What is the difference between the CFA® Charter and CFP® Certification?

The primary difference between a CFA® and CFP® is who they work with and the work they do. The Chartered Financial Analyst® (CFA) and the Certified Financial Planner® (CFP) are two of the most popular and frequently confused financial credentials. Despite having similar-sounding acronyms, the CFP and the CFA are two very different titles, and they possess different skills. While CFAs are qualified to work in various financial roles, including investment analysis, portfolio management, and wealth management, CFPs often work in the financial services industry in professions such as financial planner, financial advisor, investment advisor, financial consultant, and wealth manager.

The day-to-day activities and duties of a CFP and a CFA are somewhat distinct, so a firm understanding of the differences between the two is essential when making career decisions. Given your unique circumstances, you may use the information in this article to assist you in making the best decision possible.

What Exactly Are CFA Charterholders and CFPs?

CFA, the gold standard in financial certification, is a globally-recognized certification that measures the competence of a financial analyst. CFAs provide financial analysis and investment advice for high-net-worth individuals and institutional clients, including endowments, pension funds, and asset managers. Operating on both the buy and sell sides of transactions, they provide expertise in underwriting, mutual funds, hedge funds, fixed income, and derivatives, to name a few.

CFP is a certification that mainly represents financial planning, wealth management, and estate planning, among others, primarily focused on individuals and families. They typically devote a significant amount of their labor to instructional purposes. CFPs are primarily tasked with assisting customers in reaching their financial objectives, particularly those related to retirement planning. The certification emphasizes developing one's skills in financial planning and wealth management, apart from providing customers with advice on their insurance requirements.

Charterholders typically work for financial institutions and corporations. CFPs can work for companies, but more often own companies. The expense required to get the certification is another key difference. The price range for CFA is $3,050 to $3,950, whereas the price for CFP is $825.

Exam difficulty is an additional important distinction. CFA®’s Level 1 pass rate is 43%, but the CFP pass rate ranges from 62 to 66%.

Charter and Licensure - CFA Charterholder vs CFP Certification

Individual exams must be passed in order to earn the CFA or CFP certification. However, knowing the specific criteria for each exam is the first step in preparation.

Here's a preview of what to expect:

The CFA® Institute, a non-profit organization established in the United States, awards the CFA charter. The CFA Institute is based in Charlottesville, Virginia, and includes eight regional offices as well as 160 active organizations worldwide. To receive the CFA charter, an exam for each of the 3 levels must be passed. The CFA exam, on the other hand, is divided into three levels: CFA Level 1, CFA Level 2, and CFA Level 3.

The CFP certification process might take anywhere from 18 to 24 months. It has a much shorter curriculum than the CFA, since passing only one comprehensive exam is required.

Eligibility Requirements - CFA Charterholder vs CFP Certification

To be eligible to sit for the CFA Level 1 exam, you must meet certain requirements, including a bachelor's degree, be in the final year of your bachelor's program, or have an equivalent in experience or higher-education. Lastly, everyone who plans to enroll in the CFA Program and register for the exams for the first time must have an international travel passport. To become a CFA charterholder, a candidate must pass all 3 exams, fulfill the work requirements, submit letters of reference, and apply for membership.

You must also have extensive professional experience to be eligible for the CFP certification. This needs either 4,000 hours of CFP-compliant apprenticeship or 6,000 hours of professional financial planning experience. Prior to taking the CFP test, candidates must have completed the requisite hours of experience between five and ten years.

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Exam Difficulty - CFA Charterholder vs CFP Certification

The CFA exam is divided into three levels of difficulty: CFA Level 1, Level 2, and Level 3. These exams are far more challenging than other high-stake professional exams, with an average pass rate of 34% as of November 2021. CFA exam topics are broadly categorized as financial concepts, portfolio management, financial analysis, and accounting.

Level 1 Level 2 Level 3
2013 41% 43% 49%
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* 37% 44% 49%
Average 41.10% 45.70% 52.30%
*2022 includes only Feb and May test window

Comparatively, CFP is easier to obtain than CFA. The historical pass rate has been above 60% and looking as recent as 2021, it is around 53%.

Salary and Career Paths - CFA Charterholder vs CFP Certification

In the financial world, having CFA and CFP certifications is often regarded as the greatest way to excel in one's career. Finance professionals who dedicate the time and effort to getting the CFA charter or CFP degree will be successful regardless of the career route they pick.

According to Payscale.com, the yearly compensation of a CFA charterholder might range from $85,000 to $143,000 and somewhere between $51,000 and $102,000 for CFP (as of May 2022).

The CFA Institute claims charterholders may expect to make more money than the average financial industry member. While the typical total income for charterholders with a bachelor's degree is $162,500, those with a graduate degree can earn up to $237,357, thus establishing a competitive edge in the job market.

On the other hand, an entry-level CFP earns an average total compensation of $50,892 with less than one year of experience and about 5-19 years of experience, earning as much as $71,864 to $86,360 on an average. For those already extensively involved in the profession, with about 20 years or more, $102,297 is their basic average compensation.

