What is CFA?

CFA is an abbreviation for “Chartered Financial Analyst”, which is an investment-specific qualification offered by the CFA Institute in the United States. CFA is generally regarded as the most respected and recognized investment designation in the world. It is a distance learning/self-study qualification consisting of three exams (Level I, II & III) and is only offered by the CFA Institute. The exact same exam paper is written across the globe on the same day and is then marked in one central location, making the qualification a truly global qualification. In order to obtain the CFA Charter, students need to successfully complete all three exams and obtain four years’ investment-specific experience.

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This is a topic of much debate and in my opinion the answer lies in the objectives and background of each qualification.

CFA – CFA is an investment-specific qualification. It came to existence in order to provide the international investment industry with a standardised investment qualification, which provides students with all the necessary tools and ethical standards required to manage an investment portfolio, regardless of the student’s undergraduate qualifications. It is thus a focussed/specialist investment qualification with a very specific end goal in mind.

MBA – MBA in its pure form and as is offered by most universities in South Africa is a generalist management qualification. MBA came to existence in order to provide non-commerce degreed students (typically Engineers) with the commerce/financial tools in order to manage a business. Over time the qualification has evolved and most universities now offer a wide variety of subjects, including investment-related subjects, however it remains a generalist management qualification. An MBA is not a standardised qualification locally, or internationally, thus making comparison difficult and subjective.

CFA is therefore the most appropriate qualification for candidates wanting to work in the investment industry specifically. Whilst MBA is a highly regarded qualification, it is not as investment focussed as CFA and is thus better suited to candidates wishing to advance their careers across a variety of industries.

Investment banking and asset management are known for their use of jargon, abbreviations and technical terms. Buy-side and sell-side are two such terms.

“Buy-Side”. Asset managers manage money on behalf of clients by investing / buying financial instruments with a hope of making a positive return. Asset managers are therefore known as being on the “buy-side”.

“Sell-Side”. Investment banks and brokerage firms are the ones selling the asset managers the financial instruments they invest their client’s funds in, so investment banks and brokerage firms are referred to as being on the “sell-side”.

South African Corporate Finance and Private Equity firms have a strong preference for employing CA (SA) candidates, with the exception of Engineers with MBA/CFA. Significant emphasis is also placed on academic achievements. Employers also prefer candidates who have completed their articles at one of the large auditing/assurance firms. From experience I’ve seen that candidates who do not conform to the above profile find it extremely difficult to gain entry and my advice to such candidates is to consider making two or three carefully considered interim career moves (stepping stones) to reach their goal.

There are a whole host of things to consider, but I will touch on the most important ones briefly.

Geographical location in SA: The SA financial services industry has over the years evolved such that the bulk of the asset management firms are based in Cape Town and the bulk of investment banking operations are based in Sandton/Johannesburg. Although qualifications of employees in investment banking and asset management are basically the same, moving across from investment banking to asset management, or visa versa is not so simple, especially for more senior candidates. So, from a probability point of view, if your background is in investment banking, then your probability of finding suitable employment in Sandton/JHB is far greater than in Cape Town and vice versa.

Specialisation: The South African financial markets is a drop in the ocean compared to the UK, or US financial markets and many financial instruments/type of transactions that are common in those markets are not common in SA. A good example of this is the municipal bond market in the US relative to an almost non-existent municipal bond market in SA. In addition, in SA employees tend to have a broader focus – where three people would each be looking at a section of a transaction in the UK, in SA one person would be looking at the entire transaction. Be mindful of this when applying for vacancies.

Unknown Employers: Many candidates working abroad make the mistake of assuming that readers of their CV in SA would be familiar with their employers and therefore omit a short description on their CV. There are several high profile international banking and asset management operations in Europe, Asia and the gulf countries that are not present in SA, so what may seem like an impressive employer for someone abroad with knowledge of that employer, is not so impressive in SA for someone who has never heard of the employer. I personally need to regularly Google employers in order to get some perspective of a candidate’s work experience. If in doubt, include a short description.

Remuneration: Candidates earning foreign currency should not be mistaken by thinking that they could merely convert it to ZAR using the exchange rate at the time in order to determine what they could be earning in SA. In my experience it unfortunately doesn’t work that way for a number of reasons – too many to list here. In most cases candidates would need to make a salary sacrifice when returning to SA.

In most cases employers prohibit me from advertising an indicative remuneration range, but even if they do allow me to advertise it, I prefer not to do so for a number of reasons. Employers provide a remuneration range as a guideline to recruiters in order to assist them in ensuring that the right level of candidate is introduced for a particular vacancy. It is merely a guideline and could be adjusted at any time should the employer wishes to do so. Investment banking and asset management have very broad salary bands in order to accommodate senior specialist candidates, so you may find a junior analyst and a seasoned analyst on the same salary band, but earning very different salaries. Furthermore incentive bonuses in these industries make up a large portion of an employee’s overall annual income, but the nature and calculation of the incentive bonus differ significantly from one company to the next, so to view and compare the salary number in isolation of the incentive bonus scheme is not advisable. Advertising remuneration numbers could also create expectations, which lead to unhappiness and even disputes when a lower remuneration is offered than the advertised number.