Engineers and the CFA Program

I occasionally get good questions via emails and comments that call for somewhat longer replies. It only recently dawned on me that these should be made into posts so that others can easily stumble across them. So here’s the first…

July 17, 2011 at 5:47 am

Hey Lumilog,

I think i find myself in exactly the position that you described yourself. I have a lot of interest in stocks, I have been trading from past 2-3 yrs with whatever experience i have gained over the time with my own investment style ( I can call it neither technical or fundamental ).

I keep reading stuff related to investment and trading, so i too sometimes think as you wrote “it couldn’t hurt, and I was spending so much free time reading about investing anyway that it made sense to do it in the CFA program framework where I’d have something to put on my resume for all my efforts.”

I have some queries which are bugging me from a long time, I hope you can provide some insight into it.

1) How much sense does it make for me to use my time by reading CFA stuff than by using the same time on my stock research.

Ideally it would be half and half, though in reality preparing for a CFA test and working leaves time for little else. The big advantage of putting your own research on the back burner while pursuing the CFA is that the program will provide fresh insights and directions for your future research as well as force you to cover interesting topics that you may have (a) never even known existed (b) thought you understood deeply, only to discover you’re quite the novice and (c) knew existed but never would have studied on your own, despite their usefulness, because they didn’t line up with the particular slices of investing that you’re passionate about.

2) Will all the effort in clearing the CFA exam actually makes you a better investor / trader. Or Am I better of doing my own research in the same time. ( I mean, i can devote the same time to other studies of stocks, read about their businesses or study the historical data etc etc )

Hard to say but I think the main vote for the CFA program here is that it’s just a more efficient way to learn as you can read a passage in 10 minutes that has conclusions it may have taken you months to discover via simulations or trial-and-error on your own. You risk wasting time re-inventing the wheel if you don’t get at least a good overview of what other great minds have discovered over the past 100 years. But on the flip side, you probably do risk becoming so indoctrinated by what you learn that it might reduce the degrees of freedom of your own personal research, as you may feel you already know the “correct” way to choose a discount rate, asset allocate, value stocks, etc. But didn’t attending university for 4 years for your engineering degree make more sense than just spending 4 years studying engineering topics on your own?

3) I am an engineer, And I plan to leave my current job and earn my income wholly on stocks.. Finally, want to be a money manager. So, Will a CFA help me in getting into any investment related job ( am an engineer).

The CFA certainly can’t hurt. I heard from a couple of sources a few years back that engineers didn’t really need much more education to break into finance since the math & statistics skills made them instantly attractive to Wall St – at least for an entry position as a quant. Becoming a portfolio manager by contrast requires some additional skills beyond just math, and the CFA should help here.

4) I belive, CFA must have been quite easy for you since you would be aware of some investment related stuff even before preparing for CFA. Am i right?

No. I thought I was pretty advanced when I started page 1 of the Level 1 study guide, but with each passing chapter the more my Advanced Quantitative Investing System I’d developed over the previous years began to resemble Collection of Mickey Mouse Metrics that had all sorts of holes and problems I’d never even thought of. I had (and still have) heaps to learn, and my previous self-guided research maybe gave me a head start on 5% of the material. Max.

5) I am an engineer and i dont plan to do any MBA but still want to be in IB field. In this case, will CFA help me?

Again about all I can say is “it certainly can’t hurt and most likely will actually help”. Even if you forgot all the material within a month after finishing the program, just having completed it sort of brands you as a Really Smart Person and that alone can open all kinds of doors – maybe even additional ones in your current field if you’re the lone engineer who can have an intelligent conversation with the CFO at the watercooler when none of your coworkers even understands what (s)he really does.

Thanking you in advance.

Thanks for the great questions. More please!

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

26 thoughts on “Engineers and the CFA Program”

  1. I am an Engineer and I want to do the same thing – switch over to finance and start working as a Investment banking analyst, IPOs, equity research, portfolio management and etc… I can do an MBA but it’s going to take years and I am 31 already…. I have heard so much about the CFA and passing all levels will get you to where you want, but was there any success stories? Examples? Who would hire somebody at the age of 33 with an engineering degree but no Finance experience to work for them????

