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: CFA Vs. MBA? CFA Vs. FRM?
#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.
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
- 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
- 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
- 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.
- 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.
CFA Vs. MBA
Choosing between MBA and CFA is a common dilemma. 300Hours.com has created an interesting explanatory image highlighting the benefits of CFA.
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 the credit risk, operational risk, investment management and market risk.
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
- 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.
- 2-year mandatory work experience requirement.
- Difficulty 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.
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.
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