A common question that arises for those interested in pursuing a career in equity research is whether obtaining the Chartered Financial Analyst (CFA) designation is required or recommended. The CFA program covers a broad range of topics in accounting, economics, finance, valuation, analysis, and portfolio management. Given the rigorous curriculum, many view the CFA as the “gold standard” in the investment industry. However, it also requires hundreds of hours of self-study and passing three sequential six-hour exams. So, is it necessary to go through this intensive process to break into and succeed as an equity research analyst? The short answer is no, the CFA designation is not an absolute requirement, but it can be very helpful in furthering your equity research career.
Typical background and qualifications
Most equity research analysts have an undergraduate degree in finance, accounting, economics, or a related field. Strong academic performance, especially in courses covering financial statement analysis, valuation, portfolio management, and equity analysis demonstrate interest and aptitude. Mathematical, statistical, and financial modeling skills are also critical. Proficiency in Excel is a must. While not all analysts have MBAs, many complete graduate business degrees to enhance their financial and analytical skills. Top MBA programs provide recruiting opportunities at leading financial firms. Prior work experience in investment banking, consulting, auditing, or a related field is also very beneficial preparation. While not mandatory, obtaining the CFA charter displays a mastery of key content areas and a commitment to the profession.
CFA curriculum overview
The Chartered Financial Analyst program is organized by the CFA Institute and consists of three levels, each culminating in a 6-hour exam:
- Level I focuses on ethics, quantitative methods, economics, financial reporting/analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management.
- Level II emphasizes asset valuation and includes sections on ethical practices, quantitative methods, economics, financial reporting/analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management.
- Level III centers on portfolio management, incorporating ethics, quantitative methods, economics, financial reporting/analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management.
In total, passing all three exam levels requires successful completion of 900 hours of study material.
Day-to-day responsibilities
Equity research analysts typically:
- Develop and implement equity valuation models using discounted cash flow, comparable multiples, and other methods
- Forecast revenues, earnings, cash flows, and other financial metrics for companies
- Analyze financial statements, management commentary, industry trends, macro conditions, and other information sources
- Prepare detailed written company and industry reports with investment theses, recommendations, and price targets
- Communicate recommendations and findings to clients and investors through presentations
- Engage with management teams and industry experts to gather market intelligence
- Continuously monitor covered companies and industries for new developments
- Revise models, earnings estimates, valuations, ratings, and price targets as needed
Importance of the CFA
While not a formal requirement, the CFA provides significant benefits:
- Relevant curriculum – The CFA program curriculum encompasses all the key knowledge areas needed for equity research including accounting, financial statement analysis, equity valuation, economics, quantitative methods, and portfolio management.
- Analytical proficiency – Passing the three rigorous CFA exams demonstrates strong analytical thinking, financial modeling, and valuation abilities that translate directly to equity research roles.
- Prestige and credibility – The CFA charter carries significant weight and respect in the investment industry. Charterholders are seen as committed professionals with deep expertise.
- Career advancement – the CFA can provide an edge over other candidates for equity research positions and open doors to career progression including lead analyst or portfolio manager roles.
When the CFA is viewed as mandatory
While the CFA is not universally required, in some cases equity research analysts may face very strong expectations to attain it:
- Working for prestigious, large asset management firms (e.g. BlackRock, Vanguard, Fidelity)
- Covering highly specialized or technical sectors (e.g. metals & mining, pharmaceuticals)
- Seeking senior analyst or fund manager positions
- Pursuing work with hedge funds or other institutional investors
At these types of firms, the CFA is frequently treated as an unofficial requirement or at minimum a strong preference for equity research team members.
When the CFA is less relevant
Obtaining a CFA may be less critical for equity analysts focused on:
- Brokerage firm or boutique research roles
- Emerging growth companies in earlier lifecycle stages
- Less quantitative consumer/technology sectors
- Primary goal of supporting sales and trading functions
The knowledge is still applicable but CFA attainment is less likely to be an unofficial requirement.
Paths to becoming an equity research analyst without a CFA
While advantageous, there are certainly paths to succeeding as an equity research analyst without obtaining the CFA designation:
- Earn other credentials – Certifications like the Series 86/87 for securities analysis demonstrate knowledge. An MSF in finance or MBA provides analytical training.
- Start in adjacent roles – Join as a junior analyst or associate supporting senior analysts or work in investment banking or consulting to gain financial modeling skills before transitioning.
- Initially cover less specialized sectors – Join a small team starting coverage in growth sectors like technology where the CFA may be less expected.
- Show natural aptitude – Demonstrate stock-picking ability, creative analysis, and strong writing skills through publishing reports, recommendations, client notes, and content to establish your expertise.
With the right mix of experience, drive, and opportunity the lack of a CFA can be overcome. But you may hit a ceiling in certain elite firms or roles.
Time and cost considerations of the CFA
Beyond the relevance to equity research, the other major considerations are the time commitment and exam fees required:
- 300 hours of study per level is recommended, for 900 total study hours
- Candidates spend several months preparing for each exam
- Levels are taken sequentially; entire program typically takes 2-5 years
- Exams are only offered once per year
- Standard registration fee is $1,500 for each of the three levels
- Total cost can easily exceed $5,000+ with study materials, exam fees, and membership dues
This is a major time and financial investment that can delay entry into the workforce. Candidates need to weigh if the long-term benefits outweigh the costs.
Gaining work experience while pursuing the CFA
The self-study format of the CFA exams allows candidates to study part-time while working. Strategies such as:
- Studying for the Level I exam full-time after graduation before starting work
- Taking study leave from work before exams
- Studying during evenings or weekends while working
- Enrolling in CFA exam prep courses
Can allow candidates to gain work experience and progress towards charterholder status simultaneously.
Some employers even subsidize or reimburse exam fees and study materials to support employees pursuing the CFA.
Conclusion
The CFA program provides curriculum and credentials that can be very helpful for establishing and advancing an equity research career. While not absolutely mandatory, the CFA is highly desired and can be an unofficial requirement at certain prestigious firms and for senior analyst roles. Candidates without CFAs can demonstrate their capabilities through experience, credentials like the Series 86/87, and obtaining an MBA. With patience and strong performance, non-CFA charterholders can still succeed in equity research, though opportunities at elite investment firms may be more limited. The hundreds of hours of study and $5,000+ exam fees are a barrier to obtaining the CFA charter. But the flexibility of the self-study format allows candidates to earn the credential part-time while gaining relevant work experience. Overall, the CFA is not strictly required but provides advantages that significantly improve chances for entering and progressing in equity research analysis.