CFA holders becoming commonplace

Demand for the Chartered Financial Analyst designation is booming and, as a result, industry observers say the CFA is fast becoming a prerequisite for investment management rather than the gold standard.

Earning a CFA is no longer an express ticket to an executive office and six-figure paycheque. These were the findings of a panel of industry experts assembled by Concordia University’s Goodman Institute of Investment Management’s MBA/CFA program, to discuss the CFA’s place in the industry.

According to Peter Simon, a finance officer with executive search firm Spencer Stuart, the CFA doesn’t distinguish candidates to the degree it once did and has, in fact, become the baseline credential for anybody looking to become an investment analyst or to manage any substantial amount of money.

“We actually don’t care about the content of the CFA,” says Simon. “It’s increasingly just a ticket to the game.”

That ticket is becoming more common. Global demand for CFAs is unprecedented, particularly in China and India. But a CFA in those regions earns substantially less than those in markets like Toronto, where the median CFA compensation is $150,000 a year.

“A fully loaded India-based CFA likely costs about $15,000 US a year. That’s their annual compensation,” says Simon. “At current rates of growth, within seven years, there should be more CFAs in China and India than there are in North America.”

With a much larger pool of CFAs willing to work for less than their western counterparts, Simon says, future CFAs will need to strengthen their communication and leadership skills if they want to obtain the same level of achievement that most of today’s CFAs currently enjoy.

One area where many CFAs are now looking to expand and carve out a lucrative niche is in private wealth management.

“The majority of CFAs will likely remain investment analysts and portfolio managers, but increasingly on the client service side, there is an expectation for CFA skills,” says Simon.

According to the Toronto CFA Society, currently about 9% of the CFAs in Toronto work in private wealth management, but in many high-net-worth firms, the bulk of the asset management is conducted by CFAs.

Bob Gorman, himself a CFA, is the chief portfolio strategist for TD Waterhouse. In the early 1990s, he established TD Private Investment Counsel, which manages upward of $13 billion in assets for HNW clients. Gorman estimates that more than 90% of the advisors who manage Private Investment Counsel’s customized portfolios have the designation.

“Having your CFA or being enrolled in their program is pretty much a prerequisite at this point for us,” Gorman says. “In combination with good interpersonal skills, which are extremely important when dealing with private clients, the technical skills you pick up from the CFA and experience help to combine to create a really good [private wealth] portfolio manager.”

As for CFAs taking on the role of the retail advisor, at this point it seems unlikely, given the typical compensation CFAs can demand.

Citing an upcoming study from the Institute on global CFA salaries, Charles Tschampion, director of industry relations for the CFA Institute, says compensation in Canada lags behind that of most industrialized nations, but a middle-of-the-road CFA in Canada can still expect to earn $150,000.

Average salaries vary even within Canada, Tschampion says. A CFA in Toronto can reasonably expect to earn $165,000, while a CFA in Calgary is looking at about $180,000.

Compensation jumps dramatically if the CFA is managing assets.

“For portfolio managers, Toronto is the highest paying in Canada at $251,000; Montreal is second at $223,000; and Calgary is third at $187,000,” Tschampion says.

This all pales in comparison to global financial hubs such as London and New York, where the median salary for a CFA is more than $250,000 US.

“Canada globally ranks eighth out of 10 countries we tracked, although it had the second highest percentage increase at 31%. About a third of that is due to the increase in the Canadian dollar,” Tschampion says. “Except Calgary, all the Canadian cities are below the equivalent of $150,000 US, and are grouped in the bottom-earning category with Shanghai, Beijing and Munich.”

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(09/12/07)

Mark Noble