The MBA has been the choice degree for many hoping to work in finance but a rival three-letter qualification is pushing the business school staple to lose some of its lustre.
The rapid rise in the number of students taking the CFA examinations at Levels I, II and III has called into question the need for a full-time finance degree.
Some financial sector experts argue that students who have completed all three levels of the CFA exams and become chartered financial analysts have an advantage over those with an MBA or Masters in Finance.
“It dominates the MBA in the finance sector,” says Steven Young, head of the accounting and finance department at Lancaster University Management School.
The CFA qualification is being helped by growth in the number of charter holders. More than 160,000 candidates took CFA exams through 2014, up from around 50,000 in 2003, fuelled by demand from emerging markets.
“In the past two years we’ve seen important growth in the number of students who are interested in the CFA exams,” says Viet Ha Tran, senior associate director for finance programs at IE Business School.
The exclusivity of CFA — data suggest more than half of test takers will fail at each stage of their attempt — and the sheer complexity of what the students have had to study put an employer premium on charter holders.
“Most of the financial institutions are putting their junior employees through CFA training,” says Lancaster’s Steven.
Enthusiasm around the CFA exams is illustrated by the number of employers that have long targeted CFA holders. The top recruiters include JP Morgan Chase, HSBC, UBS and Citi.
“The CFA charter is often listed by hiring firms as a prerequisite for employment,” says Stephen Horan, managing director of credentialing at the CFA Institute.
CFA credentials are particularly sought after by asset managers. Aberdeen Asset Management for example, Europe’s largest listed fund house, requires the CFA or the Investment Management Certificate for some roles.
“Investment managers must prove [that] they can apply technical knowledge within an ethical framework. The CFA program is designed to do just that,” Stephen says.
What sets the CFA qualification apart, he suggests, it that it focuses specifically on investment knowledge — most graduate school programs cover a broad range of topics.
Another key advantage is that the CFA program can be completed alongside a full-time career. MBA programs, comparatively, have traditionally demanded at least 12 months of full-time study.
Then there is the cost. Each stage of a CFA qualification costs about $1,000. By contrast, the price tag of an MBA program at a top institution that requires two years’ study could be well over a hundred thousand dollars.
Where a business school qualification may have the edge, however, is in practicality.
IE’s Viet suggests CFA exams are theoretical, whereas business school programs can look at the same topics from a practical approach by applying concepts into real capital markets situations — a case study method of learning.
Business schools are also renowned for their networking opportunities. Alumni networks are a big benefit to a full-time degree.
Yet the CFA Institute argues it can provide an alternative. There is a global community of more than 130,000 investment professionals that charter holders can tap into, while test takers can become members of one of 140 local CFA member societies “This compares favourably to most alumni networks,” says the CFA Institute’s Stephen.
Many business schools have sought to partner with the CFA Institute and incorporate elements of the program into their degree programs.
For example, the two flagship programs at Warwick Business School — the MSc Finance and MSc Finance & Economics — have CFA-approved syllabuses. “We do not see the CFA as competition but as a partner,” says Alex Stremme, Warwick assistant dean.
At Frankfurt School, the Master of Finance course too is a member of the CFA Institute’s University Recognition Program. “Our students are very attracted by this and many of them sit CFA exams while pursuing their degree,” says Dr Julia Knobbe, program director at Frankfurt.
Increasingly, both sets of qualifications are seen by education providers as complimentary. “The CFA and MBA networks reinforce each other,” says the CFA Institute’s Stephen.