In today’s highly competitive workplace, employees look for any way to get ahead. Nowhere is this more evident than in the financial industry where ambitious workers often pursue additional certifications and designations.
Whether you’re considering a career in finance or already have one, furthering your education is a proven way to elevate your career trajectory, increase your earning potential and make you a more valuable asset to your company. But there are numerous programs and certifications that cater to the career advancement of financial professionals, so which one is right for you?
Two of the more popular programs in finance are the Chartered Financial Analyst (CFA) designation and the Masters of Business Administration (MBA) degree. This leads to a natural conflict, CFA vs. MBA.
These programs are often compared for suitability by aspiring prospects and there are a number of factors that need to be considered before deciding. These include the candidate’s expected career path, time considerations, program costs and compensation.
Career Path of CFA vs. MBA
If you work in investment management, or aspire to do so, you should consider the CFA program since the program is concentrated in investment analysis. The designation is highly coveted by asset management firms, and many aspiring analysts and portfolio managers choose this path.
A fast-growing destination for CFA is consulting, where charterholders advise institutional investors including pension funds and university endowments in the areas of asset allocation, risk management and manager performance evaluations. This allows these institutions to best serve their beneficiaries. CFAs are increasingly making into the C-Suites as Chief Investment Officers or Chief Financial Officers.
The MBA, on the other hand, addresses broader skill-sets that can be applied to more fields so the prospective student doesn’t need to have an established career path. Traditionally geared towards business and finance, an increasing number of MBAs are being lured into different fields, including health care and IT, speaking to the degree’s versatility.
This does not mean that getting an MBA won’t qualify you for investment management. There are several MBA programs with concentrations in Finance and some institutions such as Creighton University offer a Master program with a track for CFA exam prep. MBAs have traditionally been put on the management track and are no stranger to the C-Suites themselves. According to research from Spencer Stuart¹, roughly 40% of the S&P 500 CEOs have MBAs in any given year.
The CFA program encompasses the entire investment decision making process. But completing the CFA program is a grind and requires successful candidates to pass three progressively demanding exams and accrue four years of work experience in an applicable investment field.
The exams are stacked in a progression from the basic analytical tools needed in Level I, Asset Valuation in Level II. The capstone is Level III, Portfolio Management, where it all comes together. The program’s body of knowledge is huge and dives deep into complex and exotic financial instruments.
It is recommended candidates study at least 300 hours to be prepared for each of the three exams.
Further, the exams are offered only one day a year in June so the pressure is on to pass (Level I has switched and is now offered twice per year, June and December).
But it’s not all number crunching as candidates scrutinize ethical dilemmas in the industry early on in the program. CFAs must also adhere to strict ethical guidelines and complete an annual professional conduct statement for as long as you are a charter holder. It’s a difficult and solitary journey so you must be very self-motivated or you won’t complete the program.
But with the gains financial markets have enjoyed over the last few years, there has been a shift towards more passive investing, replicating a specific benchmark such as the S&P 500. This trend is at odds, in theory, with the active management approach of the CFA program which emphasizes spotting undervalued investment opportunities.
The MBA is more flexible in its structure and curriculum. The core concepts taught at most schools include finance, accounting, management, marketing and operations. But there is the opportunity for personalization with electives and concentrations. Finance and accounting are popular concentrations that could provide background applicable to many different careers.
The MBA program puts more of an emphasis on group interaction and presentation skills, mirroring many work environments. As in the workplace, a student’s assessment may be hindered by teammate’s deficiencies. So the students are learning not only the curriculum, but softer skills that can be just as important for career advancement.
There is more flexibility with time for the CFA program since the only absolute commitment is the annual exam date. There are no interim assignments, classes or group meetings. The program can take as little as two years, utilizing the December Level I offering, but most take at least three. However, you must have accrued four years of applicable work experience before the CFA charter can be awarded so for younger candidates that may be a deterrent.
Conversely, an MBA degree can be awarded in less time and depending on the transferring of credits, many MBA programs can be completed in a little over a year. Some universities allow ambitious students to earn credits directly towards an MBA while an undergrad which further speeds up the time to completion.
However, acceptance into an MBA program may require you to take the GMAT entrance exams. Although offered frequently, preparations for the GMAT which will increase your time invested. But more schools are weighing work and life experience against test scores and are waving the GMAT requirement.
Financial Considerations CFA vs. MBA
The average CFA candidate spends around $5,000 to complete the program. For 2015, the standard registration for each of the three levels $860. There is also a $425 one-time CFA program fee. Candidates are provided with a copy of the curriculum with registration but most use some type of study guides from exam prep companies.
Conservatively assume $1100 for third party study materials for all three levels. Since only about 1 in 5 candidates pass all three levels on the first attempt, meaning you can expect a fourth registration fee of around $860 to retake one exam.²
An often overlooked expense actually occurs after the charter has been awarded. Members must pay annual dues to the CFA Institute in order to maintain active status, $250 per year². Over a 25 year career, that would add another $6250, pushing the total to over $11,000.
Most CFA candidates don’t stop working through the program so there’s no major opportunity cost ramifications.
MBA programs are more expensive. A survey by GetEducated.com revealed the average cost of a regionally accredited MBA is $37,011. A top MBA program can considerably more expensive unless your employer is offering tuition reimbursement. If not, you may have to weigh the option of taking on a student loan. Getting your online MBA won’t be as difficult to juggle with full-time work but if you do go full-time to a university for your MBA you also must factor in the opportunity costs, including foregone compensation.
Return on Investment CFA vs. MBA
Both the MBA and CFA should result in compensation increases but, over time, many believe the MBA offers more upside. The average starting salary for an MBA is roughly $51,000 according to Payscale, and rises to almost $99,000 with 10-19 years of experience. An MBA with a concentration in finance can be even more lucrative where the median salary rises to $106,640 with 10-19 years of experience³. The networking alone at top business schools might be worth the cost down the road. A company is compensating for the access to your contacts and networks you cultivated during your MBA tenure, something the CFA probably can’t match.
The CFA designation is ubiquitous, in that the designation is the same for every charterholder. There is no brand recognition stemming from a particular school.
But the CFA offers attractive outcomes as well, with the national average salary of $80,000 according to Payscale³. The average starting salary is slightly higher, at $57,000 but this is probably skewed since you have had to accrue four years of work experience already for the CFA charter.
And if you can land a job at a buy-side firm, such as a hedge fund or private equity company, the compensation could be quite large if the firm has a profitable year.
Whichever program you choose, investing in yourself is the one investment that always pays off. The skills learned in these programs will make you a more valuable employee. Simply the initiative shown by attempting one of these programs will earn you points at your job. And if you’re still not sure on the MBA vs CFA, you can always get both!
Check out these other CFA related articles:
What you need to know about the three changes if CFA 2017 Exam
The CFA vs. MSF Debate
3 Jobs You’ll Need the CFA For
CFA Exam Strikes Again
Crunch Time for CFA Candidates