Finance Certifications and Licenses
After earning their finance degree, many finance professionals go on to earn additional certifications and licenses in certain specialized areas of the financial field. These certifications can help you advance your career in your present job, but since they are transferable anywhere in the country, they can also grant you considerable flexibility by enabling you to take your skills to another job or set up your own business.
Certifications and licenses are designations granted by an independent third-party that ensures a person is qualified to perform a certain task or job.
The difference between certifications and licenses is that certifications are earned through a professional society, while licenses are required by law for certain professions and thus are earned through the government, usually state agencies.
Both require that the individual demonstrate a certain level of competency or knowledge in a profession, usually by passing an examination. Many professional certifications are valid for only a certain period of time and must be renewed regularly by proving on-going education and training.
Certifications and licenses are meant to raise professional standards, ensure quality service, and inspire trust in the public by showing the individual is a professional dedicated to excellence. In general, the most respected certifications are those that have the most rigorous requirements and that involve the most time, education, and expertise to master.
CFA (Chartered Financial Analyst)
The Chartered Financial Analyst (CFA) is an internationally recognized certification offered by the CFA Institute. It is intended for those with degrees who wish to improve their skills in money management and investment analysis, especially portfolio management. With an exam failure rate of about 50%, it is one of the most difficult of financial certifications to acquire. Charter holders are also required to abide by a strict code of ethics that is overseen and enforced by a board of professionals.
Applicants wishing to enter the CFA program must be in their last year of a bachelor's degree course or have at least four years of professional work experience that involves investment decision-making.
Three levels of exams must be passed before certification is granted. It takes most applicants a total of about 3½ years to study for and take all three exams.
The curriculum, which is designed mostly for self-study, includes the following types of topics: portfolio analysis and management; analysis of investments (such as stocks, bonds and derivatives); quantitative methods (such as statistics and the time value of money); economics (including micro- and macroeconomics as well as international economics); financial reporting and analysis; corporate finance; security analysis (including global markets and various asset types); and ethical and professional standards (with a focus on the compliance and reporting rules that must be followed when managing a client's money).
Students usually sit for one exam a year for three years. The Level I exam tests a student's general knowledge of portfolio management, asset valuation, and financial reporting as well as various financial tools and inputs. The Level II exam focuses on asset valuation and the application of tools and inputs, while Level III concentrates on portfolio investment and assesses skill in managing equity, derivative investments, and fixed income.
The exams are scored by a group of subject matter experts using the standard-setting method, in which an overall score is determined. Students are given only Pass or Fail results. However, students are also given three ranges into which their test results fall (below 50%; between 50% and 70%; and above 70%), and students who fail are told how well they compared with other students who failed. This enables students to have a better idea of their standing if they wish to re-take the exams.
Professionals who successfully attain their CFA designation usually start out as executive trainees in the financial sector and with experience can advance to more responsible executive levels. CFAs use their skills to analyze various investment opportunities and make “Buy” or “Sell” recommendations to their clients or their firm.
CFP (Certified Financial Planner)
Certified Financial Planners (CFPs) help individuals to examine their options and make the financial decisions that will be best for their particular needs, especially in the areas of insurance, retirement, and estate planning.
This certification, which is offered through the American Institute of Certified Financial Planner Board of Standards, is noted for its difficulty of qualification and the amount of financial knowledge certificants must master. Because the public places a great amount of trust in the decisions of financial planners, CFPs must also comply with a rigorous code of ethics that is overseen by the CFP Board.
Professionals who wish to acquire a CFP certification must first of all hold a bachelor's degree from an accredited college or university, although it does not necessarily have to be a financial degree.
They must then study more than 100 topics that cover planning in all of the major financial areas: insurance, retirement, estate, employee benefits, state and federal income tax, investment and securities, gift and transfer taxes, and asset protection.
After completing all course work in these topics, applicants are then qualified to take the CFP examination. (Applicants who already hold certain pre-approved certifications or degrees such as CPAs, CFAs, or PhDs in economics may be exempt from the education requirements and proceed directly to taking the exam.)
The exam is divided into two parts over two days and takes a total of 10 hours to complete. It is a combination of multiple choice questions and case problems dealing with financial planning. The pass rate is approximately 55% to 60%, according to the CFP Board.
Even after passing the exam, the qualification process is still not over. Applicants must also complete at least three years of full-time or equivalent part-time work experience in the financial planning field, as well as pass a criminal, character, and ethical background check.
After successfully receiving their certification, CFPs must renew it every two years by completing certain continuing education courses.
