CFA® vs. FRM®

Which Financial Designation to Bank On!

It’s natural to find yourself at a crossroads when determining the best career for you, especially when choosing between two powerhouse designations in the finance industry: Chartered Financial Analyst (CFA) and Financial Risk Manager (FRM). Both designations have their merits, but your decision should be based on your comfort with the subject matter and personal interests. For starters, CFA charterholders work for corporate businesses to analyze security markets and trends. FRMs, on the other hand, work chiefly in risk analysis. While both designations require candidates to go through (and pass) some intense examinations, there are subtle differences that can affect your decision-making process.

CFA and FRM Quick Overview

With over 160,000 CFA charterholders worldwide, the CFA charter is one of the most important certifications in the financial industry. The FRM certification, with over 70,000 professionals, sprung to immediate relevance during the United States subprime mortgage crisis (2007–2010), when risk was not appropriately evaluated or managed. The need for a new sector of specialists who recognized the possible risk of various investments and took action to mitigate it was clear.

The CFA charter covers a wide variety of financial industry-related topics, such as fixed income, financial statement analysis, and ethics, to name a few. The FRM certification focuses on risk management topics, such as market risk, volatility, liquidity, and inflation.

Applicants for the CFA charter

  • must pass all three levels of the CFA exam with at least a MPS (Minimum Passing Score)
  • have a bachelor's degree or four years of relevant experience, join the CFA Institute (CFAI®)
  • have two years of relevant investment employment experience

Candidates for the FRM certification

  • must pass two exams (Part 1 and Part 2)
  • have a minimum of two years of expertise in managing and working with financial risks and their management
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Salaries

Compensation for both the CFA and FRM designations predominantly depends on your:

  1. Job title (role)
  2. Years of experience
  3. Geographic location

Total compensation for many financial roles consists of base salary, cash bonuses, and equity, with bonuses accounting for a large portion of the remuneration in the investing sector.

CFA Charter

The typical average annual salary for financial research analysts is roughly $86,000 with a 5% yearly growth rate. With that said, the CFA program is designed for candidates to work in the capacity of executives and senior-level partners with salaries upwards of $250,000.

FRM Designation

The typical annual salary for financial risk analysts is roughly $62,000 with a 7% yearly growth rate. One thing to consider is that many FRMs candidates opt for the designation after receiving a CFA charter or other finance-related certifications. This also means they have already been working in the field for many years and depending on the varying job titles, the highest wages may not be reflected in determining the state median pay and can be upwards of $200,000.

Why Not Attain the CFA and FRM Designations?

Both designations could improve long-term career prospects in the financially competitive world, where employers prefer candidates with diverse skill sets and knowledge. Of course, one should be aware of the expense and time commitment associated with the five levels of exams, which require a combined total of 1,200 to 1,300 hours of study time.

The Deciding Factor

When it comes to a career, narrowing your options down to one decisive element might be difficult. The CFA and FRM designations are among the highest regarded in the financial industry and require significant time and effort. Choosing the one that fits your schedule and keeps you on track with your professional goals.

The CFA charter is intended for professionals working in investment management, such as investment bankers or portfolio managers. The CFA charter requires a candidate to complete challenging tests in economics, ethics, money management, and other financial issues. Not only is the designation well known and accepted worldwide, but also connects one to the best in the industry. The FRM certificate is ideal for those pursuing risk management or risk assessment careers in banks or corporate treasury departments. Risk exists for the typical investor, but it is also a reality for the financial institutions that serve them. An FRM certificate holder may assist a company with identifying risk, pricing risk into their products, and minimizing risk wherever possible.

Whatever career path you take should depend on your interests and passion for what you like to do.

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Frequently Asked Questions

The CFAI does not have an exam topic dedicated to risk management, but it does include similar content under portfolio management and wealth planning.

Given the three levels of the exam and individual registration price, the CFA exam is more expensive than the FRM Exam (which has just two parts). When the $350 registration fee is included, the overall CFA exam cost ranges from $3,050 to $3,950. The FRM costs between $1,700 and $2,000, depending on the student.
Because both designations demand significant effort and attention, pursuing the CFA and FRM programs simultaneously will impact your scores. The optimal approach would be to pass all the CFA exams before attempting the FRM.
To register for the CFA exam, applicants must have a bachelor’s degree or be in their last year of a bachelor’s program. You must also have an international travel passport and the ability to take the examination in English. The FRM program does not require any minimum qualifying criteria to take the exam. Even an undergraduate (in their graduating year) is qualified to take the FRM Part 1 Exam. However, you can only take the FRM Part 2 Exam once you have passed the FRM Part 1 Exam.

Read More About the CFA Charter

Getting the CFA charter or CPA designation is an important decision for anyone in the financial industry. This article will help you decide which one to choose.
Understanding the difference between the CFA charter and CFP designation is critical when deciding on your career path. This article will help you choose the best solution for your requirements.
Do you want to know whether getting a CFA charter would benefit your career? Here’s all you need to know about various job opportunities for CFA charterholders.
Want to compare CFA charterholder salaries worldwide and in other finance-related roles? Here is a list of the primary aspects that influence your compensation.
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