CFA® vs CPA
What’s the difference?
Although both a Charter Financial Analyst (CFA®) and a Certified Public Accountant (CPA) play significant roles in the financial industry, the tasks often done by them might be difficult to differentiate. CFA charterholders typically work as investment analysts, portfolio managers, strategists, consultants, or wealth managers among other roles. CPAs often hold accountants, auditors, controllers, and chief financial officer positions.
When deciding on which career path one wishes to take, it is important to have a solid understanding of the differences between the two.
What Exactly are CFA Charterholders and CPAs?
A Chartered Financial Analyst, also known as a CFA charterholder, is a professional designation that is awarded by the CFA Institute (CFAI®) to financial analysts in order to evaluate their level of expertise and integrity. CFA charterholders are employed by financial institutions looking for top-tier financial talent. High net-worth individuals and institutional customers, including endowments, pension funds, and asset managers, benefit from their expertise in financial research and investing. Companies in need of internal risk management and analysis may also turn to charterholders for their expertise.
CPA is someone who has earned a professional designation through a combination of education, experience, and licensing. A certified public accountant focuses primarily on the tax issues of customers. CPAs are adept at managing substantially more intricate situations. CPAs may be of assistance to businesses, wealthy individuals, and others with complex financial problems.
Certification and Licensure
Individual exams must be passed in order to earn the CFA charter or CPA distinction. The CFA Institute (CFAI), a non-profit organization established in the United States, awards the CFA charter. The CFA exam is divided into three levels: CFA Level I, CFA Level II, and CFA Level III.
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.
The CPA license is given by the United States to the different State Boards of Accountancy in all 55 jurisdictions. The National Association of State Boards of Accountancy (NASBA) administers and regulates CPA licensing, which does not have a centralized administrative organization. To take the exam, candidates must fulfill the state standards established by NASBA. Furthermore, your employment duties as a CPA professional may differ based on the state in which you practice.
Steps to Obtaining a CPA License:
- Check the CPA licensing requirements in your state - Since these state boards will ultimately license you, check with them to 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 in the state where you intend to do so, you must meet the academic standards set forth by that 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 might mandate an ethics test, others might mandate that registered CPAs take continuing professional education (CPE) annually to keep their licenses.
Requirements
In order to become a CFA charterholder, a bachelor's degree and four years of relevant professional experience are required, in addition to passing all three levels of the CFA exam. Candidates who wish to enroll in the CFA Program and register for the exams for the first time must have an international travel passport. Further, CFA exam candidates must have 4,000 hours of relevant professional job experience (which can be in areas other than investment-related). Other prerequisites include residence, citizenship, and a social security number.
CPA licensing requires a bachelor's degree with 150 semester units or 225 quarter units. Some states allow you to sit for the exam with 120 hours, then require the full 150 hours for licensure. At least 24 semester units in accounting are required. Most states require at least one to two years of public accounting work experience. In addition, you must pass all four parts of the CPA exam.
Exam Difficulty - CFA vs CPA
The CFA examinations are separated into three difficulty levels: CFA Level 1, CFA Level 2, and CFA Level 3. CFA exams are far more difficult than other professional examinations, with an average pass rate of 45% as of May 2023. Financial principles, portfolio management, financial analysis, and accounting are some of the areas covered on the CFA examination.
Note: The CFA Level 3 exam pass rate has historically been higher than the other levels.
| 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 | 36.75% | 42.6% | 49% |
| 2023* | 38.5% | 52% | 48% |
| Average | 41.5% | 46.1% | 51.9% |
The CPA exam is definitely difficult and extensive. Candidates who have just graduated from college, on the other hand, have an advantage since most accounting principles are taught during the core curriculum. Financial Auditing and Reporting (FAR), Auditing and Attestation (AUD), Regulation (REG), and Business Environment and Concepts (BEC) are the four sections of the CPA exam. FAR is often regarded as the most difficult test to pass, while BEC is considered the easiest. Here are the CPA 2022 Pass Rates:
| Section | Q1 | Q2 | Q3 | Q4 | Cumulative |
|---|---|---|---|---|---|
| AUD | 47.35% | 49.13% | 48.67% | 47.21% | 47.90% |
| BEC | 57.33% | 61.53% | 59.91% | 60.30% | 59.85% |
| FAR | 45.95% | 45.66% | 44.30% | 40.67% | 43.76% |
| REG | 60.03% | 61.25% | 61.78% | 56.41% | 59.85% |
Salary and Career Paths - CFA vs CPA
The salaries of CFA charterholders and CPAs may vary substantially depending on individuals' educational background, job experience, location where they live, the size and industry of their current company, and the professional path that they have chosen.
