MBA vs. CFA vs. FRM: Roles and Careers in Finance

Pursuing the right education to enter the right career path is instrumental for long-term success.

Often, students are misguided due to lack of authority and credible information.

People seeking a career in finance often find themselves confused between three courses:

#1. MBA: Master of Business Administration

#2. CFA: Chartered Financial Analyst

#3. FRM: Financial Risk Manager

(Wiki links for general study)

Each course has its benefits and is suitable to a certain finance career path. This article is designed to help people like you choose the best finance education option. We will discuss the three courses in detail.

#1. Master of Business Administration (MBA)

An internationally-recognized degree, MBA is designed to equip the learner with business and management skills.

The MBA degree works not only in the business sector but in the government, public sector and private business as well.

Pursuing MBA is about learning various core subjects as their applicability is expansive.

1x1.trans MBA vs. CFA vs. FRM: Roles and Careers in Finance

Role of MBA in Finance Industry

You can enter the finance industry with an MBA degree.

The degree gives financial and business skills to handle enterprises.

Highly valued internship opportunities equip the learner for the finance jobs.

The functional course teaches leadership, economics, statistics, accounting, strategy and marketing.

Those who specialize in Finance learn about stock market analysis, global economy, futures and options, financial instruments, financial foundation, market trading, market volatility, bankruptcy, risk management and corporate finance.

In short, an MBA-degree, with or without specialization in Finance gives opening in the finance industry.

Except for two segments – equity research and portfolio management – the MBA degree works with all financial sectors. Even if a person works in a non-financial sector, switching to the finance industry becomes easy with the MBA degree as recruiters value it highly.

Few Pros and Cons

They are:

PROS

  • Helps to gain “soft skills” useful in management
  • Develop better networking skills
  • Widely recognized even outside finance oeuvre
  • Access to consulting firms, banks and other financial or non-financial companies

CONS

  • Requires leaving full-time job for 2 years
  • Very expensive, leaving learners in debt

MBA Course Requirements

It is a typically 2-year full-time study program; however, in the last couple of years, a lot of institutions started offering part-time study options too. A few years of professional work experience before enrolling in an MBA program is the requirement of few business schools.

Applicants need to submit Graduate Record Examination (GRE) scores, Graduate Management Admission Test (GMAT) scores, reference letters, academic transcripts and statement of purpose during enrollment. Non-native English speakers need to submit IELTS or TOEFL scores additionally, to prove adequate English skills.

#2. Chartered Financial Analyst (CFA)

CFA is a specialized course offered by The CFA Institute to train graduates in specific finance fields. It is an advanced course pursued after graduation, enabling the learner to acquire niche financial knowledge.

Armed with CFA, one can work in portfolio management and equity research, two areas where the MBA degree does not help much.

Role of CFA in Finance Industry

Someone already working in the finance segment or looking to switch over to a specialized finance segment can opt for CFA charter. The CFA charter helps in areas like financial strategy, research analysis and asset management roles like private banking, financial advising, relationship management and portfolio management.

The CFA charter is globally recognized. In other words, it is transferable within the market. If you plan to move countries, the CFA charter will still be relevant! Check out this page detailing roles held by CFA charterholders globally. Once you clear the exam, you too become a part of this elite group.

Clearing CFA exam is tough, really tough.

The course structure is extensively intensive, meaning the candidate learn the finance segment thoroughly. Lastly, various research studies show that CFA charterholders are paid higher on an average.

Pros and Cons

They are:

PROS

  • Gaining specialized knowledge extremely useful in finance.
  • No need to leave full-time job to study CFA.
  • Necessary for equity research, portfolio management and certain hedge funds. All three options are high in demand; thus, a lot of career growth potential.

CONS

  • An intense exam system necessitating at least 1000 hours of study to clear all the three levels.
  • CFA has no value outside finance. People interested in private equity, bulge bracket investment bank or venture capital will find CFA to be of little help.
  • No access to recruiters or networking unless you have attended the exam and joined CFA society.

CFA Course Requirements

A highly valued and respected designation in finance, the CFA course can’t be taken lightly. Certain norms and conditions are attached. A Bachelor’s degree is the first step and four-years of professional experience in finance are mandatory.

The CFA exam is a three-step process: Level 1, Level 2 and Level 3.

The exams happen around the world on the first Saturday of June, except for Level 1 exam which also happens in December. Candidates have to pass all the levels sequentially and the medium of instruction is English.

The Level 1 exam tests professional and ethical standards with questions about investment tools, financial concepts and comprehension, and some questions require use of analytical skills too.

The Level 2 exam tests application of analytical concepts and standards in certain situations. As such, the questions are about assets valuing necessitating complex analytical skills.

The Level 3 exam tests applicability and compliance of standards in portfolio management. The questions synthesize learned concepts and checks applicability in wealth planning and portfolio management.

The first two levels have multiple choice questions and the last one is mostly essay-based. Each level is a 6-hour exam.

