2L -- CFA? Forum

[soft blue]

I'm a 2L interested in corporate work going to a corporate shop for the summer. A friend suggested that a very good idea for me would be to get a CFA (Level 1), since my 2L/3L are going to be extremely chill and I'll have the time. (No journal, easy RA job for lots of credits, etc). This friend is a midlevel restructuring person, and strongly feels that 1.) the certification says something to clients and 2.) is genuinely useful.

People with CFAs on the board -- thoughts?

[Anonymous User]

I'm a 2L interested in corporate work going to a corporate shop for the summer. A friend suggested that a very good idea for me would be to get a CFA (Level 1), since my 2L/3L are going to be extremely chill and I'll have the time. (No journal, easy RA job for lots of credits, etc). This friend is a midlevel restructuring person, and strongly feels that 1.) the certification says something to clients and 2.) is genuinely useful.

People with CFAs on the board -- thoughts?

It's definitely not necessary and too expensive. I passed level I in college and never thought of taking level II.

[derekne]

I'm a 2L interested in corporate work going to a corporate shop for the summer. A friend suggested that a very good idea for me would be to get a CFA (Level 1), since my 2L/3L are going to be extremely chill and I'll have the time. (No journal, easy RA job for lots of credits, etc). This friend is a midlevel restructuring person, and strongly feels that 1.) the certification says something to clients and 2.) is genuinely useful.

People with CFAs on the board -- thoughts?

I passed level 1 in June 2018 and I’m glad I did. The first exam covers the core material any finance major at a decent undergrad business school would cover, and coming from a STEM background, I found it incredibly helpful. That being said, taking the actual exam isn’t necessary if you have the motivation to learn the material on your own. Nor is sitting for all three exams If you have no desire to go into a Portfolio Management role at a AM firm or a MF.

[notinbiglaw]

You don’t even need to take the test. Just take lvl 1 test banks and you’ll learn enough for Corp law purposes.

Beyond that you’re better off taking some kind of modeling class using Excel.

[soft blue]

I passed level 1 in June 2018 and I’m glad I did. The first exam covers the core material any finance major at a decent undergrad business school would cover, and coming from a STEM background, I found it incredibly helpful. That being said, taking the actual exam isn’t necessary if you have the motivation to learn the material on your own. Nor is sitting for all three exams If you have no desire to go into a Portfolio Management role at a AM firm or a MF.

You don't think it's a valuable signalling device, either internally or externally?

You don’t even need to take the test. Just take lvl 1 test banks and you’ll learn enough for Corp law purposes.

Beyond that you’re better off taking some kind of modeling class using Excel.

Why? What's the value add for me; I won't be doing Excel modelling + my understanding is that's mostly just seeing what outcomes you'll get from different business scenarios (interest rates, commodity prices, etc) which isn't relevant to what we do.

Per my friends in banking/PE most of those classes are scams. Do you recommend one? (they all think their internal training was great but I obviously don't have access to that)

[derekne]

I passed level 1 in June 2018 and I’m glad I did. The first exam covers the core material any finance major at a decent undergrad business school would cover, and coming from a STEM background, I found it incredibly helpful. That being said, taking the actual exam isn’t necessary if you have the motivation to learn the material on your own. Nor is sitting for all three exams If you have no desire to go into a Portfolio Management role at a AM firm or a MF.

“You don't think it's a valuable signalling device, either internally or externally?”

So it really depends on what you’re going for. If you eventually want to move over to the business side, then yeah level 1 will be a helpful signaling device because it will demonstrate that you have solid financial chops. Being a CFA charterholder- which you can qualify for if you do four years of legal work that “impacts the investment community”- will certainly be respected in the firm and amongst clients. But I’m not sure the value add is high enough to spend your limited free time studying for L2 and L3 when you’re practicing.

It’s true a lot of the info falls outside of the traditional corporate finance material that M&A lawyers get exposure to, but all of the core L1 concepts are useful to know. It may not be applicable to your
Day job, but it will make you more financially literate and increase your ability to have substantive convos with your co-advisors and clients.

Also the classes are BS. Buy the schweser guides and Qbank and you’ll be good to go for L1

[notinbiglaw]

CFA lvl 1 doesn’t signal much. The exam is more about speed than depth of knowledge. The amount of finance material is actually pretty small but you have to drill it into your bones to be fast enough on a financial calculator. So people who know what it is don’t think much of it because most of the calculations are trivially easy in Excel. People who don’t know just don’t know.

