Last Spring, I had a chat with a journalist from one of our competitors who had been/is taking adviser qualifications.
I found her efforts admirable and this conversation really gave me food for thought.
In the next few months, I mulled over the idea of preparing for a professional certification myself and shopped around, because there are plenty of professional bodies and exams out there.
I wanted something that would interest me but also be useful at the same time. Therefore, it would have to be a certification in investment.
I first considered the CFA Level 1 as it was the investment qualification I had heard the most about.
However, the fees ($900 to $1,200) and the low pass rate (37%) had the effect of a repellent on me. I thought it was not reasonable to spend that much money for something that would in all likelihood end up being a complete disaster.
You may call me pessimistic, I will answer that I am just not self-delusional. If even financial professionals find it hard, my chances were close to none and the technical level is probably way above what a financial journalist needs.
I had a look at the other programmes listed on the CFA’s website and came across the Investment Management Certificate (IMC).
After further research, I had made my decision. This was the right certification for me in many regards.
It aims to provide the foundations in investment management and acquiring the baseline knowledge. It is all I need for now.
Also, while the CFA is not related at all to financial advice (from what I know), the IMC does look into this profession, albeit superficially (it is primarily aimed at investment managers rather than financial advisers). As a result, it still had some relevance to my job.
Last but not least, the IMC is relatively UK-focused in comparison to the CFA which is global in its nature. As I am not a complete stranger to the UK financial industry, that would play in my favour.
I have not completely abandoned the idea of sitting the CFA Level 1 one day. Life is still long (hopefully) and the IMC will enable me to test the water. If I cannot complete it, then the CFA Level 1 is completely out of reach.
As soon as I moved house to a more comfortable and quiet place, there was no excuse and I had to walk the talk.
At the time of writing, I have just passed the first unit ‘The Investment Environment’.
I will not deny it, it is a great relief, but I am only halfway there. I will need to successfully pass unit 2 ‘The Investment Practice’ to complete the certification.
In short, it is half time, I am leading 1-0, but there are 45 further minutes to play.
What was on the menu?
For those who are not familiar with the IMC, the first unit is structured in six chapters: 1- Financial markets and institutions, 2- Ethics and investment professionalism, 3- The regulation of financial markets and institutions, 4- Legal concepts, 5- Client advice, 6- Taxation in the UK.
‘The regulation of financial markets and institutions’ is arguably the most important chapter and is also by a far and wide the longest one. Of the 85 questions at the exam, between 25 to 35 will be allocated to this chapter.
Luckily, it was no terra incognita for me as it extensively deals with the role, status and powers of a very familiar organisation: The Financial Conduct Authority.
While working at Money Marketing certainly facilitated the study of this chapter, I still had to digest extensive extracts from the FCA Handbook.
The chapter also covers, albeit in a much more concise manner, the rest of the UK regulatory bodies.
Some were totally unknown to me such as the Panel of Takeovers and Mergers and the Competition and Markets Authority.
Others sounded familiar, but I did not know what their role was prior to my study. That would include the Prudential Regulation Authority (PRA) or The Financial Policy Committee.
The difficulty of this chapter was definitely its length and the importance of the information it contains. Almost every single line is crucial and there is no other way than learning by heart.
Some questions in the test simply test the knowledge of the regulatory principles but others require one to apply those same principles in case studies.
It means learning everything verbatim is not enough, you also have to understand what you are learning.
The second and fourth chapters also involve learning the material by heart, but they are thankfully much more succinct.
The first chapter was probably the most destabilising one to me. It smoothly starts with an introduction explaining how the financial system works, who the different actors are and how money circulates between them.
It then abruptly delves into a world that was completely unknown to me: investment exchanges and their infrastructures.
It required a lot of back and forth between Investopedia and the study book to understand what things such as central counterparties, market makers, clearing houses, SETS, SETSqx, bid-ask spread were.
