Ambitious professionals in the finance and investment management industry, whether entry-level or more experienced, have several options for boosting their careers. But the two most popular and effective credentials for career advancement in the financial world are the Chartered Financial Analyst (CFA) and the Master of Business Administration (MBA). This article compares their merits – as well as their drawbacks.
Let’s start with the MBA.
To be eligible for the MBA, candidates must have attained an undergraduate degree from an accredited university. Your degree doesn’t necessarily need to be in business; non-business majors can (and do) enroll in MBA programs.
The MBA requires two years of full-time post-graduate education in an academic institution and takes students through a curriculum centered on all components of managing a business. In addition, some schools now offer a more condensed, intensive MBA program, which can take anywhere from 11 to 18 months to complete.
Most MBA programs, regardless of length, offer courses in finance, operations management, change management, supply chain management, organizational behavior, and marketing. Many offer courses on computer programming as well. MBA students choose a specialty to focus on, such as entrepreneurship, marketing, finance, or management, to name a few.
The MBA is arguably one of the most expensive designations, with the average tuition costing $100,000 and up, plus living expenses. These high costs result in most MBA candidates taking on a substantial amount of student loan debt. Moreover, there’s the opportunity cost that comes with giving up your job to pursue the MBA and the actual loss of wages you sacrifice when enrolled in an MBA program.
The good news is that financial aid and scholarships can alleviate some of the costs associated with an MBA education, and some employers partially or fully reimburse their employees’ expenses.
Return on Investment
While it may be costly, the MBA does offer its holders a significant return on investment that makes it worthwhile. Graduating with an MBA from a top-ranked business school can make you a more attractive candidate to employers because it demonstrates a commitment to professional development and an interest in gaining expertise in your field.
Also, for the reasons mentioned above and because most MBA curriculums are designed to prepare graduates to run a business from top to bottom, many financial firms consider MBAs for management and executive roles.
Regarding salary, according to U.S. News data, the overall compensation for MBA graduates from the business schools with the highest reported salary and bonuses averaging around $170,000 for new hires.
So how does the CFA Charter compare?
To be eligible for the CFA Charter, candidates must:
- Have a bachelor’s degree (or be in the final year of obtaining one)
- Have at least 48 months (or four years) of relevant work experience
- Pass all three levels of the CFA Exam
- Submit two to three letters of reference from sponsors
Like with the MBA, your undergraduate degree doesn’t have to be in finance. However, unlike the MBA, attaining the CFA Charter isn’t a formal academic program. Instead, it requires you to study independently and pass three rigorous exams in sequential order over a period that lasts up to four years on average. According to CFA Institute, candidates will need to study an average of 300 hours for each exam level.
Each CFA Exam level tests a candidate’s knowledge of Ethics, Equity Analysis, Corporate Finance, Fixed Income, Derivatives, Alternative Investments, Portfolio Management, Financial Statement Analysis, Economics, and Quantitative Methods. Each Exam progressively broadens the scope of how topics are tested as follows:
- Level 1: Knowledge and Comprehension
- Level 2: Application and Analysis
- Level 3: Synthesis and Evaluation
With pass rates for the first two levels below 50% and the 10-year weighted average pass rate for Level 1 less than 40%, the CFA Exam is one of the most rigorous exams you will ever take, even more than the CPA Exam, which is challenging in its own right.
Compared to the MBA, the CFA is so much more affordable. The only costs are the exam registration fees and any third-party provider a candidate chooses to assist with the Exam preparation. The curriculum is self-contained; the CFA Institute provides all the materials that are needed for each topic.
The total cost of all three CFA exams ranges from $2,600-$8,000, assuming three consecutive passes with no travel and accommodation costs. There’s also a one-time enrollment fee of $450, which candidates pay when they sign up for Level 1.
The approximate cost breakdown by exam level is as follows:
- Level 1: $1,200 – $3,000
- Level 2: $700 – $2,500
- Level 3: $700 – $2,500
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.
Return on Investment
Like the MBA, the CFA Charter is grueling in its own right and also delivers a significant return on investment once obtained. Charterholders earn significantly more than their non-chartered peers, depending on educational background, years of work experience, the city in which they live, the size and type of company they work for, and their career path.
For the same reasons as the MBA, the CFA Designation opens doors to career advancement and is widely recognized as the highest distinction in the investment management industry. Also, employers tend to consider Charterholders for management positions due to the following advantages they have over their non-Charterholder colleagues:
- A robust ethical foundation
- Earned prestige and recognition of expertise
- Increased ability to make complex investment decisions
- An exclusive global network of Charterholders
Everyone has different goals in life, depending on their unique personalities and circumstances. For the highly ambitious, obtaining both the MBA and CFA are within the realm of possibility and would definitely even further distinguish them from their peers. However, for most finance professionals, attaining only one of these prestigious credentials is feasible. That’s when choosing the right one for you matters.
Generally speaking, both the MBA and CFA will give you an advantage in the workplace in career advancement and salary. While the figures will differ from one source to another, the consensus is that both credentials will result in a significant salary increase. So, for most candidates, this decision will come down to the specific career paths they intend to pursue post-credential.
The CFA Charter is much cheaper than the MBA and more specialized, making it more desirable for finance professionals looking for careers in risk analysis, wealth/portfolio management, or who want to run their own fund. On the other hand, the broader MBA, with its principles on marketing, culture, customer experience, etc., may be more suitable for those whose goal is to run their own firms in the long run.
If you decide that the CFA Charter is the right designation for you, get started with a FREE trial of our CFA Level 1 Learning Platform.