MBA vs. CFA

Choosing between MBA and CFA is a common dilemma. 300Hours.com has created an interesting explanatory image highlighting the benefits of CFA.

1x1.trans MBA vs. CFA vs. FRM: Roles and Careers in Finance

It is not necessary to choose between MBA and CFA. You can pursue both, anytime!

Think of MBA as an entry-level access giver with acceptance across all finance platforms and CFA as a specialization catering to certain specific segments like equity research.

Ultimately, the choice or a lack of one depends on your personal goals and ambitions.

#3. Financial Risk Manager (FRM)

The Global Association of Risk Professionals (GARP) offers the international professional certification called, Financial Risk Manager (FRM).

A person with FRM certification specializes in financial risk management in global and domestic scenarios.

The FRM certification program follows the four major strategic disciplines of risk management, which are credit risk, operational risk, investment management and market risk. 

1x1.trans MBA vs. CFA vs. FRM: Roles and Careers in Finance

Role of FRM in Finance Industry

The FRM certification targets a niche and in-demand segment, risk management.

It is internationally recognized where the job of the FRM professional is to manage market and non-market related financial risks. It gives knowledge about credit risk, investment risk, operational risk, market risk and quantitative analysis.

The FRM certified professional can work as financial risk consultant, advisor, risk manager, credit manager, asset and liability manager and risk control manager. The FRM gives credibility to the person and his/her skills to handle risk management situations.

The field of risk management is desirable and contains a lot of growth potential because firms and companies are focusing towards the development of stronger and effective risk measures.

Few Pros and Cons

They are:

PROS

  • Demonstrating high value skill set in a niche segment.
  • Ability to display risk management skills to employers.
  • Access to the elite group of risk management professionals around the world.
  • Better salary than other finance professionals.

CONS

  • 2-year mandatory work experience requirement.
  • Difficultly level higher than PRM and CFA exams.

FRM Course Requirements

A graduate degree and 2-years of work experience is the minimum requirement to attempt FRM certification exam.

The purpose of the FRM certification exam is to assess the ability of the candidate to measure and manage risks in a real-world scenario.

The exam happens twice a year, specifically on the third Saturday of November and May.

Each exam is of 4-hour duration and it consists of two parts. Paper 1 contains questions about the core concepts of risk management such as financial market and products, valuation and risk models, quantitative analysis and risk management foundations.

Part 2 contains questions about measurement, implementation and management of risk management principles in a practical fashion. Weight is given to market risk measurement and management, credit risk measurement and management, risk management and investment management, operational and integrated risk management and current issues in financial markets.

Endnote

All the three courses – MBA, CFA and FRM – offer three different career paths in the finance industry.

Be clear of why and in what position you want to join the finance industry, and your long-terms goals. Based on this vision, decide whether an MBA, FRM or CFA will fulfill your goals.

What Are the Different Types of Trading Jobs That a Financial Graduate Can Get?

1x1.trans What Are the Different Types of Trading Jobs That a Financial Graduate Can Get?

Many times youngsters, who are pursuing financial degrees, come to me asking what all different type of jobs or opportunities are available within trading.

They only are aware that trading means buying and selling financial instruments for a profit. But they are not sure as to exactly what they can expect as a trader.

I thought I would write a quick article which will help you guys clear this doubt.

Here I will explain the different types of trading jobs that a financial graduate can get. But first let’s understand what exactly trading is.

Believe me when I say that in today’s world, the job of a trader can be very demanding, taxing, and exciting all at the very same time but the emoluments could be absolutely fantastic for traders who are very successful.

Confused? Well let me try to explain it a bit more.

Let’s start with what exactly trading jobs are.

Trading jobs usually include the activity of buying and selling shares of listed companies, financial bonds issued by various organizations or government, exchange traded commodities, foreign exchange or similar other monetary instruments to either assist client requests or to take a proprietary position in an anticipation to gain from probable market activities.

You must have heard about buy side jobs and sell side jobs. Now what exactly are these? The buy side of the business is the side which buys financial instruments, while the sell side is the side which sells financial instruments.

To put it in a very easy way – just remember that the buy side buys, and the sell side sells! So the question is what is the buy side trader buying and what is the sell side trader selling?

The buy side of trading includes working with financial organizations such as commercial banks, mutual fund companies, hedge fund companies, pension fund companies and insurance companies which typically purchase huge quantum of financial instruments for the purpose of money management.

The prime aim of a buy side analyst is to invest in financial instruments which congregate with his customer’s expectations. Typically a buy side analysts’ research report is not published but it is used to assist the specific organization which created the report.

On the other hand, a sell side analyst is involved in selling research and counsel to his clients and investors. If you look at an equity research report that tells you to buy, sell, or hold the financial instrument –this report is typically written by a sell side analyst. The sell side of trading includes working with financial organizations such as investment banking, asset management companies and hedge fund companies.

So now that we know what exactly a trading job is, let’s try to figure out where these trading jobs are!

Where Do You Find a Trading Job?

