It is a choice many financiers face: Should I get an MBA or a CFA qualification?
This summer, a growing number of people chose the latter. In June, 227,031 candidates registered for Levels I, II, and III of the Chartered Financial Analyst exams—a 20% increase in the past year alone, and a record high figure since the exams were first administered in 1963.
Data suggest that the majority of them were destined to fail. The CFA is a complex curriculum for investment professionals, with candidates swotting for roughly 300 hours for each stage of the exams. In comparison, while it is exceedingly tough to get into an elite MBA program, you are pretty much guaranteed to pass.
Some believe that the sheer difficulty involved, and commitment required to obtain CFA status, as most candidates juggle full-time jobs, mean the three-letter-credential trumps the MBA. There are 154,000 CFA charter-holders globally—a growing yet still relatively small figure, giving the qualification exclusivity. In contrast, there are 11.7m applications to business schools each year.
“For anyone who wants to be serious on the buy-side—hedge funds, asset management or investment management—the full suite of CFA exams is unsurpassed,” says Steve Thomas, associate dean for MBA programs at London’s Cass Business School. He is also a member of the CFA Institute’s examinations committee. “CFA holders are quite seriously high-flying.”
While the CFA is a significant challenge, the flexibility of the exams—candidates study mostly independently, and maintain their careers—can be attractive. Many finance employers let staff take time off to obtain CFA qualifications—typically five days each year—as there is a mutual benefit. And as you’re working full-time, you won’t miss out on important industry developments. In comparison, an MBA degree requires that candidates pause their careers for up to two years, although part-time online courses are now more of an option.
Viet Ha Tran, senior associate director of finance admissions at Madrid’s IE Business School, says: “Most candidates try to pass the CFA exams when they are under 30 years old (and still working). A student can easily pass (a level of) the CFA if they prepare for it over six months, studying for two-to-three hours a day. Obtaining an MBA or other master’s degree typically requires 12-to-15 hours a day of study over a period of 12-to-18 months.”
Then there is the cost. The three CFA exams will set you back about $3,000 in total, plus annual membership fees for the CFA Institute, which vary by location. In the UK the dues are $440. On the other hand, a two-year MBA at a top-flight US business school will cost over $200,000 if you factor in tuition, living and travel expenses (not including the salary you will also sacrifice).
Although a larger number of people have an MBA, that arguably gives business school students an advantage: Networking. MBA candidates study in lock-step with each other, in a collaborative culture, forming tight bonds that can stand up to the test of time. “Networking is undoubtedly more relevant to MBAs, particularly full-time courses,” says a careers manager at a leading UK business school, who spoke on condition of anonymity.
“For a CFA there is no collaboration, no school,” the person adds. “The lack of a school or alumni structure does inhibit a network as people don’t study together for any length of time or much outside their current employer group.”
Another potential advantage for the MBA is that students study a broad curriculum covering all aspects of business and management. This can help them move into more senior management positions.
The careers manager says: “The CFA gives an understanding of business mechanics, value creation, economic cycles and governance practices. It does not teach how to lead a team or write a business plan, or devise a strategy for growth. The CFA equips investment people to move forward in their careers, but it is not about preparing you for leadership.”
Stephen Horan, managing director for credentialing at the CFA Institute, retorts: “We provide members and candidates with a strong network of more than 150 local member societies around the world where they can connect with peers and industry colleagues at many events throughout the year. Members are also invited to take on voluntary leadership roles at their local society, including several board-level roles, which provide non-executive management experience.”
He goes on to say that the two programs are highly complementary, and many CFA charter-holders earn an MBA later in their career. If you disagree, post so in our comments box below.