Given the variation of CFA charterholder and CFP's salaries fall under a vast financial spectrum, a typical range of averages might not fully offer the whole picture. Here's a table mentioning the individual CFP vs. CFA salaries for some top-tier roles:

CFA Charterholder Career Path
Top 5 Roles Average Salary
Buy-side research $83,660
Consulting $87,660
Investment banking $115,000
Risk management $96,630
Corporate executive $197,840
CFP Certification Career Path
Top 5 Roles Average Salary
Lead adviser $163,000
Personal financial planner $127,000
Client services adviser $97,000
Associate adviser $68,000
Wealth management adviser $125,000

Pros and Cons of CFA Charterholder vs CFP Certification

CFA Charter

PROS:

  • Big Investment Firms: Acquiring employment with some of the most well-known names in finance will be easier with the CFA certification.
  • 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 in the financial sector.
  • Salary: Typically, CFA charterholders receive higher pay for the same position than those who do not have the CFA charter. A CFA charterholder's salary can range from $52,000 to $154,000 annually.
  • Connections: There are already over 100,000 charterholders in 130 countries throughout the globe. The benefit of worldwide recognition is that a charterholder can be more easily transferred across the markets.
  • Expertise Credential: The CFA certification is the gold standard of finance and carries enormous weight in the business and financial worlds. Anyone who recruits portfolio managers, pension fund managers, hedge fund managers, or Fund of Funds (FOF) professionals is familiar with the CFA Institute and its charterholders.

CONS:

  • Program Duration: It will take four years to complete the exam and collect a minimum of 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 was only 44%.
  • Expensive: The cost of the three CFA exams, assuming three straight passes with no required travel to the testing center, is between $2,600 and $4,000.
  • Cumbersome: Even if you pass all three levels, there are still additional requirements, such as fulfilling work requirements. Summer, part-time, and internship work do not qualify, nor does managing your assets.
  • No job guarantee: Consider alternative issues before enrolling to jumpstart a stagnant career. As with any certification, the CFA charter doesn't ensure you get every job you apply for.

CFP Certification

PROS:

  • Low start-up costs: Getting started as an independent financial consultant will not require a large initial investment. License fees and other expenses are unavoidable but modest compared to other businesses.
  • Not difficult or expensive: Pass rates for the CFP exam vary from 62 to 66%, indicating that the exam is not very difficult. And the cost to get certification is $825, which is much less than the CFA charter.
  • Flexible Schedule: Once an adviser has established a customer base, flexible work hours are possible, creating a good work-life balance. You can tailor your schedule to meet the hours during which you are at your most productive.
  • Unlimited earning potential: Their revenues are determined by the quantity of new business they acquire and the number of commissions or fees they generate each year. They have the opportunity to make as much or as little money as they are capable of.
  • High Growth Industry: From 2020 through 2030, the BLS predicts that there will be an average of 21,500 vacancies for personal financial advisers per year. Replacements for employees who are relocating or retiring are a significant factor in the number of job opportunities projected this decade.

CONS:

  • Lots of stress: Due to the potential volatility of the financial market, a job as a financial advisor would always be fraught with stress. During market downturns, advisors must constantly manage their clients' anxieties and emotions.
  • Continuous Prospecting: Obtaining customers is the most difficult aspect of becoming a successful financial counselor. When the adviser ceases prospecting, new business dries up. Until they have a substantial customer base, advisers must continually advertise themselves and their expertise in pursuit of new clients.
  • Willpower needed: Financial advisers won’t achieve success if they lack the discipline and determination to work the hours. At times, the demands of one's job take precedence over everything else, and not everyone is adept at managing this shift smoothly.
  • Compliance regulations: You'll need a license, and you'll need to remember to renew it annually. Financial advisers must keep up with constantly changing regulatory requirements to protect their clients against malpractice. This may be both time-consuming and costly.
  • Lots of hard work to get going: At the beginning of this career, there is a lot of uncertainty, so financial advisors must be willing to work hard to succeed in the long run. It's not uncommon for new financial advisors to consistently work more than 50 hours per week.

CFA vs. CFP - Key Summary

Details CFA Charter CFP Certification
Number of Levels 3 1
Costs $2,550 to $3,450 $825
Exam Pass Rate 30-50% 62-66%
Content Focus Portfolio Management, Investment tools Financial and investment planning
Career Path Investment Analyst, Portfolio Manager, Strategist, Consultant, Wealth Manager Financial planner, financial advisor, estate planner, trading & research associate, financial consultant, financial analyst, financial representative, etc.
Study Time 300-350 per exam 250 hours for the entire exam
Completion Time (Course Duration) 3-5 years 3 years
Requirements 3 exams and one of the following: bachelor’s degree, be within 11 months of graduation from the date you sit for the Level 1 exam, combination of 4,000 hours of full-time work experience and university education accrued over a minimum of 36 months 1 exam, bachelor’s degree and 6,000 hours of relevant professional experience or 4,000 hours of apprentice experience
Salary $85,000 to $143,000 $51,000 to $102,000
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FAQs

CFP certification costs $825, which is much less than the CFA charter.

Because of its extensive and lengthy content, the CFA exam is more difficult than the CFP. According to CFAI’s historical data, covering 10 years, the average pass rate was just 44%. The CFP test has a pass rate ranging from 62 to 66%, showing that the exam is not challenging.

While CFA requires passing three levels (study time 300 hours each), it’s just one exam for CFP (study time 250 hours for the entire exam).

Read More About the CFA

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