Excelling in finance requires meticulous planning, assured decision-making, and a little risk-taking. Coincidentally, these qualities are also helpful when choosing the proper graduate-level business education.
If you're interested in becoming a financial professional, you may be considering one of two advanced credentials: the Chartered Financial Analyst (CFA) and the Master of Business Administration (MBA). Each delivers unique benefits and drawbacks. A CFA can result in a higher average starting salary, while an MBA can lead to higher career earning potential. MBA programs are more competitive but offer more support.
Ultimately, both are excellent credentials; their value depends on your career objectives. A CFA typically holds hedge fund and analyst positions while MBA degrees offer a wider variety of prospects, according to Business Insider.
This article helps answer the question CFA vs. MBA: which is the right credential for you? It covers:
CFA is a title given to investors who pass three rigorous examinations; this credential is one of the most highly regarded in the financial world. The CFA Institute reports that more than 170,000 people across 165 countries have earned one.
The CFA is narrow in scope. Credential-holders work in asset management, often as investment management executives. The CFA designates professionals as qualified investors and provides them access to a global network of fellows and continuing education opportunities, including ethical and professional training.
Entry and mid-level financial professionals, including investment analysts and career changers, are the target audience for a CFA, according to the CFA Institute. To apply, professionals must accrue at least 4,000 hours (consecutive across three years) in combined graduate education and work experience. The CFA program is also open to recent bachelor's degree-graduates and undergraduate students in their senior year. However, these applicants need "four years of investment-related work experience" to complete the program and become a CFA Institute member.
According to 2019 CFA Institute data, 70 percent of candidates work full or part-time; 23 percent are students (the remaining candidates are unemployed or self-employed). Most candidates (13 percent) are research, investment, or quantitative analysts, followed by corporate financial analysts (9 percent), accountants or auditors (8 percent), and consultants (7 percent).
Unlike a traditional graduate degree, CFA candidates do not typically learn in a classroom-based environment. Instead, many choose to self-study using CFA Institute resources. The program has three levels and corresponding exams of increasing difficulty. All exams include questions on ethics and professionalism. Each requires over 300 hours of study on average. It typically takes four years to earn this credential.
Registering for the program through the CFA Institute website grants you access to the entire curriculum. Essential topics include quantitative methods, economics, financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, portfolio management, and wealth planning. The CFA Institute offers study materials that include practice examinations and personalized study plans. Recent data suggests most students (75 percent) prepare using the CFA program curriculum, but many (61 percent) also use non-CFA-approved materials.
Classroom options are als o available. At Fordham University, qualifying students can pursue undergraduate coursework that prepares them for the first examination. Exam prep companies and tutoring agencies offer resources for working professionals.
A CFA Institute fact sheet states that applicants must pass each examination, earn the necessary four years of experience, supply letters of recommendation (two or three), and apply for organizational membership to earn a CFA. This process can easily take longer than four years because examinations are held irregularly. The level i examination is offered quarterly, but level ii and level iii are available only twice per year.
Earning a CFA designation in three years is possible if you start the process with quality work experience. Those who begin pursuing the certification as undergraduates can finish tests early but still need four years of work experience to earn the charter.
The CFA Institute fact sheet identifies top job titles for CFA-holders as: portfolio manager, research analyst, chief level executive, financial consultant, and risk manager. Professionals work in sectors like equities, fixed income, private equity, derivatives, and real estate.
The Master of Business Administration (MBA) is not only the most popular business graduate degree; it's the most popular graduate degree in any discipline. The MBA prepares graduates for high-level management and leadership positions in business and business-adjacent enterprises (such as government, education, and religion).
MBA students can study a wide array of subjects; specialization options at top MBA programs include economics, management, marketing, and (of course) finance. A finance-focused MBA also offers the kind of general business leadership education other degree programs, including a master of finance, do not feature as prominently.
MBA programs differ by business school but typically include both core business coursework and specialty-specific classes. Students learn economics, marketing, business management, communications, ethics, and finance—even if they're not pursuing a finance specialization. Those in a finance concentration study topics like retirement planning, tax planning, estate management, wealth management, risk management, and portfolio management.
Schools can set unique requirements but commonly ask students to maintain a minimum GPA and complete an internship (or relevant work experience). At a basic level, programs only graduate students once they have completed core and elective coursework.
The time commitment for an MBA is typically two years of full-time study; part-time students may take longer. Accelerated programs, including accelerated Executive MBAs (EMBA)—designed for highly experienced students—typically take less time.
Finance MBA holders have many job prospects, especially in sectors like investment banking and private equity, including hedge funds. Common finance positions include finance manager, branch manager, financial advisor, strategist, and consultant.
The key phrase here is "right for you" because both credentials are well-regarded in the industry.
One difference is standardization; the CFA follows a universal curriculum, whereas each MBA program is unique. An employer may judge an MBA graduate by their school's ranking (or perceived ranking). The CFA has a more clearly defined value. That said, an MBA from a top business school like The Wharton School has gravitas everywhere.
Additionally, MBA programs have a more challenging admissions process; it can be grueling, especially at top schools with the highest return on investment. MBA applicants need excellent undergraduate grades, personal essays, and letters of recommendation. Earning a CFA is more about how willing you are to put your head down and study.
The CFA credential is also much less expensive than an MBA; it costs between $3,050 and $3,950. Prestigious MBA programs typically run between $80,000 and $125,000, though scholarships and employer funding may cover part or all of the tuition.
While more cost-effective and easier to get into, the CFA requires immense self-motivation. MBA students receive the support of professors, classmates, and university resources. One Bloomberg article says CFA candidates often do not retake levels they fail.
According to Business Insider, CFA holders earned a median income of $132,000 after ten years, while MBAs made $105,000 in the same timeframe. But, the ROI at top-tier MBA programs easily surpassed both those numbers. Poets & Quants says MBA programs with the best ROI include University of Pennsylvania ($169,200), Northwestern University ($168,000), Dartmouth College ($162,000), and Columbia University ($160,800). These income figures represent the annual earnings net of debt payment for MBA graduates after just two years. They are higher than the ten-year averages for CFA charterholders.
Perhaps the most significant difference between these credentials is the CFA prepares professionals to invest and manage money, whereas the MBA relies on a broad business curriculum. Hands-on investors should consider a CFA; aspiring managers should examine an MBA.
Deciding between a CFA and MBA comes down to career goals, money, and learning style. Fortunately, both credentials can lead to excellent finance careers. Those who honestly cannot decide between these credentials may choose to earn both, further improving their career prospects.
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