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:
- How committed are you to go deep in finance?
- How much money can you invest into this education?
- 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.