Is the title confusing?
Let us clear it out.
This article will be a comparison (CFP vs CFA) between the Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) professions.
We will be going through a brief on these professions, how to get these degrees/certification and how to gain professional leverage with them.
CFP is a financial certification requisite for those interested to enhance their financial planning careers.
Within the United States, the certificate is conferred by the Certified Financial Planner Board of Standards and outside the United States, the same is conferred by the 25 organizations associated with the Financial Planning Standards Board.
If you already have approved CFP designations like Chartered Accountants (CA), Chartered Certified Accountants (ACCA), Certified Public Accountants (CPA), Chartered Wealth Managers (AAFM), Chartered Financial Consultants (ChFC), Chartered Life Underwriters (CLU), Chartered Financial Analysts (CFA) and attorneys, you can directly enroll for the CFP exam.
As mentioned, if you already have the designations listed above, sit for the exam directly.
If not, you need to follow certain educational, ethical and experience requirements.
Two ways are determined by the Board to complete the educational requirements:
First, you need to have a relevant Bachelor’s degree or higher in any one discipline from an accredited institution.
Once the CFP Certification Examination is cleared, you have to provide a transcript from the institution as proof of your degree.
Second, you can complete a Board sanctioned Education Program from affiliated colleges and universities.
These programs contain both the credit and non-credit certificates and these can be attempted through online instruction, classroom instruction or self-study, whichever suits you amicably.
It’s an exhaustive exam; spread over 2 days, 10 hours and zillions of multiple-choice questions, it’s not an exam to be taken lightly.
The exams happen thrice a year in March, July and November in various registered locations.
A certain fee is attached to every exam. If you’re not good at self-study, you should take professional exam preparation help.
At least 3 years (or, 6000 hours) of experience is necessary, working in the area of financial planning.
It could be about preparing financial plans, handling investments, retirement counseling, selling insurance and such.
The experience brief should be submitted with the form. There are two requirements to fulfil here:
The first requirement is that the experience should be in one or more of the six primary personal financial planning elements. These elements are:
The second requirement measures the nature of your experience which should be one or more of the five ways.
These five ways are:
Supervision of client delivery, personal client delivery, supporting client delivery, teaching and residency programs/teaching.
You can find more details on the official website.
Once all the requirements are fulfilled, you become a Certified Financial Planner (CFP).
How will the CFP certificate help your career?
According to the U.S. Bureau of Labor Statistics (BLS) 2020, the median salary of a CFP is 88,890 USD.
With the CFP certificate, you can work with individual clients or handle them within an organization to manage their long-term and short-term financial goals.
According to PayScale 2020, the average salary of a CFP is INR 398,263.
You can advise them on legal restrictions, financial laws, estate planning, investment planning, insurance benefits, tax planning, and other things.
As a financial planner, you need to possess a holistic understanding of the client’s business and offer complete financial solutions.
The duties would include interviewing clients, preparing financial plans, executing them and monitoring the outcomes.
Strong analytical skills and good people communication skills are crucial for this business.
Learning to use databases and excellent research skills are mandatory too.
You can work as self-employed or be employed by investment companies, insurance companies, banks, loan institutions, and other financial companies. Further, there are options like conducting workshops, financial consulting and teaching too.
CFA is a globally recognized certificate conferred by the US-based CFA Institute, formerly known as the Association for Investment Management and Research.
When you clear the CFA exam, you are known as a “CFA charter holder”.
An extremely difficult exam, the exam pass percentage historically is as low as 32%. Candidates who are successful take about four attempts to clear the charter.
Of course, you have to clear the exam.
To become eligible, a relevant Bachelor’s degree is mandatory.
Experience-wise, 4 years of qualified experienced is taken into consideration. You can become a member of the CFA Institute and get membership from the local CFA community.
There are three exams of six hours each and you have to clear all the exams.
The first exam happens in June or December and the remaining exams happen in June only.
It’s like if you fail the second or the third exam, you have to wait for an entire year to take the exam again.
All three exams check your knowledge for financial analysis and a sense of ethics.
The first exam tests the financial concepts basically; the second exam tests financial analysis skills and intensive accounting procedures while the third exam tests portfolio management skills and decision-making potential.
Lastly, it is of utmost importance that you, the charter holder, maintain the norms and regulations recommended by the CFA Institute Code of Ethics and Standards of Professional Conduct.
According to the U.S. Bureau of Labor Statistics (BLS) 2020, the median salary of a CFA is 85,660 USD.
According to PayScale 2020, the average salary of a CFA is INR 677,971.
Once you get the charter, you can begin working for institutional investors as a financial analyst.
You can work in the capacity of a Money Manager, Financial Advisor, Portfolio Manager, Financial Risk Analyst, Securities Trader, Investment Banker, Sales Professional, Investment Firm Manager, Chief Investment Officer, and Chief Executive Officer.
There is a lot of scope for CFA charter holders. According to the Bureau of Labor Statistics, there will be a 23% increase in jobs for Financial Analysts, a 15% increase for Commodities Agents and a 9% increase for Financial Managers between 2010 and 2019.
Of course, you need to have a CFA charter to get these positions.
Here is a chart highlighting the differences.
Any of the courses have the potential to give shape to your career. Choose any of these carefully, understand what direction will they give to your finance career and should you be pursuing them. If you have any doubts, ask below.