CFA® vs. CPA
Which One to choose?
Chartered Financial Analysts (CFA®) and Certified Public Accountants (CPA) play significant roles in the financial industry. CFA charterholders typically work as investment analysts, portfolio managers, strategists, consultants, or wealth managers. CPAs are often accountants, auditors, controllers, and chief financial officers.
| Details | CFA | CPA |
|---|---|---|
| Requirements | 3 exams and 1 of the following:
|
4 exams, a bachelor's degree, and 150 schooling hours |
| Costs | $3,220 to $8,250 | $2,000 to $5,500 |
| Number of exams | 3 | 4 |
| Exam Pass Rate | 43-44% | 40-50% |
| Content Focus | Portfolio Management, Investments | Financial Reporting, Audit, Tax |
| Career Path | Investment Analyst, Portfolio Manager, Strategist, Consultant, Wealth Manager | Accountant, Comptroller, Financial Manager, CFO |
| Study Time (hrs) | 300-350 per exam | 300-400 hours for entire exam |
| Completion Time ( Course Duration) | 3-5 years | 1.5-2.5 years |
| Average Salary | $180,000 | $119,000 |
CFA Certification vs CPA Licensure
CFA Institute (CFAI) awards the CFA designation to acknowledge the expertise and integrity of financial analysts. Financial institutions seek these professionals due to their top-tier talent. High net-worth individuals, endowment and pension funds, asset managers, and companies needing internal risk management, rely on CFA charterholders for their proficiency in financial research and investing.
Achieving the CFA charter or CPA distinction requires successfully navigating individual exams. The comprehensive CFA exam has three levels: CFA Level 1, CFA Level 2, and CFA Level 3.
Steps to obtaining the CFA charter:
- Pass all three exams in sequence
- Collect evidence of qualifying job experience
- Send in reference letters to back up your application
- Apply to become a CFA charterholder
CPAs earn their professional designation through education, experience, and licensing. They specialize in handling complex tax issues for clients, demonstrating their proficiency in managing intricate financial situations. They assist businesses, high net-worth individuals, and others facing complicated financial challenges.
The National Association of State Boards of Accountancy (NASBA) oversees 55 state boards that regulate and grant the CPA license. Candidates must meet state standards set by NASBA to take the exam. Additionally, the scope of employment responsibilities for CPA professionals may vary based on the state of practice.
Steps to obtaining a CPA license:
- Check the CPA licensing requirements in your state. Since state boards will ultimately license you, ensure you can take the exam in your state or jurisdiction.
- Complete your school requirements for a degree and acquire experience. To obtain your license, you must meet the academic standards set forth by your state.
- Pass the CPA exam. Your understanding of accounting standards, the legal obligations of the profession, and much more will be tested in the four components that make up the CPA exam.
- Finish the certification process. While some jurisdictions mandate an ethics test, others may require that registered CPAs take continuing professional education (CPE) annually to keep their licenses.
Requirements for CFA and CPA
To become a CFA charterholder, you need a bachelor's degree, four years of relevant experience, and must pass all 3 CFA exam levels. First-time CFA Program enrollees require an international passport, and exam candidates need 4,000 hours of professional experience. Prerequisites include residency, citizenship, and a Social Security number.
A bachelor's degree with 150 semester units (or 225 quarter units) is essential for CPA licensing. Some states allow exam eligibility with 120 hours, but 150 hours are needed for licensure. A minimum of 24 semester units in accounting is required, along with 1 to 2 years of public accounting experience. In addition, you must pass all 4 parts of the CPA exam.
CFA vs CPA Exam Difficulty
The CFA exams comprise three levels of increasing difficulty. CFA exams are challenging, with an average pass rate of 43% in 2023. The exam content spans financial principles, portfolio management, financial analysis, and accounting.
Note: The CFA Level 3 exam pass rate has historically been higher than the other levels.
| Level 1 | Level 2 | Level 3 | |
|---|---|---|---|
| 2014 | 43% | 46% | 54% |
| 2015 | 43% | 46% | 53% |
| 2016 | 43% | 46% | 54% |
| 2017 | 43% | 47% | 54% |
| 2018 | 44% | 45% | 56% |
| 2019 | 42% | 44% | 56% |
| 2020 | 49% | 55% | 56% |
| 2021 | 31% | 41% | 42% |
| 2022 | 36.75% | 42.6% | 49% |
| 2023 | 37.25 | 46.6% | 47.5% |
| 2024 | 44% | NA | 49% |
| Average | 40% | 45% | 52% |
CPA exam candidates who just graduated from college have an advantage since most accounting principles are taught during the core curriculum. The CPA exam has three core sections: Auditing & Attestation (AUD), Financial Accounting & Reporting (FAR), and Taxation & Regulation (REG). There also is an optional discipline section: Business Analysis and Reporting (BAR), Information Systems and Controls (ISC), or Tax, Compliance and Planning (TCP).
Here are the CPA 2023 pass rates:
| Section | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| AUD | 47.01% | 48.24% | 45.64% | 46.41% |
| BEC (sunset in January 2024) |
56.98% | 59.16% | 54.90% | 38.17% |
| FAR | 41.82% | 42.78% | 44.08% | 39.36% |
| REG | 58.63% | 59.71% | 59.13% | 54.68% |
CFA vs. CPA Salaries and Career Paths
The salaries of CFA charterholders and CPAs may vary substantially depending on a professional’s educational background, job experience, location, the size and industry of their current company, and the professional path that they have chosen.