You don’t need to build Excel models but you will be required to navigate them at some point. Just being able to navigate a model will save you a lot of grief trying to get info out of bankers who think you’re an idiot for not being able to find an input variable buried in a hidden cell AQ120 on tab 45 or something. Especially true if you’re in PE/startup/real estate space where the deals aren’t big enough to get you bankers (either at firm or from client) assigned to support you.

There are some clients that don’t want to give you info and will give you a spreadsheet with formulas stripped then you sometimes just have to reconstruct some of the formulas. Or wait a week as your partners try to pry info from the client.

[derekne]

CFA lvl 1 doesn’t signal much. The exam is more about speed than depth of knowledge. The amount of finance material is actually pretty small but you have to drill it into your bones to be fast enough on a financial calculator. So people who know what it is don’t think much of it because most of the calculations are trivially easy in Excel. People who don’t know just don’t know.

You don’t need to build Excel models but you will be required to navigate them at some point. Just being able to navigate a model will save you a lot of grief trying to get info out of bankers who think you’re an idiot for not being able to find an input variable buried in a hidden cell AQ120 on tab 45 or something. Especially true if you’re in PE/startup/real estate space where the deals aren’t big enough to get you bankers (either at firm or from client) assigned to support you.

There are some clients that don’t want to give you info and will give you a spreadsheet with formulas stripped then you sometimes just have to reconstruct some of the formulas. Or wait a week as your partners try to pry info from the client.

Disagree with your framing of the signaling factor. If you’re trying to lateral from big law into finance, the upside of the CFA doesn’t come from the fact that you passed a difficult exam. The biggest hurdle for any lawyer is demonstrating that they have a strong finance/modeling background. The CFA level 1 is the best way to show this outside of a formal financial modeling course like Training The Street.

I’ve got plenty of friends in IB/PE so this topic has come up even though I have no intention of moving to banking. They all agreed that doing L1 would increase the odds of someone getting through the process. Despite all of the banker-lawyer horror stories floating around, all of my friends respect the V10 lawyers they typically work with and think they’re a cut above them in terms of raw intelligence. But they universally assume that lawyers know nothing about the technical aspects of finance, and a formal cert. like L1 goes a long way in that respect.

[LBJ's Hair]

if you're at a T6 law school and want to signal to finance people that you know *something* slash maybe switch to a finance role down the line, honestly the move is to tack on another year and do a JD/MBA. a CFA isn't gonna like, hurt, but it's not gonna move the needle much. an MBA from an HBS/GSB/Booth/CBS would. not for the coursework, but the alumni network.

if you just wanna learn stuff, buy Rosenbaum + Pearl on investment banking, do Macabacus, maybe the Damodaran valuation too if you wanna get crazy

[soft blue]

if you're at a T6 law school and want to signal ... [get] an MBA from an HBS/GSB/Booth/CBS.

Yeah but I didn't apply and don't want to do a year of just MBA. My loss. Also not looking to lateral into finance -- just want to be able to speak the language, show clients I actually know what I'm talking about, etc. If that's what I wanted to do I would've just ... done that.

(also such disrespect to Stern/SOM!)

[RedGiant]

Former banker/trader here who has a Tuck MBA and has been kicking around corporate law for many years, so I'm going to weigh in.

A CFA is not a generic "business credential." It's pretty specifically finance-oriented, and even more specific than that, toward asset management. So sure, does it signal something? Yes. If I were reading your resume and saw that, I wouldn't think, "this person is serious about learning about finance to be a better lawyer." Instead, I would think, "this person has one foot out the door from law and is kicking around maybe moving into finance." While it shows initiative and is not an easy test (I've had several roommates over the years work very hard to earn the full CFA cred), I don't think it signals what you think it does.

