Why Become a Certified Financial Modeling and Valuation Analyst?

Why Become a Certified Financial Modeling and Valuation Analyst?

A CFMVA certification fills in a skills gap common with many financial analysts, especially those relatively new to the field. While these analysts have a degree, for practical purposes they often need more training before many employers will consider them. The FMVA certification shows top employers that the candidate has the skills necessary for the position to which they apply. It opens up many more career opportunities.

Gaining certification via the FMVA is also convenient for the applicant. Rather than work at lower-level jobs and gain training that way, or taking more classes to gain an advanced degree – and rack up more student debt - FMVA certification allows you to obtain the knowledge you need in a carefully structured format.

The Corporate Finance Institute (CFI) sets all course requirements for the FMVA. These courses are all approved for continuing professional education credits for CPA charter holders, making these certifications even more valuable for accountants.

What Is a Financial Modeling and Valuation Analyst?

A financial modeling and valuation analyst creates a spreadsheet, or model, of a company's expenses and earnings used for calculating how a future decision or happening may impact the organization. This modeling and valuation is used to analyze the way the stock price is affected by these decisions or events. It can help those in charge of a company’s decisions (the board or CEO), make those decisions with vital information on the future value of company stock, products, and more based on the current makeup of the market.

What Does a Financial Modeling & Valuation Analyst Do?

What Does a Financial Modeling & Valuation Analyst Do?

Financial modeling and valuation analysts collect the necessary accounting information for evaluation of every aspect of what is needed to make good financial decisions. They do this by examining a company’s prior financial records so that they may determine the likely outcomes of future business ventures.

Other duties include:

  • Performing and presenting valuation analysis for various projects
  • Working to develop presentations and proposals for clients
  • Incorporation of industry changes in the design, improvement, and implementation of valuation models
  • Data gathering through researching competitors, consulting with clients, and visiting manufacturing and other sites to gain firsthand knowledge

Most FVMA analysts work in offices. Many will work in the financial districts of large and medium-sized cities. Virtually all positions are full-time and the work is demanding. Many analysts work in excess of 40 hours per week.

Requirements to Become a Certified Financial Modeling & Valuation Analyst

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Degree Necessary

A bachelor’s degree is necessary to take the Certified FMVA exam. Suitable majors include finance, accounting, economics, statistics, or mathematics. Many companies want candidates with up to three years’ of business experience. An FMVA certification can boost the careers of those candidates who lack the relevant business experience.

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Subject Focus

All courses are available online and candidates can complete coursework on their own time. There is only one level to the Certified FMVA exam. The courses are a combination of theory and practice.

However, not all subjects have equal value for exam purposes. The weight of each subject relevant to the exam is noted below.

  • Accounting : The weight of this subject is 5%. Courses provides a guide for the accounting process including balance sheet layout, income and cash flow statements, and depreciation.
  • Budgeting and Forecasting : The weight of this subject is 8%. Participants learn to develop budgets and forecast results via quantitative and qualitative methods. By using variance analysis, the student understands performance tracking. They gain the knowledge to use tools to build a strong budgeting process within their company or organization.
  • Business Valuation : The weight of this subject is 10%. Students learn to evaluate companies using discounted cash flow, comparable company analysis, precedent transactions, and other techniques. Students become proficient in various evaluation methods and determine the pros and cons of each. By using multiple methods, they can provide a valuation range.
  • Excel Skills : The weight of this subject is 17%. Students learn to build financial models with Excel. They also discover how to use Excel tools for the budgeting process. Students will build Excel dashboards and learn techniques for advanced data visualization.
  • Financial Modeling : This is the most heavily weighted part of the exam, at 25%. Students must create financial models on their own. This might include a Mergers and Acquisition model, a three statement model, and a discounted cash flow model.
  • Finance Theory : This is the second most heavily weighted section, at 23%. Students use various financial analysis techniques such as benchmarking and ratios and learn their practical applications. Upon successful completion, the student can perform a thorough financial analysis of any organization with access to its financial statements.
  • Presentations : The weight of this subject is 8%. Students learn to develop charts and graphs and make professional presentations.
  • Strategy : The weighting of this subject is 4%. Students study corporate and functional strategies, along with internal and external analysis.
3

Exams

After enrolling in the Financial Modeling & Valuation Analyst (FMVA)® program, students must successfully complete nine required courses and three electives. A minimum score of 80% is needed to pass each course. As students complete each course successfully, they receive an automatic completion certificate.

