Is the CFA right for you?

It’s important to know the difference between an MBA and a CFA, and how each could impact your future finance career options...

Boosting credentials is one way to expand your skills and improve your chances of landing your dream financial services job. But should you go the traditional MBA route or the newer CFA route?

It’s important to know the difference between an MBA and a CFA, and how each could impact your future finance career options. An MBA is an excellent way for a finance professional to take general business skills to the next level - a great credential which can be applied to multiple fields, should you choose to change course in the future.

The Chartered Financial Analyst (CFA) designation, on the other hand, is a very specific investment and finance credential given by the nonprofit CFA Institute. The CFA program focuses on investment skills like investment analysis, portfolio management, and asset allocation.

According to the CFA Institute, “The CFA® Program bridges industry practice, investment theory, and ethical and professional standards to provide investment analysis and portfolio management skills.”  

The CFA track is more specific, streamlined, and particular than the MBA track, and it is a self-led program. While holding a CFA carries a certain level of cachet in the world of finance, it’s not right for every professional.

The steps of the CFA program

The CFA is a notoriously difficult program which involves a rigorous series of steps that train students in the topics of ethics, quantitative methods, economics, corporate finance, financial reporting and analysis, security analysis, and portfolio management. The steps include:

  1. A three-level exam (three exams of six hours each)
  2. Four years of “professional work experience” in areas like trading, corporate finance, and economics
  3. Membership in the CFA Institute and affiliation with your local chapter
  4. Agreement to abide by a strict code of ethics and standards of conduct

The exam process is an arduous task. The exams cover the CBOK (“candidate body of knowledge”) and must be passed in strict order. Forty to 65 percent of candidates pass each exam level - and only 30 percent of initial Level 1 candidates go on to pass Level 3. The CFA Institute recommends that candidates spend about 250 hours preparing for each level. The cumulative time investment to attain the average CFA is similar to that of an MBA, especially when the requisite four years of work experience is tacked on.

Pros and cons of the CFA

In addition to gaining a valuable credential for your resume and rich knowledge of your field, completing the CFA program tells future employers that you possess a strong level of commitment and dedication to your profession. Achieving the CFA designation shows future employers that you are intrinsically motivated to advance your skills. Pursuing a CFA can lead to better jobs and higher salaries. Particularly if you are entering a field like investment management or seeking to become an economist or financial advisor or planner, the CFA can be a definite boost.

However, the CFA is a major time investment. You should be very confident that you want to achieve the designation before you commit. It’s also expensive: there’s a one-time enrollment fee along with exam and registration fees, plus the cost of books and study programs, and the income you’re likely to lose while pursuing the credential. All in, you will spend anywhere from $2,500 to $8,500 and roughly two to four to years complete the CFA program.

Of course, MBAs are also expensive to attain and generally involve a few years of intensive schooling, at a high cost, without the ability to simultaneously bring in income. The CFA isn’t generally as expensive to attain as an MBA, and is very often pursued while working full time. But it is extremely competitive and challenging to complete.

CFA versus MBA

So how do you know whether an MBA or CFA is the right path for you? Well, the good news is that you don’t necessarily have to make a choice. More and more MBA programs - Cornell University’s, for example - now offer a CFA track within their MBA programs. This allows matriculated students to pursue both credentials simultaneously. In fact, in April 2006 the CFA Institute partnered with 41 graduate programs to provide curriculum combining some CFA material with MBA programs.

Bottom line: for many, the CFA credential is considered the gold standard, and its possession a definite advantage for investment professionals looking to advance their careers.  

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