Financial advisors, stock brokers and investment professionals of all kinds swim in a sea of designations and certifications. Because each title has its own three- or four-letter abbreviation, the designations are known as the "alphabet soup" ofinvestment adviceindustry.
Two of the most strenuous yet financially rewarding titles areMaster in Business Administration(MBA) enQualified financial analyst(CFA). A potential financial advisor or anyone considering a career in finance or investing should consider their differences.
Should you invest time, resources and money in an MBA or a CFA?
Key learning points
- For financial professionals, two of the most important qualifications are having a Master of Business Administration (MBA) and a Chartered Financial Analyst (CFA).
- An MBA takes two years of full-time study in a program that often costs at least $100,000, with students taking classes that cover all aspects of business as well as the opportunity to focus on a specific industry.
- A CFA requires at least 19 months of self-study and passing three exams; it is less expensive than an MBA (less than $5,000) and focuses more specifically on investment analysis, portfolio strategy, and asset allocation.
- The average starting salary for those with an MBA is approximately $92,000, while those with a CFA designation can see an average starting salary of $98,000.
MBA study course
An MBA takes two years of full-time study, with classes covering different aspects of running a business. The courses range fromHuman ResourcesUnpleasantfinancial accounting, vanmarketingInsellmanaging operations,supply chains, and technology. Students earn MBAs in specific subjects, such as healthcare, communications or information systems technology, depending on which field interests them most. These degrees still emphasize a broad knowledge of core business concepts.
MBA Cost and Compensation
Obtaining an MBA is usually expensive. Students not only pay for two years of full-time graduate school or its part-time equivalent, but they also lose out on potential income during that time. A two-year MBA program can end up costing well over $100,000 from a top business school, not including room, board, books and peripherals.
The amount of debt for MBA graduates is high – up to $71,000 or more – and these are just the latest figures from October 2021.
Also take into account the consequences of the salary you lose during your studies. Of course, financial support can alleviate some of this burden, and some companies willcovers some of the costs for employees who want to earn an MBA. Ofreturn on your investmenthowever, can make it worth it. Earning an MBA from a reputable school can make you more attractive to employers because it demonstrates drive and work ethic, not to mention a solid network. It provides lifelong professional connections with dozens of other Type A overachievers with whom you have shared a long, hard challenge.
If you want onemanagerial role in a large companyor those in areas such as marketing, consultancy, finance orInvestment bank, it would be wise to at least consider getting an MBA. Healthcare is another area where middle and upper management is increasingly being filled with MBAs to better cope with changeinsurance,government regulationand patient record keeping standards.
An MBA is more expensive to purchase than a CFA and typically requires you to be a full-time student, while someone studying for a CFA can have a full-time job at the same time. The trade-off, however, is that an MBA often provides a bigger boost to your earning potential upon completion than a CFA.
CFA
The CFA designation, first introduced in 1962, gives those who pass three exams, known as charterholders, specialized skills such as:investment analysis,walletstrategy, andasset allocation.It is less common than an MBA and highly sought after among investment professionals. Regulators in more than 28 countries recognize the charter as an authority to meet certain licensing requirementsCFA Institute, which administers the test and awards the certification.
Financially, obtaining a CFA designation is cheaper than obtaining an MBA because the program is based on self-study and not classes. The only fees required are exam fees. These costs vary depending on how early you enroll, but the program cost is $900 and $1,200 for early and standard enrollment, respectively, plus a one-time enrollment fee of $350.
CFA is grueling and lengthy
Although affordable, the time required to earn a CFA is significant.CFA-examsconsists of three sections, each lasting six hours. You must pass each section before moving on to the next. For 2022, the first part, Level I, will be offered quarterly, while Level II will be offered in February, August and November and Level III only in May and August.
This means that if a candidate passes each section on the first attempt, taking the CFA is still a minimum 19-month journey. In fact, the CFA Institute says that candidates spend an average of 300 hours of study on each section, and that the average candidate takes four to five years to pass each section.The pass rate for each section has hovered around 45% in a given year, making CFA one of the highestgrueling testthat you are likely to encounter.
In fact, the general consensus is that the CFA exam is more difficult to pass and requires more study than the CFA examcertified public accountant (CPA) exam.. And that exam is certainly no piece of cake. Forum commenters on the CPA Information and Review site who are familiar with both exams generally view the CFA as the more challenging, requiring more study time. It's worth noting that since the CFA exam involves auditing issues, people with an accounting background have an advantage in taking it.
Some highly motivated individuals obtain both MBA and CFA credentials, providing them with training in both the broad and more specific aspects of business, wealth and portfolio management.
Who gets a CFA?
According to the surveys, Payscale estimates the national average salary for a CFA at $98,000.What kind of professionals can do thatchoose to get a CFA? “The most traditional career paths that the CFA Charter has been most relevant to are for thatresearch analystsand those who could go on to become portfolio managers,” says Stephen Horan, Ph.D., CFA, CIPM, former executive director and co-head of education at the CFA Institute. “However, the charter is a general investment certificate. It is increasingly becoming a useful tool for a wide range of careers, such as traders, brokers, academics, risk managers, regulators and senior executives. These non-traditional roles are the largest in their own right. category of charter holders."
Some motivated individuals pursue both MBAs and CFAs. Horan notes that MBAs and CFAs can complement each other: “Traditional MBA programs are broader than the CFA program, covering topics such as management, marketing and strategy, while the CFA program offers deeper coverage ofinvestment controlthan typical MBA programs.”
Having both an MBA and a CFA is especially valuable for portfolio and business management positions, Horan adds. Charter holders are increasingly working in corporate finance roles that would naturally be filled by MBAs.
According to a 2018 CFA Institute data report, the average age of CFA program graduates is approximately 28 years old. But today, younger students often begin the program in their senior year of school or shortly thereafter. Some graduate schools teach the CFA program within their MBA courses, allowing students to earn a degree and prepare for certification at almost the same time.
Is the Master of Business Administration (MBA) good for a career in finance?
Compared to the Chartered Financial Analyst (CFA), a Master of Business Administration (MBA) offers a broader overview of business principles. An MBA teaches students valuable analytical and leadership skills that prepare them for opportunities in a range of industries and careers in finance. For example, MBA graduates can pursue a career as a consultant,financial managers, financial analysts or financial managers.
Is the Chartered Financial Analyst (CFA) good for a career in investment banking?
The CFA serves as a valuable reference point for those interested in a career in investment banking. The rigorous curriculum includes skills in financial modeling, corporate finance, ethics and financial analysis, to name a few. In addition to investment banking, CFA charterholders often pursue careers in commercial banking, consulting and asset management.
MBA or CFA: Who Earns More?
According to Payscale, the average base salary for an MBA graduate is $92,000, while the average for those with a CFA designation is $98,000.
What is the Cost of an MBA vs. an MBA? a CFA?
Typically, an MBA costs between $80,000 and more than $100,000. In contrast, a CFA designation costs significantly less: less than $5,000.
How Long Does it Take to Complete an MBA vs. an MBA? a CFA?
Typically, an MBA takes two to three years of study, although some programs offer a one-year MBA. The CFA includes three exams – levels I, II and III – that take an average of four to five years to complete.
In short
Ultimately, both the MBA and CFA are valuable. Not only does an MBA improve job prospects and earning potential and help build a broader network, but in some cases companies will require an MBA for certain leadership or management roles.
However, CFA is highly sought after by professional investors working on itmoney managersInregistered investment advisers, the types of companies where many financial advisors get their first job and basic training and background.
