Financial Risk Managers (FRM) and Chartered Financial Analysts (CFA) are both powerhouse positions in the finance industry. However, if you’re at a crossroads in your career and determining which path you should travel for your next step up, there are important distinctions between the two. The CFA Charter works for corporate businesses to analyze security markets and trends while FRMs work chiefly in their namesake, risk analysis. Compare and contrast points of interest to find out which designation will be right for you.
The Global Association of Risk Professionals awards the FRM designation. The job entails analyzing many different types of risk, including volatility, liquidity, inflation, and company-specific risk such as reputation. FRMs became an increasingly popular choice in certification after the mortgage crisis where risk was not appropriately analyzed.
The CFA Institute awards CFAs. The CFA program offers exposure to various financial topics, including equities, fixed income, and derivatives. CFAs are known for their sound investment guidance based on detailed knowledge of the financial industry.
Potential employers would hire an FRM for a strictly risk-related position and CFAs for areas that do not directly involve risk analysis, such as portfolio management or trading strategies. Though FRMs and CFAs can overlap with their clients, some unique financial entities will engage with each certification.
- Banks (deal with CFAs as well)
- Treasury departments
- Global risk management trade accounts
- Federal executive branch
- Monetary authorities or central banks
- Institutional investment firms
- Executive panels
For financial risk managers, the median pay is around $96K, with an annual growth rate of 7%. Keep in mind that this includes many FRMs already certified and have been working in the field for several years.
The median pay for financial analysts is around $86K with a 5% annual growth rate. While it is close to accurate, CFA programs are often meant to train executives and senior-level partners. Because of the shift in job titles, the top salaries might not be represented in calculating the state median pay.
The FRM program consists of two exams, a minimum of two years of approved work experience in risk management or another approved field, and required membership maintenance. It is recommended that candidates spend over 200 hours preparing for each exam. The program has structured coursework akin to a master’s degree course without the actual degree.
Candidates must complete all undergraduate coursework, 4,000 hours of approved work experience, submit references, and pass all three levels of the CFA Exam. The exams are known for their difficulty. It is recommended that each student spend over 300 hours studying for each exam. Once candidates meet all the requirements, they may then apply to become a member of the CFA Institute.
To determine how the certifications will fit into an already packed schedule, potential applicants should consider how much each program will cost them.
Candidates can take both parts of the FRM exam in one day. However, it is recommended to spend about 500 total hours preparing for test day. Candidates are responsible for a one-time enrollment fee of $400, and each exam registration costs $550 to $750. The FRM costs around $1,700 to $2,000, varying slightly from student to student. The GARP states that the FRM is the equivalent of a US master’s degree.
While it is possible to pass all three levels in about 18 months, most candidates take between 4 and 5 years to pass all three levels. Through 2022, the program will cost $450 for a one-time enrollment fee and $700 to $1,000 per level at three levels total. In all, the CFA program can cost upwards of $2,500 to $3,500.
Note: Beginning with the 2023 exam cycle, the price of the one-time enrollment fee will decrease from $450 to $350. The prices to register for each individual exam will increase from $700 to $900 for early registration and from $1,000 to $1,200 for standard registration.
The CFA charterholder program is a significantly longer experience than the FRM. Check out more ways the CFA Charter compares with other finance certifications by reading our insightful article, CFA® Charter: The Value of the CFA.
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