There are really a ton of resources for you if you want to learn more about finance and financial literacy I know I've posted some quick hits, but here are some more:

Do the Valuation and Valuation Workbook by Tim Copeland or cruise around Damodoran's website (mentioned by a prior poster)
Try the Essentials of Accounting workbook (walks you through the basics of acctg)
Cross-register or audit a class at the b-school in financial accounting (even if the b-school has policies, approaching professors nicely and asking to sit in is often well-received and can be done "under the table". If you audit a class, commit to yourself to really "doing the work" for the class)
Take classes on LinkedIN or Coursera re excel basics or modeling basics
Spend your free time reading Money Stuff by Matt Levine (absolutely excellent)
Read the WSJ, Fortune, BloombergBusinessweek
Cruise around Latham's "Book of Jargon" which is available for multiple corporate law areas and geographies.
Consider joining the ABA Business Law Section, the Association of Corporate Counsel or ask if you have access to PLI programs through your school (they have multi-day webinars re Essentials of Accounting).
Do informational interviews with young alums and ask them where and how they learned the most/politely ask this to alumni panelists who visit your school
Read an S-1 for a recently listed IPO that's in the news and see what they say in their "Risk Factors" and "Our Business" sections--you can learn a lot about industry that way.
Subscribe to First Round Capital's newsletters
Read Ray Dalio's blogs
Read Andreesen/Horowitz's blogs
Follow business leaders on LinkedIN
Subscribe to Cambridge Associates' and PIMCO's free newsletters

You might also consider that being a better business lawyer (esp. if you're working with startups) involves a much broader skillset - negotiations, contract drafting, privacy, employment law, etc. There's a lot of ways you can make yourself more marketable and more fluent in "business speak" that don't involve finance only. Don't have tunnel vision as you look at your course selection.

Hope this helps!

[derekne]

if you're at a T6 law school and want to signal ... [get] an MBA from an HBS/GSB/Booth/CBS.

Yeah but I didn't apply and don't want to do a year of just MBA. My loss. Also not looking to lateral into finance -- just want to be able to speak the language, show clients I actually know what I'm talking about, etc. If that's what I wanted to do I would've just ... done that.

(also such disrespect to Stern/SOM!)

In that case OP you’d be well advised to take LBJ’s and Red Giant’s advice. The formal credential isn’t necessary if you just want to make yourself a better deal lawyer and have the motivation to do the legwork without the fear of losing $1,000 hanging over you. Go buy Rosenbaum & Pearl or Aswath’s book and start reading. When you feel ready, pick a company you’re interested in and starting combing through their public filings and build out a model from scratch,(comps, DCF, etc.). That’s the quickest way to build up your core competencies. I also highly recommend Money Stuff by Matt Levine. He’s a WLRK alum and former GS structured products banker and really does a great job covering more obscure areas of finance,(like structuring equity derivatives).

[soft blue]

You might also consider that being a better business lawyer (esp. if you're working with startups) involves a much broader skillset - negotiations, contract drafting, privacy, employment law, etc. There's a lot of ways you can make yourself more marketable and more fluent in "business speak" that don't involve finance only. Don't have tunnel vision as you look at your course selection.

Not terribly interested in startup work, but point well taken. The sense I've gotten from talking to my friends in PE/IB is that the biggest flaw -- by far -- in business lawyers is that they can't think like businesspeople. They think that their lawyers are very smart but 1.) have no idea why they're being asked to do what they've been asked to do (so it's hard for them to add value in that way; they often make choices that are counterproductive for business purposes) and 2.) have such a knowledge gap that it's difficult to communicate with them on a business level (thus the idea to take the CFA; to understand finance stuff enough that I can have a conversation with them.) The few lawyers they know who they think can think like businesspeople/understand what's going are (per them) rock stars who they love and want to work with whenever possible. I'm trying to be that guy.

More generally, I'm confident that my law school & firm will teach me the material (if I put in the effort, try to learn, etc) on the purely legal end as far as drafting, negotiation, etc go. I'm really interested in taking the next two years and trying to learn as much "business" stuff as I can so I can be a valuable lawyer in that way, in addition to knowing the law / more traditional legal skills. Thoughts on what I should look for in that direction?

Also, I'm a huge Levine fan! Fantastic resource, was also wildly useful in interviews. (My entire Simpson interview schedule was nothing but people who I could talk to about Levine stuff, for example -- I got the partner who did the Hovnanian transaction, a guy who represented Dell/Silver Lake vs. Icahn, someone who was very involved in Windstream, etc.)

Thanks for the advice.

[derekne]

You might also consider that being a better business lawyer (esp. if you're working with startups) involves a much broader skillset - negotiations, contract drafting, privacy, employment law, etc. There's a lot of ways you can make yourself more marketable and more fluent in "business speak" that don't involve finance only. Don't have tunnel vision as you look at your course selection.