Although the qualification process for a CFP certification is long and arduous, certificants can be well-rewarded for it. This designation is highly prized by most employers since it shows you are capable of performing almost any financial analysis needed. If you plan on going solo in your own business, being a CFP is also a good recommendation for many clients.
CCM/CTP (Certified Cash Manager/Certified Treasury Professional)
Cash managers have been traditionally responsible for overseeing and controlling the all-important cash flow of receipts and disbursements within a corporation. They are the ones who determine whether the company needs to borrow loans to meet its currency requirements, and how a firm should invest or spend any surplus cash. Since 1986, the Association for Financial Professionals (AFP) has conferred a Certified Cash Manager (CCM) designation on professionals who met their requirements for this function.
Since 2003, the CCM certification has evolved into the CTP (Certified Treasury Professional) certification, in recognition of the growing responsibilities of treasury professionals and the increased knowledge they must demonstrate in today's atmosphere of intensified public scrutiny. According to the AFP, these employees must also be highly skilled in risk management, capital structure, mergers and acquisitions, and corporate governance, in addition to their traditional cash management responsibilities. Holders of CCM credentials can transition to the CTP designation by taking the CTP exam.
To be eligible to take the CTP exam, applicants must have at least two years of full-time work experience in a finance-related field. If applicants do not have two years of work experience, they are then required to hold a graduate-level degree or have spent two years teaching full-time in a university-level finance topic, both of which are considered the equivalent of one year of work experience.
Test applicants can choose either a self-directed study format or an instructor-led class to prepare them for the exam. They will then study 900 text-based review questions and exercises, 50 online calculation problems, and a bank of 700 selected online questions that replicate those they will experience on the exam.
The exam itself consists of 170 multiple choice questions based on concepts and experiences related to treasury management. Each question is worth one point, with no penalty for incorrect answers. A student's raw score is converted through a statistical formula to result in a scaled score, with Pass or Fail results.
After successfully passing the exam, applicants are granted a CTP Associate credential. They must then spend two years working full-time in a finance, treasury and/or accounting field and earn a certain number of continuing education credits before they will receive the full CTP certification.
After earning a CTP certification, certificants must comply with the AFP's code of ethical standards and recertify themselves every three years by earning and reporting 36 continuing education credits. These credits can be earned in the form of conferences, seminars, workshops, training sessions, teleconferences, cyberconferences, and teaching or lecturing sessions.
CTPs are qualified to maintain the financial liquidity of a company, oversee its borrowing and lending activities, manage its assets and liabilities, monitor and control its exposure to risks, and recognize and deal with corporate governance issues. It is becoming an increasingly sought-after certification by many employers. According to the AFP, CTP holders represent approximately 75% of the Fortune 500 companies, and many CFOs have indicated that earning this certification increases the holder's career opportunities.
Professional Licenses
A degree in finance can open the door to more than just a traditional finance career. Often, a degree can lay the foundation to positions in other industries, such as insurance and real estate, in which an underlying knowledge of financial matters is helpful. Some of these careers may require further training in the form of a license. Licensing is similar to certification except that licensing is handled through the government, usually state agencies, rather than through a professional society.
In the insurance industry, sales agents must obtain a license issued by the state in which they want to work. Licensing conditions vary from state to state, but most usually require the completion of certain coursework and passing state exams relating to insurance fundamentals and specific state insurance laws. Separate licenses are also required for insurance agents who wish to sell life and health insurance as well as casualty and property insurance. Most states also require insurance agents to renew their licenses every two years through continuing education courses in such topics as new insurance laws and policies, ethics, and consumer protection.
Many insurance agents also decide to sell financial products such as securities, mutual funds, and annuities, for which they must also be licensed. These require additional studying and passing exams such as the Series 7 exam to become a general securities sales representative, or the Series 6 exam for those who want to sell only mutual funds and variable annuities. Both of these exams are issued through the Financial Industry Regulatory Authority (FINRA).
In the real estate industry, sales agents and brokers must also be licensed for every state in which they wish to work. Again, requirements differ in every state, but most applicants for a general real estate sales license must complete certain specified coursework (usually from 30 to 90 hours) and pass a written exam dealing with the fundamentals of real estate transactions and various state property sales laws.
Real estate brokers, who act as intermediaries between buyers and sellers, usually have to comply with stricter licensing requirements such as 60 to 90 hours of classroom instruction, a more comprehensive exam, and one to three years of work experience selling real estate. Broker applicants who already hold a bachelor's degree in real estate may be exempted by some states from the experience requirement. Most states also require that real estate agents and brokers renew their licenses every one to two years through continuing education.