Financial advisors can earn a range of certifications and designations indicating their specialty and expertise. Two popular designations are CFA (chartered financial analyst) and CIMA (certified investment management analyst). CFA is a common designation that shows someone has a background in investment reporting and analysis. CIMAs focus on strategic financial management. Here’s a look at both certifications, how they’re earned, what they indicate and how those who hold them can help you.
What is a CFA?
CFA stands for chartered financial analyst, so it is not surprising that many CFAs pursue a career in financial analytics. The CFA program and certification is administered by the CFA Institute, which is a global organization. According to the CFA Institute, the two most common jobs for a CFA are portfolio manager and research analysts.
CFA charterholders typically work in investment analysis roles at financial advisor firms, investment firms, insurance companies, banks and investment funds. Financial planners or advisors with the CFA certification have a mastery of financial analytics, trends and markets. Clients who want help with investing and asset allocation will often work with a CFA.CFA Prerequisites
You must have a bachelor’s degree, or be in your final year completing your bachelor’s degree. The bachelor’s degree can be substituted for four years of full-time work experience. You also have to have an international travel passport, understand English and live in an eligible country. You must also pass the CFA Institute’s conduct criteria, which includes past complaints, accusations or convictions.The CFA Exam
After meeting the requirements for registration, you must then pass all three levels of the CFA Exam. The CFA Institute offers the exam for each level once a year in June, although you can also take the Level I exam in December. The recommended study time before taking the exam is 300 hours for each level. The combined global pass rate of the exam was recently 52%.
The exam rigorously tests your knowledge of ethics, investment tools, asset classes, portfolio management and wealth planning. However, each of the three levels focus on a different aspect of this knowledge. The Level I exam covers basic knowledge and focuses on investment tools. Level II emphasizes more complex analysis and focuses on asset valuation. Level III’s focus is on portfolio management.
After you complete all the necessary requirements you will receive your certification and become a member of the CFA Institute. Every year, you will have to pay dues and certify that you are adhering to the standards of the CFA Institute.What is a CIMA?
CIMA is an acronym for certified investment management analyst. The certification is offered by the Investments and Wealth Institute. The designation focuses on asset allocation, ethics, due diligence, risk measurement, investment policy and performance measurement. Those with the CIMA designation typically focus on investment consulting.
CIMAs generally have jobs with larger financial consulting firms, where they have extensive interaction with clients and manage large accounts. They can work with both individuals and corporations. They typically advise large companies or high net-worth individuals, for several reasons. The first reason is that the CIMA credential allows these advisors to significantly raise their rates. Additionally, CIMAs have to show they are skilled not only in finance but also business strategy, management and operations. This means they are well-prepared to assess risk and make decisions for entire corporations or funds. For the same reason, they are often better suited to advise wealthier clients and large corporations.
CIMA certificate holders are required to prove their expertise through continual recertification. This means CIMA designees must complete at least 40 hours of continuing education every two years.CIMA Prerequisites
In order to be eligible for the CIMA certification, you must be an investment consultant with at least three years of professional experience and no record of ethical misconduct. You must also take the two-to-four-day executive education program, which is offered in person at the University of Pennsylvania, Yale and the University of Chicago. (Yale also offers an online alternative.)The CIMA Exam
After completing the course, you are eligible to take the CIMA designation certification exam, which is administered year-round at Pearson VUE testing centers. The test is five hours long and has 140 multiple-choice questions.
Other than the mandatory course, you study on your own terms to prepare for the exam. However, you should plan to study for around 150 hours to pass the CIMA exam.
After passing the exam, you’ll still need to pass a second background check, provide compliance disclosure, complete the license agreement and pay the initial certification fee in order to become a CIMA.CIMA vs. CFA
These are both highly respected credentials, especially in investing. There are other similarities between the two credentials, and up until June of 2019, it was possible for CFAs to skip the CIMA course and just take the exam. However, there are differences between the two credentials as well.Differences
Both CIMAs and CFAs bring vast and wide-ranging expertise to investment consulting and portfolio management. If you’re considering a firm to do investment management for you and you see that their investment advisors are CIMAs and CFAs, you’ll know your money is in deservedly credentialed hands.Tips
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