While several factors contribute to the variance in compensation, the CFA credential generally boosts overall salary and benefits, giving charterholders an advantage in the job market. According to the CFA Institute, charterholders may earn higher pay than finance professionals. Charterholders with a bachelor's degree earn a median total income of $162,500, while those with a graduate degree earn an average of $237,357.
According to the Bureau of Labor Statistics (BLS), a CPA's average annual pay, without bonuses, is around $119,000. CPAs with less than one year of experience earn an average of $70,000 a year, while those with more than twenty years of experience earn an average of $150,000 annually.
Robert Half International, a financial employment agency, notes that accounting professionals with a CPA license earn an average of 5% to 15% more than accountants without a CPA credential. The following were the median yearly salaries of accountants and auditors in the top industries in which they worked:
- Finance and insurance: $79,310
- Management of companies and enterprises: $78,540
- Government: $77,290
- Accounting, tax preparation, bookkeeping, and payroll services: $77,080
The CFA charterholder and CPA designations are significant credentials in the finance industry. Here are the top 5 roles and the median salaries of each:
| CFA Career Path | |
|---|---|
| Top 5 Roles | MedianSalary |
| Equities Portfolio Manager | $316,600 |
| Income Portfolio Manager | $253,250 |
| Chief Investment Officer | $334,500 |
| Chief Financial Officer | $227,500 |
| Financial Analyst | $80,930 |
| CPA Career Path | |
|---|---|
| Top 5 Roles | Median Salary |
| Senior Manager/Director Audit/Assurance – Public Accounting | $121,500 |
| Manager/Director Audit/Assurance – Public Accounting | $90,000 |
| Senior Auditor/Assurance Services – Public Accounting | $57,750 |
| Auditor/Assurance Services, 1-3 Years of Experience – Public Accounting | $49,000 |
| Entry-Level Auditor/Assurance Services- Public Accounting | $41,000 |
Please note that salary figures fluctuate based on market dynamics and other variables.
*Source: https://careeremployer.com/financial-analyst ,
https://www.bls.gov/ooh/business-and-financial/home.htm
Pros and Cons of CFA Charter & CPA License
PROS
- Employment: The CFA credential will make it easier to gain employment at some of the big, well-known investment firms.
- Finance Knowledge: Examining the curriculum will help you build solid financial knowledge and abilities to achieve your long-term professional goals in the financial sector.
- Salary: Charterholders typically receive higher pay for the same position than professionals without the CFA. A charter holder’s salary can range from $52,000 to $154,000 annually.
- Connections: There are over 190,000 charterholders in 160+ countries. The benefit of worldwide recognition is that a charterholder can quickly transfer across markets.
- Expertise Credential: The CFA credential is the gold standard of finance and carries enormous weight in the business and financial worlds. Companies that recruit portfolio managers, pension fund managers, hedge fund managers, and fund of funds (FOF) professionals are familiar with the CFA Institute and its charterholders.
CONS
- Program Duration: The test will take 4 years to complete, and you must have at least 4,000 hours of work experience within 36 months.
- Difficulty level: Because of its comprehensive and lengthy content, the CFA exam has an average pass rate of 43% over 10 years.
- Expense: The cost of the 3 CFA exams, assuming three straight passes, is between $3,220 and $8,050, excluding travel and lodging.
- Cumbersome: Even if you pass all three levels, you must also account for the other CFA requirements before receiving your charter.
- No preferred job: As with any certification, the CFA charter doesn’t guarantee that you’ll get every job you apply for.
PROS
- Career Advancement: In public accounting, obtaining CPA licensure is especially important to advance to a management role or become a partner.
- More Job Options: Technology, artificial intelligence, cybersecurity, healthcare, energy, sports and entertainment, government, and other fields offer immense CPA potential.
- Job Stability: Trained CPAs are hard to find, especially in industries requiring higher specialization. This increases job stability and negotiating power during a job search.
- Job Fulfillment: Job satisfaction is an extensive career benefit for CPAs. They can choose from a range of career options to make an impact.
- Increased Salary and Benefits: Junior-level CPAs with 1 to 3 years of experience can expect to earn between $52,000 and $87,000 annually. After four years of experience, average wages range from $66,000 to $110,000.
CONS
- Program Duration: The CPA process can take up to 7 years. This includes four years to complete a bachelor’s degree, one year for additional credit requirements, and 1 to 2 years of relevant job experience.
- Exam Difficulty: In 2023, the cumulative pass rate for all four CPA exam sections ranged between 45% and 63% because of the complexity of topics served.
- Continuous Learning: If your state board requires continuing professional education to maintain your CPA title, continuous learning courses will help you keep your skills up to date.
- Long Working Hours: Accountants may work more than 70 hours a week during tax season. The American Institute of Certified Public Accountants (AICPA) reports that approximately 90% of CPAs work more than 50 hours a week, and a quarter work more than 70 hours a week during the busy season.
