not more useful than everything above.

These points go back to the flawed concept of “investment banking certifications.”

In this field, certifications barely matter vs. work experience, academics, interview preparation, and networking.

Certifications exist mostly because they’re easy to sell, and the benefits take a long time to measure – so they often go unmeasured.

The CFA for Investment Banking: Counterarguments

Whenever I point out these issues, people who just studied for hundreds of hours tend to respond violently.

I’ll address here the most common objections and acknowledge the ones that have some validity:

“But I’m a career changer! I can’t do another degree or an MBA, so I need the CFA to get in.”

Please read the articles on lateral hiring and MBA-level recruiting.

If you’re unwilling to do an MBA, you do not have many paths into investment banking past a certain age.

The key problem is that unlike an MBA or even a Master’s degree, the CFA does not give you direct access to recruiters and on-campus recruiting.

In this case, you should focus on finding related jobs in adjacent, less competitive industries (see the lateral hiring article).

“I’m a liberal arts major, so I need the CFA to demonstrate my interest in finance.”

No. You need early finance internships in university to put yourself in the running for an internship at a large bank later, as the recruiting timeline starts ridiculously early.

If you’re starting early, it would be far more useful to take an accounting or finance class, do some self-study, and leverage these skills to win internships.

We even have a finance internship resume template if you have no real work experience.

“The CFA goes far beyond the skills required in investment banking.”

I agree. The CFA covers plenty of material that goes beyond the job of an IB Analyst or Associate… which is exactly why you don’t need it.

For example, they won’t ask about quantitative methods, derivatives, or portfolio management in a standard investment banking interview.

You need to know a wide range of technical and “fit” topics for IB interviews, so don’t bother with material that will not come up.

“But the CFA is useful in my country or region, and many bankers have it.”

This is a fair point.

Especially in many emerging markets, certifications like the CFA or CA (Chartered Accountant) can be more valuable.

In countries like India and South Africa, the CA can even be a pathway into IB roles (but note that this is the “CA,” not the “CFA”).

So, if you’re in a country where the CFA is highly valued, and many bankers have it, passing Level I at some point may make sense.

“I need the CFA to exit the back office.”

Nice idea, but this plan is unlikely to work. See our article on the front vs. middle vs. back office.

In this case, it’s best to use lateral hiring to move into more relevant jobs over time; you could also focus on S&T or markets-facing jobs for a higher chance of making the change.

And if you can afford it, a top MBA or Master’s in Finance would help you more than the CFA.

“I have a low GPA or attend a non-target school. The CFA will help me stand out.”

The CFA might provide a boost, but not enough to erase a 2.5 GPA (for example).

If you’re at a non-target school, the most important point is to start very early – and the CFA won’t help you overcome a late start.

Even with the new eligibility rules, you still can’t complete Level I until you have two years of undergrad left.

But IB recruiting for Year 3 internships takes place in Year 2 (at least at many banks in the U.S.), so this point is irrelevant for students.

If you really want to cite the CFA, you can always write that you’re “studying for it” and plan to take it on a certain date (and if you don’t pass, remove it).

“But I’ve already networked a lot, have good work experience, and am well-prepared for interviews. I don’t want to spend those 300 hours networking, so the CFA is a better option.”

If you’ve already done everything required to win IB interviews and job offers, I agree there are diminishing returns to networking and interview prep past a certain point.

But do you need the CFA if you’re in this position?

You’d be better off learning a new skill, joining a new activity, or doing anything more interesting than studying for another exam.

When is the CFA Useful?

I am trying to be fair and balanced, so here are the best use cases for the CFA:

1) Roles in Portfolio Management (and Some Equity Research and Hedge Fund Jobs)

There’s no question that it matters in many industries outside of IB, such as portfolio management.

If you go into this field, you’ll probably complete several levels of the CFA at some point.

Some equity research teams and hedge funds will also be impressed if you’ve passed it while working long hours.

But I still wouldn’t recommend it as your #1 priority for winning these roles – the quality of your stock pitches and your ability to discuss investment ideas matter much more.

2) Emerging Markets or Regions That Greatly Value It

It can be difficult to judge work experience in emerging markets, and the CFA offers a standardized way to assess skills, which is useful.

But this one depends heavily on where you’ll work and its importance there.