The program’s video-based chapters require completion, as do all course exercise and quizzes. They then take the final exam. It is possible to complete the FMVA program within 200 hours. Most students complete the coursework within six months.

The exam is accessed online via a dashboard once the student has completed and passed all courses. There is no need for scheduling and candidates can take the exam at their convenience. Students have three hours for completion. While material from core courses is included, the 50 multiple choice question structure does not include material from elective studies. Questions appear from a randomized question bank, so no two exams are identical. The questions include Excel modeling case studies.

How is the Certified FMVA Exam Scored?

How is the Certified FMVA Exam Scored?

A new certified FMVA exam is available as of August 31, 2020. Anyone registering prior to that date who does not complete all requirements by August 31 will take the new exam.

Candidates must obtain a score of 80 or above to pass the exam. Results are available right after the exam is completed and scoring is done by computer. If a student fails to pass, they have the option of paying a $50 fee and retaking the test at least one month later. The month-long gap is necessary so that students have ample time for study and preparation.

Study Resources and Preparation for the Certified FMVA Exam

The study recommendations given by FMVA organizers include studying between one to three hours for every optional course, two to eight hours for selective courses, and two to five hours for every core course.

You should certainly consider taking the FMVA practice exam before tackling the real thing. You can take as many practice exams as you want before taking the actual exam

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Difficulty

As per CFI, the FMVA® final exam includes “basic knowledge questions, financial ratio calculations, and Excel modeling case studies.” The difficulty level is akin to the qualified exams given at the completion of each course. If you were able to pass the individual courses relatively easily, you should not experience an issue with the certified FVMA exam.

Keep in mind that this is the equivalent of an open book test, as this is how financial modeling and valuation is done in the real world. The pass rate for the certified FVMA exam is fairly high at 70%. This attests to the relative difficulty of the test. Fewer than one-third of those taking the exam do not pass it on their first attempt.

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Cost

The cost of the certified FVMA exam is currently $497, making it a very affordable option. It’s far less expensive than other financial certifications, such as financial risk management or financial planning. As noted, those who do not pass the exam on their first attempt may try so again with just an extra $50 fee.

Study materials for the exam are available from CFI, including a self-study bundle allowing you to build dynamic models from scratch across various industries. The self-study format features the methods used by top Wall Street professionals. Altogether, the self-study bundle offers more than 100 hours of Wall Street training material for $497.

Career & Salary

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Where Might You Work?

Those earning FVMA certification may work for some of the top companies in the world. Examples include Amazon, Microsoft, Ferrari, Starbucks, and major banks and corporate finance departments. They can find jobs in investment banking, commercial banking, venture capital, private equity, corporate development, real estate development, running a startup, or mezzanine finance. The latter is a form of lending that is riskier than traditional lending but not as risky as regular equity investing. Valuation models for such loans are crucial.

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Career Outlook

The employment outlook for financial analysts and those in related fields is projected to grow an average of 6% by 2028, on a par with average growth for all occupations. Keep in mind these estimates were made without taking the economic effects of the pandemic into account. However, financial analysis has always been a competitive field and there is no reason to think that will change.

In 2018, there were an estimated 329,000 people in the US employed in this field. That number is expected to grow by 20,300 by 2028. The BLS predicts that new and innovative financial products, as well as “the need for in-depth knowledge of geographic regions” will lead to strong employment growth in this field.

3

Jobs

The financial and corporate jobs available for someone earning FMVA certification include:

  • Financial Analyst : The median salary for a financial analyst is $62,000, but senior financial analysts may earn $84,000 or more.
  • Budget Analysts : The median budget analyst salary is $76,000. These employees organize finances for both private and public organizations.
  • Financial Managers : The median salary for this position is $128,000. Financial managers create financial reports and make investment decisions. They are tasked with developing short and long-term strategies and to meet their organization’s financial goals.

According to CFI, the average salary of those completing FVMA certification is $121,000.

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