Chapter 5 was the sunshine after the rain. It purely focuses on investment, which was the reason why I chose to study for the IMC in the first place.
It gives a description of the different categories (and sub-categories) of clients and asset classes.
There is also a limited (but interesting) financial advice piece. It includes among others fact find, establishing investment objectives and how to allocate a portfolio based on those objectives.
The chapter also looks into the asset allocation in different types of pension funds, general insurance and life insurance.
I really enjoyed the strategical dimension in this chapter. It was, at least to me, more stimulating than regulations and it also means that I did not need to review this chapter very often.
But against my initial expectations, chapter 6 is the one I preferred.
As it deals with UK taxation, I feared it would be incommensurably dull, but there was also this strategical dimension that made this chapter as stimulating as the previous one.
Obviously, you have first to learn all the UK taxes that are relevant in an investment context, but once it is done, that is when it becomes interesting.
First of all, you have to learn all the computations to calculate those taxes but also strategies to mitigate them.
Maybe tax planning was my true calling, who knows?
How I prepared
I had a lot of apprehension while preparing for this exam. Of course, I have sat exams in an academic context before, but professional exams were something new to me. I did not know what to expect.
Also, I had to deal with a time constraint. The study material is renewed every 1 December and I started in late August, which means I had to successfully pass the test for this unit 1 before 30 November. I was not too eager to start all over again almost from scratch and I am not sure my bank account would have liked me to pay the fee for a second attempt.
As a result, I followed the recommendations provided by CFA UK (the body organising the IMC) very scrupulously.
It advises at least 100 hours of study for unit 1. Since I am not a finance professional, I knew I would need more.
Therefore, I aimed for 100 hours just for what I called the “initial phase”, which was about reading the study book five times and writing down things I had trouble memorising. It’s time consuming, but I find it makes it easier to process information.
It is very tempting to read passively, it happens instinctively. But writing (especially in your own words) forces you to actively engage with the content.
After an initial skim read of the study book, I had a rough of idea of the length and complexity of each subchapter.
I then allocated those 100 hours for this “initial phase” between late August to 28 October. The point was to ensure I would have two weeks left before the test to focus on my weaknesses.
On 28 October, the result was below the requirement threshold. While the recommendation is that you should score at least 75% at the mock exams, I only got 71% at the mock test I took immediately after completing this so-called initial phase.
But it was a good opportunity to identify my areas of weakness and the two final weeks were dedicated to remediate to those shortcomings.
I read over and over all the subchapters I had not well assimilated and practised the mock exams again and again until I scored above 90%. In total, I have spent around 150 hours to prepare for this exam.
That was sufficient this time around.
It was an interesting experience and I feel relieved my efforts bore fruit. I am not getting complacent though. I know I have only completed the easiest unit of a relatively “beginner-friendly” certification.
I have learnt plenty of things, some of which will, I hope, be useful in my work.
It also answered some questions I had been asking myself for a while. For example, I did not know much about the UK regulatory bodies beyond the FCA.
I guess I also now have a vague idea of what advising clients on investment requires and how to structure their portfolio (I am not saying I would know how to do it, I just roughly know how those things work).
The most immediate benefit I gained from this unit is a solid overview of the UK tax system. With the upcoming Autumn Statement, I hope to be able to make good use of what I have just learnt.
However, I do wonder what I will remember of it in say six month’s time. This is especially true of the contents that had no relevance or link to what I do in my everyday (all the things related to investment exchanges for example).
But I suppose, even pros do not retain everything they have learnt while studying for their certifications.
As I have not had any free evenings over the past few months, I will deliver myself a break until December. Although I must say, it already feels strange not having to study after work. It just does not feel normal.
I look forward to start learning for unit 2. From the few I could see, it will be much more mathematical than unit 1. I hope time has not eroded my numeracy skills too much (I used to be an accountant a while ago).
Hopefully, this Weekend Essay will have a part II in a couple of months.