You can get financial trading jobs with various companies including commercial banks,brokerage firms, investment banks, hedge funds, asset management firms, and similar financial organizations.

Traders at commercial banks and investment banks need to center upon providing liquidity for their customers and earning profits for their companies.

On the other hand, traders who work with asset management companies look out for the best price while buying or selling financial instruments for their customer’s portfolios. While the traders who work with hedge funds typically take proprietary positions to profit from likely changes in market activities.

OK. Now let’s go to the next step. Now that you know what exactly a trading job is, how do you get a trading job?

How Can You Get a Trading Job?

The first requisite to get a trading job is to graduate from a reputed school or university and take an internship at a commercial bank or a hedge fund to learn the nuances of the trade.Most traders typically have a graduate degree, while now days many traders have advanced financial degrees like CFA, CPA and MBA.

Due to the growing use of advanced mathematics and statistics in the financial markets, even post graduates and doctorates from various mathematical and statistical fields are also common in trading related jobs.

In the United States, most traders appear for the Series 7 & 63 exams when they plan the take up trading jobs.

The Series 7 and Series 63 are normally the licensing tests that a person must pass in order to become a stock trader.

Usually, a trader will begin his career with a financial organization in a junior position as an intern and then an assistant trader before working his way up to become senior or an experienced trader.

Many times, most of the successful traders in due time,end up starting their own trading companies.

The Different Types of Trading Jobs That an Analyst Can Get Are:

1x1.trans What Are the Different Types of Trading Jobs That a Financial Graduate Can Get?

#1. Buy-Side Trading Jobs

Typically you will get buy side trading jobs with financial institutes such as investment banking companies, corporate and commercial banking firms.

You could also get trading job opportunities with buy side organizations such as asset management firms.

Portfolio managers working with certain asset management companies would buy and sell financial securities on their own.

But in other cases, the portfolio managers could choose which securities to buy or sell but then provide directions to traders who would then actually do the process of buying and selling financial instruments.

As they are mostly following the orders given by the portfolio manager, traders at buy side firms often possess limited discretion in their actions than other traders who work in other types of companies.

But, this does not mean that these traders do not have any discretion at all.

For example, the portfolio manager could specify that he wants to purchase a specific financial instrument, but it is the trader’s prerogative as to when and at what price to purchase the financial instrument.

Further a portfolio manager could specify that he wants to purchase a particular type of instrument but leave the decision to choose a specific instrument and time of the purchase with the trader.

However, the job of a buy side trader is frequently to get the best value for the portfolio manager within specified parameters, making thiswork a little less demanding than other trading jobs.

#2. Sell-Side trading jobs

You will get sell side trading jobs with financial institutes such as asset management, hedge funds, institutional investors and retail investing.

Sell side trading jobs can be also got at commercial banks and investment banking firms.

The key trading activity at sell side firms includes buying and selling of financial instruments for the benefit of its customers.

Sell side traders do not utilize their own research, but their aim is to sell their research reports to other investors.

Typically, their research reports are sold to the buy side analysts.

So you can say that the buy side analysts are the customers for the sell side analysts.

The main differentiation between buy side and sell side traders is the role of marketing.

Sell side analysts use a great amount of time interacting with existing customers and possible new customers about their research.

Their job is to persuade buy side analysts that their findings are worth paying for.

The sell side trader has been under pressure in the last couple of years, as a lot of key developments, including the financial crisis and the brisk technological development in the financial markets, have resulted in the sell side trader’s role to evolve swiftly.

Due to money pressures, investment firms have to decide between traditional and automated trading.

Some investment firms have opted for a mix of the two.

The operating cost of a traditional sales desk could be quite material, and this could lead to increased use of technology and reduction of labor.

This reducing tendency of banks to take risk may help the financial system on a whole, but it probably means that individual sell side traders at banks could be compensated less in the future.

#3. Jobs with Hedge Fund companies

You can also get a trading job with hedge funds.

These jobs could include taking instructions from various portfolio managers or using own discretion to decide which securities to buy and sell.

Unlike analysts who are employed at sell side firms, hedge fund traders do not attempt to satisfy customer requests but instead aim to benefit from forthcoming market movements.

For this job you should have an aptitude for mathematics and statistics, capability to react rapidly to shifting conditions, the strength to endure market instability and the capability to take fast choices based upon partial information.

But remember one thing, as hedge fund traders usually taking more risks, the possible rewards are also greater, but then so are the stress levels.

Most of the times you will see that good hedge fund traders eventually set up their hedge funds to really mint money.

Analysts who consider jobs with hedge funds should be prepared to take risks with big sums of money on a daily basis and be contented with the likelihood that if their performance is not good for a long period of time they might actually be fired.

Remember that successful traders are always hugely passionate about what they do and always use their time studying the financial markets.

Key Takeaway…

If you think that whatever I have explained above excites you, then a career in trading may be right choice for you.

Believe me there is not going to be any better success key than hard work.

If you have any questions regarding this article please feel free to touch base with me and as usual I’ll be more than happy to help.

Image Source: businessinsider.com

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