Getting a Financial Modelling Qualification
6 July | by Danielle Stein Fairhurst, Mohamed Mostafa and Lance Rubin
Introduction
If you’re planning to pursue a career in financial modelling, there is no shortage of free resources to help you improve your financial modelling skills.
There are also hundreds of financial modelling training courses to choose from; most will give you a certificate of attendance, and an opportunity to claim Continuing Professional Development (CPD) points from your professional body.
Some will even give you a Certificate of Completion (note the capital C!)
Before you decide on a training course, you should consider;
What skills will I learn?
Will you learn how to build a financial model, or will you simply be memorising content by rote in order to pass an exam?
You need to consider what practical modelling skills you will learn that can be actually applied to your work.
Will the course include advancements in the latest technology or not?
How do I best learn?
Most training provides a combination of reading, watching videos and practical model building.
What mode of delivery and assessment suits me best?
Consider whether the training and exams can be taken online or must be attended face-to-face, and if this mode of learning and assessment will fit your lifestyle.
Training will certainly help you gain the skills you need to do your job, however, if you are serious about your career as a financial modeller, you should consider becoming formally certified with a financial modelling qualification.
A few different certifications have established themselves in recent years and the two which seem to be most popular with aspiring modellers are:
Level 1: Advanced Financial Modeler (AFM), Level 2: Chartered Financial Modeler (CFM) and Level 3: Master Financial Modeler (MFM) certifications from the Financial Modeling Institute (FMI)
Financial Modelling and Valuation Analyst certification (FMVA) from Corporate Finance Institute (CFI).
Project Finance Institute (PFI) has only recently launched so take a look at it, but it is primarily focused on project finance related financial modelling.
In this article, Danielle Stein Fairhurst (AFM FMI) and Mohamed Mostafa (CMA, FMVA) will give their perspectives on their qualification of choice and make some comparisons between the FMI and CFI.
What’s your involvement with the qualification?
Danielle: I’m a financial modelling consultant and trainer, an Approved Training Provider, and also sit on the Advisory Council for FMI.
Mohamed: I am a certified FMVA, FP&A manager in a consulting firm which allows me to build widely diverse models as part of my job. Refer to my Eloquens channel for some examples.
How long does it take to prepare and gain the qualification?
Danielle: For a person fairly new to financial modelling, the guidelines are that you should expect to spend around 100 hours of preparation to prepare for Level 1.
Mohamed: Experts can finish it in one month and for someone who is only starting to make their way in modelling, it would take around three months with studying two hours per day.
How do you prepare to sit the exam?
Danielle: You can prepare on your own with the resources provided by FMI, or take a training course. FMI will suit independent learners, as the exam simply tests the modellers ability to build a financial model, nothing more, nothing less. If you prefer to be given all the preparation materials and then be tested on those, then CFI may be a better option for you.
Mohamed: All training is provided by CFI and testing is done at each stage fully online
How and where do you sit the exam?
Danielle: The exam is entirely practical with no multiple choice and candidates are expected to build a full financial model within the four-hour timeframe. FMI exams are run only twice a year and historically have only ever been available face-to-face to ensure a controlled, proctored environment. Going forward, if the FMI moves to virtual exam sittings due to COVID, the exams will no doubt still be highly controlled and proctored to ensure that the quality and standards are maintained around the world.
Mohamed: The FMVA exams and assessments are all online and are a combination of multiple choice and practical exercises. After each course you will take the exam and get your certificate for each individual course online.
How much does it cost to get the qualification?
Danielle: Each of the levels cost around US$600 (cheaper for the early bird rates) plus the cost of training, and travel if you need to physically go to an exam centre.
Mohamed: At the time of writing, it’s US$497 for the self-study option or US$847 for the full immersion, so it’s a good low-cost option.
How well is each qualification regarded in the industry?
Danielle: FMI has purposely distanced itself from the training providers, and because the FMI qualification is a face-to-face exam, it’s very well regarded in my opinion. If you’re going to spend the time, money and effort to get a qualification, I think it’s very important the qualification be well-regarded in the industry and actually mean something on your CV, so advancing your career.
Mohamed: Despite the fact that it is an online video and the exam is conducted over the internet, the FMVA is a great value-add for modellers. Its popularity has spread worldwide especially in Middle East and it has become a very well-known qualification in Egypt. I think it has shaped my way of thinking in a professional and easy way.
What is the limitation for each qualification from your point of view?
Danielle: Building a full set of financial statements is certainly a useful skill to have, but in my work, it’s not something that you need to do every day. The formulas and technical skills you need are not actually that advanced, in fact a lot of the knowledge required is accounting, such as dealing with deferred tax for example. It’s all part and parcel of modelling though – a modeller does need to have the accounting & financial background as well as the technical skills.
Mohamed: In my opinion, the exam should be separated from the course and maybe it needs to put the candidate into real exam mode by testing their skills by build a full financial model. Having said that, I understand that from August 2020 FMVA is introducing a stand-alone final exam, with only one attempt allowed, which will reduce the pass rate, and make the qualification more rigorous. At the moment, the number of attempts is unlimited which means that candidates can keep taking the quizzes until they pass.
Also, they could add some extra advanced techniques to the course such as Monte Carlo simulation to advance the candidates skills.
How did you benefit from each qualification?
Danielle: Undertaking the FMI qualification really puts you to the test. In the real world, an aspiring modeller can get through an interview if they know the right thing to say, but in the exam there’s nowhere to hide – you cannot look things up on the internet, you can’t ask a colleague. Because it’s so tough, for those few who actually pass the exam, there can be absolutely no question that you know what you’re doing as a financial modeller.
Even those who sit the exam and don’t pass say that they learn a huge amount through the process of learning how to build a fully working and dynamic financial model in a short period of time.
Mohamed: FMVA reshaped the way I build financial models. It guides me how to build an easy, clear, professional and understandable model by providing the guideline for the perfect model. In addition, it teaches you many ways to conduct the same calculations. Beside it present a good information about valuation and finance overall.
It starts completely from scratch on topics for example such as; what is a financial statement? What are the connections between financial statements elements? How to build indirect cash flow? Etc. So the newly person in finance field can understand the whole picture. There is also a diversity in specialised models like real-estate project finance, e-commerce and mining models.
Conclusion
Each of these qualification are certainly valuable and well-regarded by employers, but each offers something different to the candidate, and you really need to take into account the style of learning that suits you best, and which will give you the most benefit for the time invested.
If you are going to take financial modelling seriously in your career or perhaps as part of an extension to services that you provide or wanting to provide as a new business then you should absolutely invest in some form of formal training.
Whether you take that next step and get certified through either the CFI or FMI is really a personal preference, but it will stand you in good stead in the future.
Both accreditations will provide value to those that are looking to improve their financial modelling skills and provide you with additional confidence in tackling those difficult what-if questions that you get asked that is often best solved with a financial model.
During and post this pandemic the demand for navigating business uncertainty focused on cash flow is only going to increase and therefore getting yourself up the curve in this sector will pay off in the long term.
Other Resources
For another useful comparison between CFI and FMI, see this three-part blog series written by Andrew Grigolyunovich, who has recently completed both qualifications.
The FMI has provided a checklist to help choose a financial modelling qualification
The CFI website for more information
The recently launched Project Finance Institute is developing a project finance focused training community and offering.
If you want to find out more and follow the rest of the article series be sure to download the Financial Modelling App
If you want to find more information on financial modelling and content visit the Model Citizn website. We have some exciting new announcements due out soon so stay in touch.
