The CFA Institute has pulled off a feat to which few others could lay claim. The provider of chartered financial analyst (CFA) qualifications has increased its applicant pool six-fold in the past ten years from less than 20,000 in 2004 to nearly 120,000 today.
The CFA is gaining ground as the preferred financial qualification. It is beginning to eat business schools’ market share.
Since its inaugural cohort of 1963, the institute has pumped out about one million graduates, most into the financial sector. If pass rates were not stubbornly low, an even bigger slice of its two million test-takers would be CFA holders. Last year’s cohort was one of the biggest on record.
During that same year, some business schools have begun to flop. About 50% of schools world-wide reported decreases in applications on one and two-year MBA programs, according to Graduate Management Admissions Council data.
The CFA has been a disaster for business schools. But it is not just financial analyst’s exams that are gaining ground in the financial sector. The MBA degree faces increased competition from a raft of professional bodies including the ACA and CIMA accountancy qualifications.
An MBA used to guarantee graduates a job in the City of London or on Wall Street, but over the years it has lost much of its sheen. “The perceived value of an MBA is probably lower than it was 10-20 years ago,” says Steven Young, head of the accounting and finance department at Lancaster University Management School.
There has been a shift to shorter, sector-specific qualifications. Many of these are considerably cheaper than MBA programs. They also allow students to continue in full-time work.
A cadre of business schools have responded to the change by launching master of finance degrees – which can be completed in less than a year, and require little or no work experience.
Others have partnered with professional bodies to deliver parts of their qualifications into MBA and master’s curriculums. HEC Paris, for example, will deliver a course on ethics and compliance in collaboration with the CFA Institute in its new MBA-MIF dual degree, while Lancaster recently launched a specialist master’s program which prepares students for CFA Level I.
There is a perception that employers now place more value in sector-specific skills. The MBA, which is seen as a generalist management degree, is beginning to look old fashioned.
“Recruiters are being savvy now. They’re saying we won’t look in one place, we’ll look in the broader world,” says Derek Walker, director of careers at Oxford’s Saïd Business School.
“Competition is not just with other students, it’s the whole external marketplace. There will be some external qualifications that might give you the edge,” he adds.
Derek points to CFA as a qualification increasing in value – but more so on the on the asset management side of the sector. Many other business school insiders agree.
“CFA is now emerging as the industry standard qualification in the finance sector, particularly in areas such as fund management,” says Steven.
But he says that the MBA may never have been the primary route to success in many finance-related areas such as auditing, insolvency, tax, equity and credit analysis, and portfolio management.
“The application of new techniques from different disciplines to finance problems means that firms are increasingly valuing specialised skills,” Steven adds. “I’m guessing that technical expertise combined with professional accreditation always dominated in these areas.”
Graduates who would once consider an MBA are instead turning to professional qualifications in areas including accountancy, such as the ACA and CIMA exams to secure careers in the financial sector.
As many as 50% of ACA holders are now employed in business, according to Gavin Aspden, director of qualifications at ICAEW, the body which runs the exams. He thinks the ACA is a “passport” to a wide range of careers.
“We don’t have bean counters anymore,” he says. Chartered accountants might work in a fnance role but in a FTSE100 company as opposed to working for a firm of accountants, Gavin says. “We’re testing the ability to solve business problems… Half our exams are business-based.”
The ACA is longer than an MBA program – it normally takes between three and five years to complete – but it is much more practical. Students have to complete 450 hours of training with an employer, whereas an MBA usually requires one or two years out of industry with a summer internship as its main practical element.
“The practical work experience is fundamentally linked. It enables flexibility,” says Gavin.
Then there’s the cost. It’s difficult to define – Gavin estimates anywhere between £2,000 and £3,000 over a three-year period – but it is considerably cheaper than an MBA, which can cost upwards of $100,000 per year at a top-flight business school.
There has also been considerable growth in the number of companies funding employees to take the ACA exams over the past decade, says Gavin.
A frequent criticism of MBA degrees is that they are long on theory and too short on practical experience – although business schools will deny this.
“Many MBA [programs] out there are fundamentally theoretical, whereas you have people out there earning good salaries while training to become chartered accountants,” says Gavin.
It is a similar story with CFA exams. Each stage of a CFA qualification costs about $1,000.
“The self-study format allows candidates to continue working full-time while they earn the charter,” says Kate Lander, head of education for EMEA at the CFA Institute.
The number of CFA charter holders has increased across the US and Europe, but there has been exponential growth in the Asia Pacific area.
The CFA’s specific coverage of investment knowledge makes it stand out. “Recruiters and employers see the CFA charter as a stamp of quality,” says Kate.
But it is argued that professional qualifications, though increasingly popular, lack networking opportunities, which is a key component on business school programs like MBAs.
Derek says that MBA students have an edge in the breath and depth of their network – people come to MBA programs from all walks of life.
“One of the reasons people come to business school is to build a network – not just class, [but with] access to alumni. Our guys are with each other for a year… It’s an intense experience,” he says.
The CFA argues, however, that it can match this. Test-takers can become a member of one of 144 CFA societies globally. These societies provide regional and global conferences, and allow members to network with peers in the financial sector.
It is a sentiment echoed by Gavin: “A business school positions you amongst likeminded people with a potentially similar objective – an accountancy qualification does the same thing.”
However Steven thinks that in many cases professional qualifications offer more networking value, through on-the-job training. “The traditional full-time study model offered by business schools struggles to complete with this form of training,” he says.
Recruiters are now considering professional qualification holders for a wider range of jobs in the finance industry. Kate says: “In the past, the designation was mostly relevant for front-office roles and analysts, but it [CFA] is becoming increasingly useful for those in sales and relationship roles, risk managers as well as positions in the middle office.”
While there is value in networking to secure jobs, it is clear employers in the financial sector are warming to professional qualifications.
“This day of single track recruiting, particularly in MBA programs, is not as strong as it was – and this means students have to work harder and understand [how to] maximise value,” says Derek.
“There will be some external qualifications that might give you the edge, [but] is one thing better than another? I don’t think so. It’s the whole package being looked at.”