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Designations For The Buy Side

Ryan C. Fuhrmann

The sell side and the buy side together make up both sides of Wall Street, a term that is meant to generally refer to the investment profession. The buy side is denoted by its lack of affiliation with investment banking and the raising of capital for firms; it is left to investment functions such as picking securities and more general financial planning functions.

To get ahead in the industry, aspiring professionals can turn to a number of designations to demonstrate a commitment to the profession. This can appeal to employers, clients and institutions of higher learning for those also interested in degrees beyond undergraduate ones. Below is an overview of the primary designations for the buy side.

Chartered Financial Analyst
Perhaps the gold standard in the industry, the Chartered Financial Analyst, or CFA designation, has a mission "to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society." It represents a network of more than 100,000 charter holders throughout the globe. Last year, more than 200,000 candidates sat for the exams.

Earning the designation consists of passing three levels, fulfilling several years of work experience, and signing an annual code of conduct and agreeing to honor a code standards of practice. There is also an annual fee involved and a voluntary ability to join one of nearly 60 local societies throughout the globe. Continuing education requirements are currently voluntary.

Obtaining the CFA designation offers perhaps the greatest flexibility in obtaining employment on the buy side. CFA charterholders are directly involved in the investment decision making process, including selecting securities for inclusion in a portfolio, determining the appropriate asset allocation for clients and their portfolios and basically anything involved with managing assets. Researching companies and the underlying securities, such as stocks, bonds and derivative securities, are all fair game for those who have earned the CFA designation.

Certified Financial Planner
The Certified Financial Planner, of CFP designation, is offered and administered by the CFP Board. Its mission is to be "the recognized standard of excellence for competent and ethical personal financial planning." As its mission indicates, the designation is intended for professionals in financial planning, primarily for individuals.

According to the CFP Board's website, the process for earning the designation consists of passing the CFP certification exam as well as its "Fitness Standards for Candidates and Registrants," agreeing to follow its code of ethics and professional conduct standards, as well as its financial planning practice standards. Currently, there are nearly 70,000 individuals who hold the designation throughout the United States and its territories.

As the name implies, CFP holders are going to be more focused on financial planning aspects of the buy side. This may include setting asset allocation and portfolio rebalancing metrics and can also include managing assets beyond individual securities. For instance, financial planners may help clients determine life, health, and property and casualty insurance needs, as well as helping to select annuity-based products.

Certified Investment Management Analyst®
The Certified Investment Management Analyst®, or CIMA designation, is explained by the Investment Management Consultants Organization (IMCA) as "ethically contributing to prudent investment decisions by providing objective advice and guidance to individual investors and institutional investors." The IMCA website states that candidates should be interested in gaining competency as an advanced investment consultant.

There are several steps that are needed to earn the designation, including paying an application fee and agreeing to a background check, successfully passing a qualifying exam, qualifying for continuing education, passing the certification exam, and agreeing to abide by the organizations professional code and related standards of practice. The qualifying exam is two hours long and consists primarily of 50 multiple choice questions. The certification exam is four hours long and contains 100 multiple choice questions.

The CIMA's target market of investment consultants appears accurate but also covers other parts of the financial services industry, including relationship management, investment marketing, and financial planning such as asset allocation, creating investment policy statements, and the process of selecting asset managers.

Certified Market Technician
The Market Technicians Association (MTA) has a stated mission of "expanding the field of technical analysis and sharing their body of knowledge with their fellow members." This is primarily through administering the Certified Market Technician, or CMT program. The program consists of passing three exam levels and agreeing to adhere to MTA's professional conduct standards after successfully passing the exams. Currently, there are more than 4,500 CMT market analysis professionals throughout the world. Continuing education requirements are currently voluntary.

Clearly, individuals with the CMT designation will be focused on technical analysis. This is one niche of the buy side that focuses on charts and trading patterns to try and predict where the price of a security is likely to head. Professionals may also combine this with other functions and use technical analysis as another data point to determine more tactical, or shorter-term trading strategies.

The Others
The above designations are among the better known on the buy side, but there are many others. This includes the Chartered Portfolio Manager (CPM), administered by the American Academy of Financial Management, the Chartered Financial Consultant (ChFC), issued by The American College, Registered Financial Planner (RFP), administered by the Registered Financial Planners Institute, as well as the Personal Financial Specialist (PFS), which happens to be administered by the American Institute of CPAs, which offers the better known Certified Public Accountant designation for accountants.

The Bottom Line
The above overview of designations for the buy side and specific job functions they are intended for is intended only as a starting point. It is important to consider the total costs and study time needed for passing related exams. Costs can easily run into the thousands of dollars for passing a series of exams and study time can easily exceed 100 hours per exam. It is also important to do legwork on which exam best applies for different jobs within the buy side. For instance, more direct investment analysis is probably best served through pursuing the CFA charter, while more general financial planning activities could be served by the others.

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