Many of those interested in a career in the financial sector wonder if they should choose a Masters in Finance or the Chartered Financial Analyst (CFA) programme. Is CFA equivalent to Masters or is it rather a credential that complements it? Which one is more worthwhile for a career boost in the field of finance?
To answer these questions, we must first focus on what the CFA is, how you can earn the designation and how it can benefit your career.
Who is the CFA for?
The credential is designed for portfolio and wealth managers, investment and research analysts, professionals involved in the investment decision-making process, and finance students who want to work in the investment management profession.
The CFA designation is widely considered to be the key certification for investment professionals, especially in the areas of research and portfolio management.
The CFA programme is a self-study programme divided into three levels of exams. The charter gives a strong understanding of advanced investment analysis and real-world portfolio management skills.
Here are the requirements of the CFA Institute:
- Hold a Bachelor’s (or equivalent) degree (or be in the final year of a Bachelor’s degree programme)
- Pass the three levels of the CFA exam
- Gain 48 months of professional work experience
- Join the CFA Institute.
The test levels
The exam for level I takes place in June and December, while the level II and III tests are conducted only in June. Candidates must pass the three levels in succession. Pass rates range roughly between 40% and 60%. About 43% of test takers passed the level I exam in June 2018 and about 56% managed to pass the level III test.
Earning a CFA designation is a time-consuming endeavour. According to the CFA Institute, each level requires at least 300 hours of preparation. It takes a minimum of three years to complete the three exams, assuming the four-year work experience requirement has already been met.
To become a CFA, you need to have acquired at least 48 months of “acceptable” professional experience. This can be accrued before, during or after participation in the CFA programme. To be acceptable, at least half your experience needs to involve direct participation in investment decision-making or producing a product that impacts this process.
What you stand to gain
The first and most obvious benefit associated with the CFA certification is the expertise that you will acquire in the field of investment management and beyond. You will learn a lot and your CV will look more impressive as a result. Earning the charter takes a lot of effort and dedication and investment professionals know it. In addition, being a CFA may lead to an increase in your remuneration. Yet you must remember that the designation alone is unlikely to result in a financial benefit. There are many other factors that play a role in your financial wellbeing such as dedication, hard work, and even luck.
In terms of career paths, you are also not limited to investment management. According to Investopedia, there are a number of professions outside investment management that are worth considering such as buy-side trader, sell-side analyst, business school professor, economist or a financial advisor.
It should be clear by now that earning the CFA designation is not easy and does not happen fast. The most obvious challenge is the time it takes to complete the programme. You need to invest at least 300 hours per year over three years. And even after all the effort, there is no guarantee that you will earn the charter. Another drawback is that you need to study alone, which requires a great deal of discipline and structure. However, there are networking events organised by CFA societies that allow you to meet fellow charter holders.
Masters or CFA or both?
The choice between the CFA or a Master’s in Finance is an easy one provided you know what you want to achieve. Both prepare professionals for work in the financial industry, but there are significant differences between them. The Masters programme has a more general approach, preparing graduates for careers in corporate finance, capital markets, and asset management. The CFA programme, on the other hand, is more suited to professionals who need more specialised knowledge and expertise in the field of investment.
Since the Masters in Finance is not a substitute for the CFA, some professionals prefer to obtain both designations. Kasper Meisner Nielsen, associate professor of finance teaching in the Hong Kong University of Science and Technology-NYU Stern Masters in Global Finance (MSGF) programme, told the Financial Times that investment professionals, even experienced ones, are drawn to the Masters in Finance, either as a replacement for or as a complement to the CFA. “The CFA is a good certification to have on your résumé if you’re going to have a career in this industry. But it does not necessarily imply you understand all the aspects of finance”, Nielsen was quoted as saying.
Read: Is a Masters Worth It?
"If you're trying to land a first finance job, a top brand Masters in Finance is going to be much better than a CFA pass. A CFA is only useful once you're already in the game," one analyst told eFinancialCareers.
The CFA designation can be of great use to you if you are considering a career in investment management and have strong experience as a decision-maker in investment. However, if you are just starting your career and want to acquire broader financial expertise, it will be better to opt for a Masters in Finance. Whatever designation you choose, work hard to obtain it and don’t be discouraged by the challenges.