CFA and CFP are popular financial credentials with distinct areas of expertise.
CFA charterholders within the global financial services industry work as investment analysts, portfolio managers, strategists, consultants, and wealth managers. Charterholders typically work with institutional investors, such as hedge funds, investment banks, and asset management firms. They might analyze investment opportunities, research financial markets, and manage investment portfolios.
CFPs frequently work as financial planners, advisors, consultants, and wealth managers. They often work with individual clients, helping them achieve their financial goals through personalized planning and advice. A professional might spend their time meeting with clients, creating financial plans tailored to needs and goals, and providing ongoing support and advice to help clients achieve their objectives.
CFA Charterholder vs. CFP Certification
Each designation requires different qualifications, training, and skill sets. CFA is considered more rigorous and specialized, requiring you to complete 3 comprehensive exams focused on investment analysis, portfolio management, and financial markets. CFP requires you to complete a comprehensive exam covering a broader range of financial planning topics, such as retirement, tax, and estate planning.
Eligibility Requirements
To be eligible to sit for the CFA, you must hold a bachelor's degree, have at least 2 years remaining in your undergraduate studies, or have equivalent experience or higher education. If you plan to enroll in the CFA charter program and register for the 3 exams for the first time, you must have an international travel passport.
The CFP certification requires either 4,000 hours of CFP-compliant apprenticeships or 6,000 hours of professional financial planning experience.
Exam Difficulty
The CFA Exam is divided into 3 levels. Each exam is more challenging than the other, with an average pass rate of 43% in the last 10 years. CFA Exam topics are broadly categorized as financial concepts, portfolio management, financial analysis, and accounting.
| AVERAGE CFA EXAM PASS RATES | |||
|---|---|---|---|
| Level 1 | Level 2 | Level 3 | |
| 2015 | 42.5% | 46% | 53% |
| 2016 | 43% | 46% | 54% |
| 2017 | 43% | 47% | 54% |
| 2018 | 44% | 45% | 56% |
| 2019 | 41.5% | 44% | 56% |
| 2020 | 49% | 55% | 56% |
| 2021 | 29% | 41% | 42% |
| 2022 | 36.75% | 42.6% | 49% |
| 2023 | 37.25% | 46.6% | 47.5% |
| 2024 | 44% | 48.5% | 48.5% |
| 10-year average (2015-24) |
40% | 45% | 51% |
The CFP designation is easier to obtain than the CFA charter. The historical pass rate has been above 60%, with 2024 at 64.5%.
Charter and Licensure
To obtain the CFA charter, you must pass all 3 levels of the CFA Exam, have the required work experience, meet ethics and professional standards set by CFA Institute (CFAI), and apply for membership with the administering organization.
The CFP is a licensed credential granted by the Certified Financial Planner Board of Standards. You must pass the CFP Exam, hold a bachelor's degree, complete a CFP Board-registered education program, and have at least 3 years of relevant work experience.
Salary and Career Paths
The 2024 CFA Institute Compensation Study notes that a charterholder with a bachelor's degree can expect a median total income of $190,000, while those with an MBA earn up to $257,000.
A CFP with less than 5 years of experience can expect to earn a median total income of $103,000. With 5-10 years of experience, the potential goes up to $150,000. Professionals with 20 years of experience can expect to earn $225,000.
| CFA Charterholder Career Path | |
|---|---|
| Top 5 Roles | Average Salary |
| Buy-side research | $98,800 |
| Consulting | $100,500 |
| Investment banking | $118,500 |
| Risk management | $111,500 |
| Corporate executive | $142,700 |
| CFP Certification Career Path | |
|---|---|
| Top 5 Roles | Average Salary |
| Lead advisor | $92,300 |
| Personal financial planner | $96,700 |
| Client services advisor | $103,100 |
| Associate advisor | $67,200 |
| Wealth management advisor | $103,100 |
Pros and Cons
Both designations are highly respected in the financial industry, indicating a high level of expertise and professionalism. Here are some pros and cons for each:
Pros
- Big Investment Firms: Obtaining employment with some of the most well-known companies in finance will be easier.
- Finance Knowledge: Mastering the curriculum will help you build a solid foundation of financial knowledge and abilities to help you achieve your long-term professional goals.
- Salary: CFA charterholders earn higher pay for the same position than those who do not have the charter.
- Connections: There are over 100,000 charterholders in 130 countries. Worldwide recognition makes it easy to transfer across markets.
- Expertise Credential: The CFA charter is a gold standard in finance. Companies that recruit portfolio managers, pension fund managers, hedge fund managers, or Fund of Funds (FOF) professionals are familiar with CFAI and its charterholders.
Cons
- Program Duration: It will take 4 years to complete the exam and get at least 4,000 hours of work experience within 36 months.
- Difficulty level: The CFA Exam is tough to pass because of its comprehensive and lengthy content. As per CFAI’s historical data spanning 10 years, the average pass rate is 43%.
- Expensive: The cost of the 3 CFA Exams is between $2,600 and $4,000, based on 3 straight passes and no required travel to a testing center.
- Cumbersome: Even if you pass all 3 levels of the CFA Exam, there are additional work requirements that exclude summer, part-time, and internship work.
Pros
- Low Start-Up Costs: Getting started as an independent financial consultant with a CFP will not require a significant initial investment.
- Easier and Less Expensive: Pass rates for the CFP Exam vary from 62% to 66%. The cost to get a certification is $825.
- Flexible Schedule: Once you have established a customer base, flexible work hours are possible, creating a good work-life balance.
- Unlimited Earning Potential: Revenues are determined by the quantity of new business you acquire and the number of commissions or fees you generate each year.
- High Growth Industry: From 2020 through 2030, the Bureau of Labor Statistics predicts an average of 21,500 vacancies for personal financial advisers per year.
Cons
- Lots of Stress: Due to the volatility of the financial market, a job as a financial advisor will always be fraught with stress. During market downturns, advisors must constantly manage their clients’ anxieties and emotions.
- Continuous Prospecting: Obtaining customers is the most challenging aspect of becoming a successful financial counselor. If you stop prospecting, new business dries up. You must continually advertise yourself and your expertise in pursuit of new clients.
- Willpower Needed: You won’t achieve success if you lack discipline and determination. At times, the demands of your job will have to take precedence over everything else.
- Compliance Regulations: You’ll need a license, and you’ll need to remember to renew it annually. You must keep up with constantly changing regulatory requirements to protect your clients against malpractice. This can be time consuming and costly.
Frequently Asked Questions (FAQs)
What is the cost of obtaining a CFA charter and CFP certification?
Is the CFA Exam harder than the CFP Exam?
The CFA Exam is considered harder than the CFP Exam due to its rigorous curriculum and 3 levels with low pass rates. According to CFAI’s historical data covering 10 years, the average pass rate was 43%.
The CFP exam has a pass rate ranging from 62% to 66%.
Can you hold both a CFA charter and CFP certification?
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