Not terribly interested in startup work, but point well taken. The sense I've gotten from talking to my friends in PE/IB is that the biggest flaw -- by far -- in business lawyers is that they can't think like businesspeople. They think that their lawyers are very smart but 1.) have no idea why they're being asked to do what they've been asked to do (so it's hard for them to add value in that way; they often make choices that are counterproductive for business purposes) and 2.) have such a knowledge gap that it's difficult to communicate with them on a business level (thus the idea to take the CFA; to understand finance stuff enough that I can have a conversation with them.) The few lawyers they know who they think can think like businesspeople/understand what's going are (per them) rock stars who they love and want to work with whenever possible. I'm trying to be that guy.

More generally, I'm confident that my law school & firm will teach me the material (if I put in the effort, try to learn, etc) on the purely legal end as far as drafting, negotiation, etc go. I'm really interested in taking the next two years and trying to learn as much "business" stuff as I can so I can be a valuable lawyer in that way, in addition to knowing the law / more traditional legal skills. Thoughts on what I should look for in that direction?

Also, I'm a huge Levine fan! Fantastic resource, was also wildly useful in interviews. (My entire Simpson interview schedule was nothing but people who I could talk to about Levine stuff, for example -- I got the partner who did the Hovnanian transaction, a guy who represented Dell/Silver Lake vs. Icahn, someone who was very involved in Windstream, etc.)

Thanks for the advice.

Red Giant probably has his/her own thoughts, but I have the exact same goals as you. One thing I’ve found helpful is building out models from scratch in a variety of different industries and sending them over to one of my IB friends for review. There are two key advantages to doing this. First, forcing yourself to go through a 10-K to pick out information is a great way to learn what’s important and what’s not when it comes to evaluating a business. The second advantage is that it puts you in the drivers seat when it comes to making assumptions about the business that will dictate how your valuation turns out. I try to be as objective as possible when doing this, but when I’m talking to one of my IB friends I also ask them how/what could be tweaked in order to make the picture rosier. As lawyers, I think it’s better to stay in the objective camp considering we’re the guys who are supposed to give unbiased advice to the clients. But it’s also important to put yourself in the shoes of the banker and ask yourself what would need to be tweaked in order to make the company-or a hypothetical transaction involving said company- look better on paper than it actually is.

[dabigchina]

You seem pretty dead set on doing a CFA, so I guess do it. It's not that much money, but it's also not going to be that useful to you as a biglaw associate. I have a CPA and work in tax/benefits, but it hasn't made any difference in my career, outside of a blurb on my firm bio.

Let's say you wind up in cap markets. You are never, ever going to change anything in the F pages (the financials), so having the ability to read F pages is going to have fairly limited usefulness. It might be useful for marking up the risk factors, but you're basically just going to be taking comments from your seniors there anyway.

Say you wind up in M&A. The bankers set the term sheet. The closest you will ever get to the financials is negotiating what gets included in working capital, and you won't even get to touch that until you are a 5th year, when you will basically have forgotten everything.

Say you wind up in banking/finance. A CFA MIGHT be useful in that you will have a more sophisticated understanding of the financial covenants. Then again, that stuff is mostly accounting and I'm not entirely sure a CFA Level 1/Level 2 will get granular enough to be of any real benefit there (think lease accounting).

[soft blue]

You seem pretty dead set on doing a CFA...

No, not at all. I'm just interested in getting the business skills that lawyers usually lack; the CFA was recommended to me as a good thing to take to get part of that education. Any advice on what would be a better use of my time?

[RedGiant]

You seem pretty dead set on doing a CFA...

No, not at all. I'm just interested in getting the business skills that lawyers usually lack; the CFA was recommended to me as a good thing to take to get part of that education. Any advice on what would be a better use of my time?

I feel like you're not listening. If your goal is to "think like a businessperson" then understanding modeling doesn't really get you there. It's one part of a complex equation that's weighted differently depending on what stage, industry and geography you're in. Business is highly interdisciplinary. It involves finance, sure, but it also involved understanding macro trends, cost accounting, organizational behavior, negotiation, sales, marketing, data analysis etc. That's why I recommended you read all the things I did above--you learn a lot from the WSJ and Fortune and Businessweek too. Understanding that cash is the plug is great and all, but just by being a scholar of "business" (not merely finance) you can learn a lot too. For instance, you can skip the "I know how to model" step by simply reading excellent buyside reasearch reports--it's fine if they know how to model and you know how to interpret it. You can learn what experts think the drivers of an industry are (not just what you came up with from the 10-K--anyone that's done securities work understand a 10-K is a marketing document as much as it is a compliance doc, for instance). Godspeed.

