What financial advisors should know about CAIA charter

As alternative investments like private equity and private credit continue to gain ground in wealth management, understanding the products can give financial advisors a business edge. 

One way to build that knowledge base: earning the chartered alternative investment analyst (CAIA) certification. The credential, offered by the 23-year-old nonprofit CAIA Association, aims to provide in-depth training across the alts sphere, spanning private debt, private equity, real assets and more. 

“These are different asset classes that have historically been reserved for the large institutions, the endowments, the pensions, sovereign wealth funds. A lot of these different products and strategies are now moving into the wealth channel,” said Aaron Filbeck, managing director of the CAIA Association’s global content strategy. “For advisors who go through this program, it’s really helpful to just better understand how these markets work, just given the pretty fast-evolving part of this industry, moving down into the wealth management channel.” 

Credibility with clients and colleagues

The certification can make a difference for advisors. Tom Balcom, founder of 1650 Wealth Management in Lighthouse Point, Florida, was an early adopter. His CAIA certificate, which hangs on the wall of his office, is No. 319, dating back to 2005, when the mark itself was just a few years old. Today, there are more than 14,000 CAIA holders around the world. 

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Two decades ago, Balcom saw the charter as a way to rise above the pack with expertise beyond stocks and bonds.

“Everybody has the knowledge about traditional investments,” he said. The CAIA mark, with its focus on nontraditional investments, “helps to differentiate yourself from other financial advisors.”

Balcom incorporates various private investments into portfolios, including market-linked notes, private real estate and private credit, and he is looking at private equity. 

Over the years, he has come to realize that for the most part his clients “don’t really care” about the fact that he is a CAIA charterholder, but his alts expertise has nevertheless helped him to build trust with them. The mark has proved useful in other areas, too, including establishing credibility with industry professionals like wholesalers. 

“Folks will see the CAIA [mark], so if they’re calling with private equity or private credit, they know, ‘Hey, this guy understands what we’re pitching,'” Balcom said. “It’s definitely useful for that reason.”

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Why the CAIA certification is unique

With the trend toward opening alternatives to more investors, obtaining a certification that shows clients deep expertise can be a useful differentiator. 

“This is the designation for private markets,” said Filbeck. “Being able to attest that you’ve gone through the rigorous educational training to be able to understand how they fit — I think that’s a huge marketing benefit when talking to clients.”

Who should get the CAIA mark

Financial advisors and other professionals who work with portfolio management and client investments, or anyone in an analyst capacity who wants a strong understanding of how alternatives work, may want to consider the CAIA. Most CAIA charter holders come from the asset manager and institutional allocator channels, but representation from the wealth channel is growing, Filbeck said. 

“By the time you walk through this program, you’ll have a very solid, deep understanding of how these different asset classes work,” said Filbeck, who earned the designation, his first of many, while working in an investment role at an RIA.

Cameron Norris, a partner at brokerage Golsan Scruggs, earned the CAIA mark last November, and it’s already helped him in his career, he said. Many of his firm’s clients are alternative investment fund managers or advisors who carry out due diligence and assess alts for potential inclusion in portfolio allocations. 

“The depth of knowledge I have gained now allows me to ask more relevant questions and engage in more productive discussions,” Norris said. “I can now delve into the core issues driving risk and risk mitigation within alternative investment strategies. Ultimately, the more I understand my clients’ needs, the better I can assist in advocating for effective implementation of their insurance programs with carriers.”

How to get the CAIA

Aspiring certificants must pass a two-level exam (chartered financial analysts may be able to skip the first level). It’s a self-study program, and registration for both exam levels is open twice a year. 

It’s possible to complete the full certification in a calendar year, Filbeck said, but most candidates take between 12 and 18 months, with 200 to 250 hours of study needed to pass each level. Level one focuses on all the major asset classes and tools available in the alts space. 

Level two is focused on implementation: “We actually put you in the cockpit of the asset allocator, someone who is looking across traditional markets, private markets, more complex markets, and trying to figure out, ‘How do I put all of this stuff together into a diversified portfolio?'” he said.

Including enrollment and registration fees, the cost for the level one exam ranges from $1,395 to $1,795 and from $995 to $1,795 for level two. (Candidates who already belong to partner organizations may be eligible for discounted CAIA exam fees.) The retake fee for both levels is $795. 

How to keep the CAIA

To use the CAIA mark, charterholders must keep their membership in the CAIA Association up to date. Membership is maintained by annual dues, currently at $350 — or $650 for two years. Those who allow their membership to lapse lose the right to advertise the mark. 

To remain in good standing, charterholders must also sign an ethics statement every year, and part of that attestation is that they are staying current on industry trends. The association has no formally required continuing education program, but it regularly publishes on relevant news and topics so that members can stay informed. 

Perks of CAIA certification

The CAIA Association, which has 35 chapters worldwide, holds networking and educational events for its community members and publishes a quarterly journal. It has approximately 80 partnerships with academic, community and professional associations, through which some opportunities may be available for candidates or members. 

Along with the CAIA letters, charterholders can use a digital badge to promote their certification.