CFA Charter or the MBA

 

When a person decides to pursue a career in finance, minimalistic research of the market and educational sector inspires a question in him – Is his time and money best invested into a Chartered Financial Analyst (CFA Charter) designation or in pursuing a Master’s degree in Business Administration (MBA)? While there is no doubt about the credentials of either option, each being able to provide high salaries and future growth prospects, the actual answer to this question has to be derived from various factors, such as goals, resources, background, time limit or monetary limitations.

What is your future aspiration?

One way to differentiate between the two degrees is on the basis of their curriculum. While the CFA program fulfills the depth requirements of the finance sector, it is not very wide over the other business areas. Thus, if you go for the CFA charter, you might be in trouble later on in your career, if it strays from the finance sector into some other sector, as your curriculum will not cover much of that.

On the other hand, the MBA curriculum is rich in breadth but not in the depth requirement across all sectors. For a managerial candidate, this allows fluidity and knowledge across fields of study, not restricting one to finance.

In summary, one’s decision on where to go must depend on how committed one is to an exclusively finance career.

What is the cost of education?

Most people choose to go into a CFA charter or a MBA program for the high salary and big and new career prospects. Most finance jobs today need an MBA or a CFA charter from the applying candidate. When one has two options, one can choose on the basis of many things, for example the cost of acquiring such a degree. This can be quantified by making a few assumptions on the two cases.

The CFA charter includes three levels of examination. Since these exams are very hard it would be naïve to presume that one could complete it in single attempts. Thus, our first assumption will be that on an average it takes 4 years to complete all three levels. Since one has to pay a one-time enrollment fee and then exam fees which together comes up to about 1815$. Since the CFA is a self-study program there are no class room costs that one has to fulfill. However, the preparation can cost on a variety of scales. On the lower end, a student needs to buy study notes, text books, and study material at certain price ranges.

Of course, realistically speaking, usually candidates need more additional preparation, like study seminars, online programs, software, audio and video programs, or flashcards. Obviously, such a comprehensive study schedule costs easily as high as 2000$ annually. On a more lenient scheme, if we presume a moderate amount of around 1000$ per year. So, if a candidate finishes his exams in four years, that would bring up the study material cost to 4000$. Therefore, an estimated cost for getting a CFA charter, other than the four year work experience needed, the total cost for obtaining a CFA charter, including registration and test prep, comes out to be around 5,815$.

The cost of studying an MBA on the other hand, ranges dramatically across the board, depending on which institute provides the education, and in which format. On the lower end, say at a state university, in a part time program or long distance education could cost 20,000$, while on the other end of the spectrum, an Ivy League education could cost as high as 100,000$.

So, in conclusion, the cost of obtaining an MBA is easily more than 4 or 5 times the cost of getting a CFA charter.

How long does it take to get the certifications?

Now, while the average suggests that a person takes about four years to complete all three levels of the CFA exam, one must also remember that since December 2003, the Level I exam could be taken twice per year. Thus, if a person gives the Level I exam in December, the level II in the following June, and the Level III next year, then he can finish the CFA exam requirements in around two and a half years, best case scenario, provided he does not fail any of the exams. But since the passing rates are as low as 35% for level one, 42% for level two, and 48% for level three, one must understand how hard it will be to achieve that. Also there is a requirement of four years or relevant work experience for a CFA charter. If taken during the exam phase, it makes it that much harder to complete the exams in two and a half years. Taking the average optimistic course, we can estimate a time of three to four years for the assumption of 4 attempts.

As opposed to the CFA, most full-time MBA courses are of two year durations, while part time courses last 3 to 4 years. This is one of the benefits of MBA over CFA that it qualifies you for a well-paying job well before and CFA charter that started along with you. This means that one can start earning earlier than a CFA charter. Also, a fixed program means anything going wrong will need to be resolved within the same time frame.

Which course provides better value for my money?

In this regard, CFA takes the lead slightly, because we just established that more investment in needed for an MBA degree. In such a scenario, where both MBA and CFA pays around the same range, the returns to investment ratio is higher on CFA’s side than on MBA’s side.

Which is the better mode of study?

Where the CFA charter and the MBA degree differ most, is in the mode of study. CFA is a self-study program, and can be done in as much time as the candidate wants to take. However, MBA is usually a classroom program. Thus it includes a set time setup.

While a CFA charter provides you the benefit of time, an MBA provides you the benefit of comprehensive study plan. There are quizzes and projects and progressive exams that need to be cleared to keep track of your progress, which are not available in CFA. However, CFA allows you to learn at your own pace, which the cramped space of an MBA curriculum does not allow.