  2. Hey Lumi,

    Thanks a million for all the insights you gave, I deeply appreciate your time and efforts for the answers. I was very eager to get answers from you, and really enjoyed this post.

    I am planning to give my Level 1 next June, So will definitely have a loads of questions. This will be the first place where i will stop by for answers 🙂

    Thanks a lot

  3. I have the same question like Kenneth: Who would hire somebody with an engineering degree but no Finance experience to work for them?
    Or better put.. how can one secure the experience required for being a Charter holder or start a career as portfolio manager?

  4. All I can say is that I got hired and am now consulting (part-time) for a money managing firm. I had no prior experience – only a passion for the topic and a pass on the CFA Level 1 exam. In fact, more than one opportunity presented itself after I passed Level 1, including a fairly high-ranking full-time position in portfolio mgmt that would have counted toward the CFA work experience. I picked part-time consulting instead b/c I prefer to freelance for the time-being (but am currently earning no credit toward the actual CFA).

    Hope that helps,
    Lumi

  5. I am also an engineer, age 34, who is considering pursuing the CFA. The fact that you found part time work consulting is encouraging, since I would like to continue working full time as an engineer for a few more years, while still getting a chance to get my feet wet, so to speak, before jumping into finance full time. Thanks so much for the info!

  6. Lumilog,

    Have you run into any employers or others who have suggested that you pursue an MBA, to strengthen your management/finance/accounting background?

  7. Not so far, but I don’t really run into many employers since I just consult from home. Many people try to decide between CFA and MBA and there are benefits to each. An MBA from an outstanding school is probably worth more than a CFA. Someone said that the MBA is a mile wide and a foot deep (meaning many topics are covered lightly) whereas the CFA is a foot wide and a mile deep (focuses only on investing). Since investing is my true love it seemed a no-brainer to do the CFA. But now that I’m more familiar with some of the great teachers at some of the best business schools, I’m not so sure the investing side of an MBA at, say, Columbia would indeed be only a foot deep.

  8. As an engineer I found that a lot of quantitative material in the CFA curriculum is easy. On the other hand, the qualitative material requires not only knowledge, but also judgment (especially at level 3), and that comes more easily when backed by professional experience in the financial industry.
    Another point of caution for engineers enrolling the CFA program is to make sure they can eventually justify four years of relevant experience, as the CFA institute will look into your application carefully.

  9. Lumi and Others,

    I am trying to move from engineering to finance. I have been working as a software developer but recently got a job as a Quant developer in some quant trading start up. I just want to know from you guys, is it relevant and good for me to move to quant developer role. How much will i get to learn about capital markets ? and will that be counted by CFA for relevant experience.
    Also, i am more inclined to be researching stocks , economy etc.. How relevant is a Quant role, when it is more of mathematics than finance.

    Looking despearately for answers !!

  10. I am a mechanical engineer working at a seaport for a construction Company..with two years of experience in d same n m quite sure that i want to get into investment banking field through CFA .Is it recomended for me to start giving exams from now .since i
    dont have four years of work experience.. Kindly give me the guidelines

  11. raj – sounds like a step in the right direction, in your move from engineering to finance though indeed the experience you acquire might indeed be more mathematical than qualitative. don’t personally know any quants so can’t advise further

    umang – you don’t have to have the 4 yrs work experience before you begin the exams. you just need to get the experience at some point to actually earn the CFA charter after passing all 3 exams.

  12. I am Electrical & Electronics Engineer currently im working as a Lab technical Support Officer in University, What i wanted to know is is it better to do the CFA for ma background or the MBA if so as i have only have 2 years experience should i wait till i get a good job to start or better to start now,

    Please advice me thanx

  13. shane – can’t answer in terms of employment – it depends on what you want to do and some MBA programs are far superior to others. i picked the CFA because the curriculum looked more like what i wanted to study, and i could do it from home at my own pace. don’t think there’s any benefit to waiting to start if you think it’s for you, unless you think you might not have enough time for it now.

  14. I came across this thread. Like to keep busy, love learning new things specifically to do with business. I have a BSc in Mechanical Engineering and will be done with my MSc Industrial Engineering (50/50) in February 2013. Considering doing finance courses, but thought might as well go the CFA route and get firm accreditation. I am only 23, so still have lots of experience to gain.

    Your thoughts?