Also, in many smaller/emerging markets, having good work experience in a financial center like London or New York can be enough to get you a job.

3) You Want to Make a Big Career Change Without an MBA

There are some situations where the CFA, or at least studying for the CFA, might make sense.

For example, if you’ve worked in corporate law for several years and cannot quit to complete an MBA, the CFA could be a helpful signaling tool.

But I don’t think this strategy would work in most fields; it must be something related to IB but lacking technical skills.

4) You’ve Already Done Everything Else, You Have a Good Job, and Your Firm is Paying for It

Finally, if you’re already in the finance industry, you’re not changing careers, and you’re at a firm that pays for the exam prep and gives you time to study, sure, go ahead.

Passing the CFA will never hurt you.

It’s just that it might not help you all that much for the time and effort invested in it.

The Bottom Line on the CFA for Investment Banking and Other Finance Roles

The 2023 changes from the CFA Institute do make the exam more appealing and relevant for many roles.

Studying for it is easier, the “Learning Modules” are much better than long readings, and the expanded eligibility and specialized paths are nice.

However, these changes don’t solve the fundamental problem: If your goal is getting into investment banking, you could spend these 300+ hours on more useful tasks.

This applies to students and professionals at all levels, but the Return on Time Invested (ROTI) is particularly bad for university students.

If you missed IB internship recruiting, please do not think studying for the CFA will save you.

You need to get work experience ASAP, and if you’re too late for IB roles, you should focus on areas like corporate banking, corporate finance, Big 4 firms, and business valuation firms.

In fields outside IB/PE, the CFA ranges from “potentially useful” to “near requirement,” so it’s impossible to make a universal statement about its relevancy.

If you’re interested in a career where it’s important, sure, go ahead.

Within deal-based roles, the CFA has its uses for certain candidates and in certain regions – but it still wouldn’t make my “Top 5 Things to Do to Get into Investment Banking” list.

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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  1. I am currently taking L2 and work at a distressed credit shop. I used to think in terms of the “Relative Value” – 300 hours on CFA vs 300 hours of something else I could do (reading, research, networking etc). I’ve realized that the relval argument only works if you ACTUALLY do something else for 300 hours that is more valuable – if you are just drinking and partying, CFA is probably a better use of your time once you are on the buy side.

    1. That is true, but I think your case falls into the last category here: “You’ve Already Done Everything Else, You Have a Good Job, and Your Firm is Paying for It”

      (Though I don’t know if your firm is paying for it.)

      I agree that many people would just squander those 300 hours on drinking/partying, so you need a specific use case that is better. But many readers on this site are aiming to break into finance careers, and for them, the CFA is still not a great use of time vs. other recruiting tasks in most cases.

  2. Any comments on CPA?

    1. While the skills you learn from the CPA are more applicable to IB roles, unfortunately, most bankers care even less about it than the CFA. It might be useful in emerging markets and any country where certifications like the CA are held in high regard. So I wouldn’t bother unless you’re planning to use it to move into some type of accounting or Big 4 role and then into IB from there (for example).

  3. I intuitively left Cape Town becoz of this stupid CFA certification.

    Its great in terms of general learning but not essential in the deal making environment.

    Everyone who has it that I know, hardly ever uses it. Its just a chip on the shoulder if you ask me.

    1. Yup, that is true. Although I would argue there are many other reasons to leave Cape Town / South Africa in general in the current environment…

  4. Shubhadeep

    Hello Brian,

    I am a cfa level 2 candidate, my under grad school was average with average marks.

    I am planning for frm level 1 after passing cfa level 2 exam.

    Meanwhile i plan to take up courses on financial modeling and python for finance while preparing for cfa level 2.

    MBA school focus will be only after cfa level 2 and i have started networking ( early stage ) .

    Country – India

    Suggestions for breaking into IB and PE.

    1. I hate to be the bearer of bad news, but India is a terrible market for breaking into IB because you don’t have a good chance unless you’re at one of the top ~2 IIMs. If you’ve already graduated and/or did not attend a top IIM, your chances aren’t great no matter what exams or certifications you get.

      If you really want to do IB, I would recommend leaving the country and going somewhere with a better recruiting market (US, Europe, etc.).

      You could still aim for boutique banks in India, but I’m not sure that is really worth it if you’re going to do an MBA anyway. Just complete the MBA in a better geography for IB roles.

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