So what is the final verdict?

There is no perfect fit for everyone, one must choose between the two on the basis of their own needs and preferences. If you want to go down the management or finance way, check three things:

  1. How committed are you to go deep in finance?
  2. How much money can you invest into this education?
  3. How fast do you want to get past the charter or degree and start getting paid?

The answers to these questions, as discussed above, can provide you with a clearer picture of which way you want to go.

Devise your own Strategy for the CFA exam

“If you fail to plan, you Plan to fail”

 

Those are the simplest yet the most precious words of wisdom on offer. Now it is up to you whether you buy it or not, for planning and strategizing are quintessential for ensuring success in every single challenge of life. And if you know – taking the CFA is one huge challenge in life. The official website https://www.cfainstitute.org itself reads “The CFA charter is a globally recognized, graduate-level investment credential awarded by CFA Institute. To earn the CFA charter you must complete the three challenging levels of the CFA Program.” So it’s not just me who refers to CFA as a challenge, the view is endorsed by the CFA institute as well.

Now since we are concerned with passing the CFA, let us concentrate specifically on planning for CFA. Here are a few points to remember that may make your planning more effective:

Devise a strategy that reflects you

Remember that it is rather critical to devise a plan or strategy that is custom made for you; one that fits you, your work cycle, your time preferences and your style of study. A borrowed plan is at most borrowed and simply not the right way to go. But that doesn’t mean that you don’t take ideas from other’s success stories, make the most out of them by carefully analyzing all the tips, tools and resources that are available and rephrase it to suit you and your comfort level.

Don’t follow any advice blindly

Overdoing things really don’t help especially when it comes to cracking a tough nut like CFA. So stick to your comfort level while planning, otherwise your plan will be exhaustive and not productive. Again blindly following advice will not help you either. For example if you have been used to working Texas Instruments BA II Plus, and on the day before the exam you happen to read an article which says Hewlett Packard 12C is more efficient, then you cannot switch to HP 12C right away. You need to be comfortable with your tools on the D-day. The comfort will itself translate into efficiency.

A different plan for each level

CFA is a three tiered exam and each level is distinctly different from each other. So you cannot approach each of the three levels with the same plan. In case you think the same strategy will work for all three levels, then you may also consider wearing the same outfit to the job interview, to your friend’s wedding and to the college re-union.

Research well before you Plan

Doing a fair round of research and understanding the entire exam process well before sitting down to plan is absolutely essential. Check the official websites for the latest updates on the rules of the exam, the test centers, the time duration for each level and each session of the exam. These are the must-knows, which are subject to change. So keeping a tab on these details is really important, since any alteration in these would mean that you need to alter your plan accordingly.

Read and Write

Reading out quality articles and blogs which discuss the various aspects of the CFA exam and provide tips for preparation of each of the three levels as well as links to various resources prove to be a great help. You may have to refer to them to make your plan effective enough to clear the CFA. Noting down the pointers that suit you will help you when you work out your individual plan.

Plan before taking the plunge

The planning for taking the exam begins with a proper decision of whether you want to take the exam at all. Statistics reveal that the number of dropouts from the CFA is pretty alarming. So I guess the first one should be sure whether he/she wants to invest time to take the exam as the three level exam takes time and ample determination as one may not clear the exam in one go or even in the first few attempts. The pass percentage for any level of the CFA has not been more than 50% ever, so take a call with suitable thought.

Plan in details for each step

Now that you have planned to take the CFA, you must sketch out a plan for every single step. For level I, the planning should ideally initiate with when you want to take the Level I exam, whether in June or in December.

Next comes the macro plan or the main strategy, which is the real plan about preparing for the exam. Planning for time management is the key to success in level I. Also you should plan well in advance -what stuff would you like to carry to the exam center, so there is no confusion on the day of examination. When every thing is ready in place, you won’t waste time searching for each little thing.

Plan for the transportation

After all the hard work you surely would not like to reach the test center late and miss out any precious time. As the exam tension peaks highest in the last few days before the exam, it is a good idea to plan for the transportation to the test center when you are planning for the entire exam process. This will certainly spare you the glitches in transportation and avoid getting late.

Plan to Relax

Yes, even that needs due planning. You have to spare time between the stiff schedules of work and exam preparation to relax and chill out, because that is necessary to keep you going. Earning the CFA charter takes time, so going on an “all work, no play” mode is not advisable :-)

Finally, Execute your Plan

Need I to elaborate this point? Planning without execution is meaningless, so be confident of your plan, stick to your own strategy and don’t get swayed by others. You will see it does pay off well, when you do things your way.

Best of luck with your preparation !