Diermeier on the CFA Program

For a chronological index of my path to the CFA, click here.

Sometimes I feel like I work for the CFA Institute’s Department of Propaganda…

Jeff Diermeier is the president and CEO of the CFA Institute. I found a couple of links this morning to interviews with him that I think both prospective & current CFA candidates might find interesting. I had never heard him speak before and thought he came across as a quiet professional, versus the shameless ├╝berpromoter other CEOs can be of their respective organizations.

The first is an audio podcast which you can get (hopefully) from
this link. If that doesn’t work click here, then download the episode called Bloomberg Interview: Jeff Diermeier, CFA.

The interview is from February 2006, about 15 minutes long, and covers such items as:

    How many people who begin the CFA program complete it?
    1 in 5

    How has the exam changed over time?
    Less economics now. Glad I waited!

    Where is the biggest growth area in people pursuing the CFA?
    Asia, which now has the same # of candidates as the USA. And since the test is only given in English, having a CFA designation can also be used to demonstrate English proficiency.

    How do they decide how to update the curriculum?
    They send out surveys to employers & charterholders. Most at the time of this interview were responding that the program should cover more on derivatives.

    And what about the difference between a CFA and MBA?
    Both are generalist programs, with the CFA being a generalist program within the investing field whereas the MBA is a generalist program in basic business management. Diermeier has both and thinks that’s a good combination in moving down a path of specialization.

And in a short discussion about Sarbanes-Oxley, Diermeier mentions something I didn’t know, that the vast majority of earnings restatements come from small cap companies.

The second link is a more recent Bloomberg interview, this time with video. It covers the same sort of topics but hits on a few new areas. A bit frustrating to watch actually, as they were obviously pressed for time so Diermeier is often interrupted.

Some highlights:

    Charterholders earn >50% than those without the designation.
    Unfortunately this isn’t really expanded upon. Assume this is on average?

    Pass rates have trended downward in the last 3 decades. Why?
    According to Diermeier, it’s due to 2 factors. One is that the investment industry has gotten harder with more topics like the derivatives, global aspects, etc., so the material is a bit harder. But he also seems to start to say that a second reason is because people don’t appear to be studying the curriculum as thoroughly, but gets interrupted. The average pass rate for all 3 tests is 50%.

    With new material being added to the curriculum, what is getting dropped?
    Diermeier just gives an example – that economics & accounting used to be on all 3 tests and now they’re only on 2 to leave more room for the broader forms of portfolio management. He seems to imply that some areas are cut to more of a “tool level” as opposed to perhaps coverage-in-full per a university course.

    Best case scenario, how quickly can you pass all 3 tests?
    2 years, but that’s only for passing the tests, not fulfilling the work experience requirements.

    Is there a curve for the tests? Could everyone pass?
    There is no curve. Theoretically everyone could pass if they knew the material, but the probability of that is low.

    What is the average pay of a CFA charterholder?
    Speaking purely in terms of average, $240,000 per year. Compare to average salary of a lawyer, which is $160,000 per year.

Motivated now? ­čÖé

Update: I finally passed all the CFA exams and wrote an eBook about the program. If you’re interested, click here.