While several factors contribute to the variance in one's compensation, the CFA credential generally raises overall salary and benefits, giving charterholders an advantage in the job market. According to the CFA Institute, charterholders may earn higher pay than other finance professionals. Charterholders with a bachelor's degree earn a median total compensation of $162,500, while those with a graduate degree earn a median total compensation of $237,357.
According to the Bureau of Labor Statistics (BLS), on average, a CPA's annual pay, without bonuses, is around $119,000 per year. CPAs with less than one year of experience earn an average of $70,000 a year, while those with more than 20 years of experience earn an average of $150,000 annually.
Robert Half International, a financial employment agency, indicated in its compensation recommendations 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 decision to become a CPA or a CFA charterholder is an excellent professional decision. These marks not only serve as a significant credential for accountants and analysts seeking to advance their careers, but also provide a diverse range of job opportunities. Furthermore, the accreditation demonstrates to your prospective employer your confidence and ability to achieve challenging goals.
| CFA 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 |
| CPA Career Path | |
|---|---|
| Top 5 Roles | Average Salary |
| Accountant and auditor | $100,000 |
| Financial controller | $101,300 |
| Information Technology Accountants | $102,910 |
| Corporate Controller | $112,000 |
| Teacher in Accounting | $127,000 |
*Source: https://www.bls.gov/ooh/business-and-financial/home.htm
Pros and Cons of CFA Charter & CPA License
- Big Investment Firms: Acquiring employment with some of the well-known names in finance will be easier with the CFA credential.
- Finance Knowledge:Examining 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 over 100,000 charterholders in 130 countries. The benefit of worldwide recognition is that a charterholder can be more easily transferred across the markets.
- Expertise Credential: The CFA credential 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.
- Program Duration: It will take 4 years to complete the test 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 the CFAI’s historical data, spanning 10 years, the average pass rate was only 45%.
- Expense: The cost of the three CFA exams, assuming three straight passes is between $2,600 and $4,000 excluding travel and lodging.
- Cumbersome: Even if you pass all 3 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 ensure you get every job you apply for.
- Career Advancement: In public accounting, obtaining CPA licensure is especially important to advancing your career. If you want to advance to a management role or become a partner.
- More Options: Technology, artificial intelligence, cybersecurity, healthcare, energy, sports and entertainment, government, and other fields offer immense potential for CPAs. CPAs are needed in every business!
- Job Stability: While accountants are ubiquitous and in high demand, trained CPAs are hard to find (especially in industries where higher specialization is required). This increases job stability and negotiating power during a job search.
- Job Fulfillment: Job satisfaction is an extensive career plus for CPAs. They can choose from a range of career choices and have a beneficial impact on the lives of people, businesses, and non-profit efforts.
- Increased Salary and Benefits: Junior-level CPAs with one to three years of experience can expect to make between $52,000 and $87,000 per year. Average wages range from $66,000 to $110,000 after four to six years of expertise.
- Expense: The cost of securing licensure ranges from $1,780 to $4,950 (including applicable taxes). The fees for early registration is $825, the regular registration charge is $925, and the late registration fee is $1,025.
- 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 one to two years of relevant job experience.
- Exam Difficulty: CPA exam is considered challenging because of the complexity of topics covered in the 4 sections of the exam. In 2023, the cumulative pass rate for all four sections of the CPA exam ranged between 45-63%.
- Continuous learning: Your state board requires continuing professional education for you to keep your CPA title (CPE). These courses will help you keep your skills up-to-date and keep doing professional work.
- Long working hours: It is common for accountants to put in more than 70 hours of labor in a single week during the tax season. AICPA reports that approximately 90 percent of CPAs work more than 50 hours a week, and a quarter of them work more than 70 hours a week during the busy season.
CFA vs. CPA - Key Summary
| Details | CFA | CPA |
|---|---|---|
| Requirements | 3 exams and one of the following:
|
4 exams, bachelor's degree, & 150 schooling hours |
| Costs | $2,550 to $3,450 | $1,000 to $3,000 |
| Number of exams | 3 | 4 |
| Exam Pass Rate | 40-45% | 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 | 2.5 - 5 years |
| Average Salary | $180,000 | $70,000 |