CFA or MBA: Which Should You Choose?
Choosing between a two-year and a one-year MBA program isn’t the only big decision facing applicants. If you’re looking to work in investment banking, you have a different dilemma: MBA or CFA (Chartered Financial Analyst)?
The few, the proud, the CFAs. OK, maybe there are actually 115,000 CFAs…but they certainly earn the designation. There are three levels to the CFA, with applicants required to pass a test at each level to move on. Here’s the tough part: According to eFinancial Careers, each exam involves 300 hours of study. In terms of a 40-hour work week, the CFA requires nearly 23 weeks of study. If you believe the conventional wisdom that the GMAT requires 100 hours of study, then the CFA is the equivalent of nine GMATs. And you thought one was bad enough!
So which designation is more attractive to employers? Well, that depends on the employer, role, and context. If you’re looking for some hard-and-fast rules, here is how the CFA stacks up against the MBA in key areas:
Cost: Picture this: It costs $1,000-$1,700 to take the CFA according to eFinancial Careers. That’s $5000 total if you pass each test on the first try. An MBA program? Try anywhere from $65K-$120K. And that doesn’t count living expenses, either.
Compensation: The CFA doesn’t track member incomes. However, a 2012 report from the Canadian CFA Society showed CFAs earning $240K on average. For MBAs, starting pay ranges from $138,346 (Harvard) to $84,281 (University of Florida). However, an MBA can boost graduates salaries by up to $3 million dollars over 20 years. In other words, there just isn’t enough information to compare the two. Let’s call it a draw.
Speed to Market: Generally, applicants start their CFA early in their careers, while MBAs must accrue four or five years of experience before applying. In short, CFAs can use their credential to increase their earning power sooner.
Exclusivity: Consider this: In 2012, nearly 191,000 students graduated from MBA programs. That contrasts with 115,000 CFAs worldwide. In other words, MBAs – particularly from non-elite schools – are more of a commodity than CFAs. This is reinforced by eFinancial Careers’ own website, which found that there were 24 resumes “for every job asking for the CFA qualification,” while there were 27 resumes for every role requiring the [MBA].” Then again, considering the wide margin between the number of CFAs and MBAs, this small discrepancy might reflect greater stability and job satisfaction among MBAs…at least in the financial sector.
Content: The advantages and drawbacks depend on what students are seeking. For highly quantifiable know-how in the financial sector, the CFA is the way to go. According to Kate Lander, who heads overseas education for the CFA Institute in Europe, the Middle East, and Africa, the CFA allows professionals to “seamlessly move between functions within the financial sector, because the depth of knowledge acquired through the qualification allows them to do so,”. Conversely, MBAs cover all aspects of business operations. While an MBA’s knowledge may not be as deep as that of a CFA, it can often be broader, says Richard Bland, head of employer engagement at the London Business School. “Seeing the bigger picture about the growth prospects of a company, sector expertise, softer and broader management skills as well as the ability to build relationships are all developed during an MBA. Investment banks are increasingly asking for these over technical skills.”
Flexibility: Here, the MBA is the clear winner, as it gives students a wider range of options beyond the financial sector. “We’ve had people who started out trying to get into investment banking or private equity, but ended up working for Shell,” Bland tells eFinancial Times. “An MBA offers that unrivalled diversity of career options.”
According to Bland, “CFA candidates are getting younger, while MBAs have remained in the older age bracket.” So maybe the most apt comparison between the CFA and MBA is Pepsi and Coca-Cola. Sure, Pepsi has the coolness factor, but Coca-Cola holds a bigger market share and more revered brand. Either way, you’re bound to end up refreshed.
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Source: eFinancial Careers