CFA Open House

By Fernando Boccanera

The Finance Club partnered with Dr. Michael McMillan to hold the 3rd annual CFA Open House at the DC Campus on October 24th. Three speakers addresses to the assembled students about the makeup and meaning of as well as the necessary preparation for the three-part CFA testing process. Twenty students and alumni attended the event, most of whom were Finance Club members. The Finance Department provided the group with food and refreshments.

An instructor in the Finance Department and member of the Council of Examiners of the CFA Institute, Dr. Michael McMillian has been a grader and a senior grader for the CFA exams for the past 13 years. In his presentation, he provided a brief history of his involvement with the CFA Institute and the CFA exam and showed a PowerPoint presentation, which can be accessed at here.

As underscored in each speaker’s presentation, the CFA is the gold standard for investment professionals. As stated in the Feb. 26, 2005 issue of The Economist, “Whereas there are tens of thousands of finance degrees available around the world, ranging from the excellent to the worthless, there is only one CFA…It used to be just an American qualification. But explosive growth has made it, in effect, global currency.” Because of the CFA’s prestige, the number of CFA charterholders has increased dramatically, from about 20,000 in 1996 to more than 75,000 in 2007. The purpose of the exam is to determine whether candidates possess the knowledge, skills, and abilities to succeed as investment professionals.

The exam covers four major areas:

• Standards of conduct

1. Ethical
2. Professional

• Investment tools

1. Quantitative Methods
2. Economics
3. Financial Statement Analysis
4. Corporate Finance

• Asset valuation

1. Analysis of Equity Investments
2. Analysis of Debt Investments
3. Analysis of Derivatives
4. Analysis of Alternative Investments

• Portfolio management

There are three levels of exams. Level I is offered twice a year while the others are offered once a year. Level I has 240 multiple-choice questions; Level II has 20 Item Sets; and Level III has 10 item sets and 10-18 Constructed Responses. An Item Set is a vignette with 6 multiple choice questions. A Constructed Response is a discussion-type or problem-solving question.

(From left to right: Shepard Buckman, Dr. Micahel McMillan, and James Baily)

After finishing the PowerPoint presentation, Dr. McMillan introduced Mr. James Bailey, vice-president of Resolute Capital Management L.L.C. Mr. Bailey received his CFA charter in 1999, and currently serves on the Board of Directors of the CFA Society of Washington as Chairman of the Education Committee. He has also served as a grader of the CFA exam.

Mr. Bailey recommends the CFA charter for any professional in the investment field. In the past, the CFA Institute provided a long list of books to prepare for the exam. Not only did enrollees have to buy many books but they had to buy them knowing that only a few chapters in each bookwould be covered. Recently the CFA Institute replaced that list by bundling the registration and material in one single fee. The bundled material has practice problems taken from prior exams at the end of each chapter. The Institute also provides practiced exams for enrollees.

The Institute estimates that the preparation for the Level I exam takes about 200 hours. The topics covered by the exams are based on Statement of Learning Outcomes (SLOs). No question can be included in the exam that is not covered by a SLO. A review of the Carey Business School curriculum showed that it complies with the SLOs. The CFA Society of Washington provides twenty exam scholarships. For more information on how to apply for a scholarship visit their Web site.

The final speaker was Mr. Shepard Buckman, associate vice president and portfolio manager at Morgan Stanley. He has an MBA with a concentration in Finance from Johns Hopkins University, and a bachelor of science degree with Special Attainments in Commerce from Washington & Lee University. He received his CFA charter in 2006.

Mr. Buckman spoke in depth about his experience in preparing for the exam. He emphasized the fact that one must be highly motivated even to prepare for the exam because it will require considerable time on top of what the average Carey student already gives to a full-time job and part-time MBA course load. In terms of the relationship between the examinations, Buckman said that for those who do pass the first exam (roughly 30-40% of those who take it), the second and third exams are less difficult in comparison. He sees the first examination essentially as the litmus test for whether a student of finance has CFA potential.

Buckman spoke highly about the connection between his Carey classes and CFA preparation. He said that his finance concentration courses prepared him very well for his CFA testing and recommended that students try to coordinate their MBA courseload with their CFA studying period so that concepts can be reinforced and best understood as taught by professors in the classroom.

In perhaps his most striking statement about receiving his CFA, Buckman said that the CFA literally opens doors and gets phone calls returned where they otherwise would not be. He said people around the world have a profound respect for and trust in those who have received the CFA. Clearly, aside from the tremendous intellectual accomplishment that a CFA provides and proves, there are serious professional benefits just in having the certification itself.

One of the most exciting announcements made during the Open House was the following: The Carey Business School is trying to establish a partnership with the CFA Institute. The School is awaiting the new Dean to formally establish the partnership.