[RedGiant]

You seem pretty dead set on doing a CFA...

No, not at all. I'm just interested in getting the business skills that lawyers usually lack; the CFA was recommended to me as a good thing to take to get part of that education. Any advice on what would be a better use of my time?

I feel like you're not listening. If your goal is to "think like a businessperson" then understanding modeling doesn't really get you there. It's one part of a complex equation that's weighted differently depending on what stage, industry and geography you're in. Business is highly interdisciplinary. It involves finance, sure, but it also involves understanding macro trends, cost accounting, organizational behavior, negotiation, sales, marketing, data analysis etc. That's why I recommended you read all the things I did above--you learn a lot from the WSJ and Fortune and Businessweek too. Understanding that cash is the plug is great and all, but just by being a scholar of "business" (not merely finance) you can learn a lot too. For instance, you can skip the "I know how to model" step by simply reading excellent buyside reasearch reports--it's fine if analysts know how to model and you know how to interpret it. You can learn what experts think the drivers of an industry are (not just what you came up with from the 10-K--anyone that's done securities work understanda a 10-K/S-1 is a marketing document as much as it is a compliance doc, for instance). Godspeed.

[soft blue]

You seem pretty dead set on doing a CFA...

No, not at all. I'm just interested in getting the business skills that lawyers usually lack; the CFA was recommended to me as a good thing to take to get part of that education. Any advice on what would be a better use of my time?

I feel like you're not listening. If your goal is to "think like a businessperson" then understanding modeling doesn't really get you there. It's one part of a complex equation that's weighted differently depending on what stage, industry and geography you're in. Business is highly interdisciplinary. It involves finance, sure, but it also involves understanding macro trends, cost accounting, organizational behavior, negotiation, sales, marketing, data analysis etc. That's why I recommended you read all the things I did above--you learn a lot from the WSJ and Fortune and Businessweek too. Understanding that cash is the plug is great and all, but just by being a scholar of "business" (not merely finance) you can learn a lot too. For instance, you can skip the "I know how to model" step by simply reading excellent buyside reasearch reports--it's fine if analysts know how to model and you know how to interpret it. You can learn what experts think the drivers of an industry are (not just what you came up with from the 10-K--anyone that's done securities work understanda a 10-K/S-1 is a marketing document as much as it is a compliance doc, for instance). Godspeed.

Right, yeah, I read the Journal and Businessweek, along with the FT. I'm not trying to miss the other stuff. The resources you listed are definitely super helpful; appreciate the advice.

[dabigchina]

You seem pretty dead set on doing a CFA...

No, not at all. I'm just interested in getting the business skills that lawyers usually lack; the CFA was recommended to me as a good thing to take to get part of that education. Any advice on what would be a better use of my time?

I feel like you're not listening. If your goal is to "think like a businessperson" then understanding modeling doesn't really get you there. It's one part of a complex equation that's weighted differently depending on what stage, industry and geography you're in. Business is highly interdisciplinary. It involves finance, sure, but it also involves understanding macro trends, cost accounting, organizational behavior, negotiation, sales, marketing, data analysis etc. That's why I recommended you read all the things I did above--you learn a lot from the WSJ and Fortune and Businessweek too. Understanding that cash is the plug is great and all, but just by being a scholar of "business" (not merely finance) you can learn a lot too. For instance, you can skip the "I know how to model" step by simply reading excellent buyside reasearch reports--it's fine if analysts know how to model and you know how to interpret it. You can learn what experts think the drivers of an industry are (not just what you came up with from the 10-K--anyone that's done securities work understanda a 10-K/S-1 is a marketing document as much as it is a compliance doc, for instance). Godspeed.

Right, yeah, I read the Journal and Businessweek, along with the FT. I'm not trying to miss the other stuff. The resources you listed are definitely super helpful; appreciate the advice.

I would look into taking something like "accounting for lawyers" and putting in a good faith effort. It will be "free" (in that you are taking credits anyway) and it will give you enough insight into how accounting works to get by as a junior lawyer.

[Anonymous User]

A CFA is not a generic "business credential." It's pretty specifically finance-oriented, and even more specific than that, toward asset management.

As you mentioned a CFA is more toward asset management, I'm curious about this: if I want to practice in the area of Trusts & Estate Planning / Private Client Service, is CFA a big plus on my resume? Thanks.