  15. t-bone,

    the only reason NOT to do the CFA program – if you love learning and a challenge, like myself – is if there’s some other better use of your time. you’re looking at a minimum of probably 1000 hours of study time from start to finish so the opportunity cost is not to be taken lightly.

    best of luck and let me know what you decide.
    -lumi

  16. I am working as automation testing engineer in mortgage banking domain since last 2 years.How CFA Level 1 exam would help me in growing and what are the prospects of doing CFA for me.

  17. hi srajan – doing CFA Level 1 will probably teach you a few things you don’t know and put a small feather in your hat – but if you’re hoping for more significantly improved career options i’d plan to do all 3 levels

  18. Hi. I was recently graduated from my Master’s program in Mechanical Engineering and been working part-time ever since. However I’m thinking of taking the CFA and if possible, get into another master’s program in financial engineering. I think of the exam as a mean to improve my chances in getting admitted into a good program. Do you think this is a realistic plan?

  19. hi amral – i’ve never read anything on the CFA helping for admissions. you’d think it couldn’t hurt but you just have to remember that it’s going to take a minimum of 3 years and a lot of study time to pass ALL the exams. even then, if you don’t have the work experience you won’t actually get the charter.

    some people talk about just passing Level 1 and then stopping – thinking that that would give them a better resume than someone else who hasn’t at least done that. a quick story – after 1 year into my engineering master’s program, i thought about switching to medical school instead. i thought my 1 year of grad school so far would only help my admission b/c it was better than no grad school. but when i talked to an advisor, he said it would actually hurt my admissions application b/c i would be seen as someone who didn’t finish what they started.

    hope that helps – good luck!

  20. Lumilog,
    I liked this post. I am 47 year old with comp science engineering background. Have spent 23+ years in tech industry. I have become full time investor for last 10 months. I am doing CFA level I. My thought process is same as yours…any way I am reading hundreds of books on investment and finance then why not do it under CFA framework. It may improve my credibility in the investment field. CFA level I itself was a shock for me. So many new things…economics, fixed income, derivatives etc that I had no knowledge of. I am not so sure I will pass level I in the first attempt but I am enjoying the learning process and enjoy learning new things every day as study for CFA level I. For that reason I refused to buy study guides and relying only on CFA institute books. Monumental task and very time consuming but hopefully will help me become knowledgeable investor in the end 🙂

  21. thanks for writing, girish. i did CFA Level 1 with only the CFA Institute books and passed on the first try. tried the same thing at Level 2 but failed the first time around so that’s when i started using the supplementary study guides. it is indeed fun to learn all of the new theory, even though it’s like drinking from a fire hose. wishing you the best of luck for the upcoming exam (taking it in december?). keep us posted of your progress

  22. Hi Lumilog,

    Currently I am pursuing Masters degree in Industrial engineering and I am planning to take all three levels of CFA. However, to earn a CFA charter you need to have relevant experience in finance. But through my industrial engineering degree I will land up probably in data analytics or manufacturing/supply chain/logistics firms. So is this an end of the story for my CFA? I am not considering the option to do MBA or any other masters program as it would cost huge more debts. But I really want to switch to CFA. Hence I need to know what things should I incorporate in order to practice as a CFA after passing all the exams and without having to attend MBA school. Thanks in advance.

  23. Hi Deepak,

    It’s certainly conceivable that you could pass the 3 exams but never get the charter due to the lack of work experience. That is where I am.

    And yet, I personally don’t care about the 3 letters after my name any more. I was after (a) the challenge (b) the education and (c) a doorway into being able to work in the field of investing, which I now do as a part time freelancer (which doesn’t count towards the CFA).

    Your concerns are real about not getting the charter. I just wanted to do the program so badly I jumped in and decided to let the rest unfold however it would.

  24. Thank you Lumilog for your reply.
    However I would like to know what special activities or tasks I could initiate now to earn the relevant experience at this position of mine so that I will earn the CFA charter?
    Or in other words what are the ways a candidate like me can earn CFA charter?

  25. Thanks for the reply Lumilog.

    However, I wanted to know that what additional activities/tasks at this position I can incorporate in order to get CFA charter for my profile?
    In other words what things I should do (after passing all 3 levels of CFA) so that I will earn CFA charter for sure?

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