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CFA vs MBA: 8 Points to Help You Decide
 

300 Hours's picture
O
(Orangutan, 339
 
Points)
 on 12/19/12 at 1:00pm
cfa.png

As we've covered the MBA subject briefly in a recent post and many readers wrote in for more, a natural follow up would be the classic question: CFA or MBA?

A very, very popular question among potential candidates compares the CFA charter to an MBA - which would be better? Like most comparisons, the answer is - it depends.
Firstly, it’s a very tricky thing to compare a CFA charter and an MBA - they’re fundamentally different creatures addressing different disciplines. However, at the same time there is a real need to evaluate these two qualifications side-by-side these days, as many up-and-comers looking to reinforce their CVs look to these two qualifications and are not clear about what each can offer to them and their careers. 

In trying to address this scenario, I will therefore critique both qualifications based on the benefits gained from a career perspective, and the costs involved. Always remember - the better qualification depends on your individual case. Read these points carefully and consider your own case before deciding which to pick (if at all).

#1. CFA: great for finance

The CFA is the qualification if you’re looking to build a successful careers in asset management, private wealth management, equity research or in ratings advisories in financial institutions. In these sectors an MBA will simply not be as valuable as a CFA charter. A CFA charter will also be an asset in all other financial services, as well as additional recognition even outside of financial services especially in Asia and Middle East & Africa.

#2. MBA: more widely recognised outside of finance
However, the MBA has the CFA beat in most industries outside finance. Acquiring advance financial analytical skills does not have the same pizazz as an MBA in non financial industries (say, advertising or manufacturing). If you’re unsure of what industry you’re planning on spending the rest of your career in, an MBA might be a good consideration.

#3. CFA: more time-efficient
The CFA holds an edge over an MBA in terms of time needed for preparation - although the CFA program demands an approximate minimum 300 hours worth of study per level, you can schedule these as you see fit. As the CFA study program is a distance-learning program, many candidates find it perfectly possible to squeeze in study preparation with a full-time position - hence you can continue accumulating work experience (not to mention continue earning) while studying for your qualification. The MBA on the other hand, will require a typical 2 year full-time commitment, which can be a significant opportunity cost and impact your work experience.

#4. But you can expect to earn an MBA sooner than a CFA charter
Hang on a second. Doesn’t this point directly contradict the previous paragraph? Not necessarily. The shortest time period you can hope to complete your CFA exams is 18 months. And that is only if you start in December for your Level I and pass all your exams on your first try (which happens to about 4% of candidates). 

The average time for a CFA candidate to completion is 4 years, which is 2 years longer than the average 2 years for an MBA. Another point to remember is that the CFA charter will also require 4 years of work experience.

#5. CFA charter costs less
The monetary cost for qualifying for the CFA depends on how many exams you need to get there and how much you spend on prep materials. Typically this adds up to about $2,500 to $8,500, but can go up to $15,000 if you spend like a drunk oil baron’s first-born every exam, and fail several times. 

This still pales in comparison to an MBA’s weighty $200,000 cost over the full term. Adding the opportunity cost of not working for a typical 2-year MBA makes the CFA qualification much, much more cost efficient however you slice it.

#6. CFA & MBA success rates are about equal
Some arguments on the CFA vs MBA thread sometimes point to the CFA pass rates. About 40% of CFA candidates pass each year, compounding to a very low total pass rate across 3 levels. Comparing this to 95% pass rates at Harvard, surely that’s one point for the b-school folks? 

Not necessarily - that argument assumes you already have been accepted to a top-tier school like Harvard. If you factor in acceptance rates into a mid/top tier school, the chances of an average person acquiring a CFA charter and graduating with a mid/top-tier MBA are about the same.

#7. Both have great alumni networks
Both the CFA Institute and typical business schools maintain thriving global networks that will be further enhance your career. However just like the studying process, I feel that to benefit from the CFA network from a career perspective, a CFA charterholder has to be more driven and proactive compared to an MBA graduate. It’s not a matter of alumni participation or events, it’s just that MBA events tend to be tuned towards a networking & business angle whereas CFA events can take on a more academic tone.

#8. Who says you have to choose? 
At the end of the day, there are many people who end up obtaining both a CFA charter and an MBA. If you’re hell-bent on making your CV the best damn piece of paper the world has ever seen, by all means take both - it’s in no way a either-or situation.

In the end, it’s all about your personal goals and situation. If you’re looking for a qualification to enhance your career in finance or establish your finance credentials, the CFA is the way to go. If you’re looking for a qualification to boost your career outside of finance, or looking to move across industries, an MBA might be a better bet.

Have you chosen one or the other? Or both? Share your thoughts with us here, or check out our other MBA article: Should You Consider CFA Partner B-Schools?

CFA Blog - 300hours.com | Twitter | Facebook

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Comments

shark-monkey's picture

Nice post.

HF
 
Points)
 on 12/14/12 at 12:56pm

Nice post.

Fear is the greatest motivator. Motivation is what it takes to find profit.

barbariansatthegates's picture

Excellent for those trying to

O
(Baboon, 101
 
Points)
 on 12/14/12 at 1:20pm

Excellent for those trying to decide. Nice OP.

______________________
Please self insert a picture of someone pulling their hair out or Glenn Beck crying. Again

wannabeaballer's picture

I actually started to study

O
 
Points)
 on 12/14/12 at 2:13pm

I actually started to study for the Lvl 1 2 years ago, and quit half way thru because I realized that it was just a piece of paper that would typecast me as a research analyst. I wouldn't recommend research to someone I hated, so I dropped my CFA dreams and decided to pursue an MBA. I think the problem with the CFA is that anyone can sign up for and take the test, regardless of personal and career achievements. There are plenty of unremarkable people with CFAs. It has been a while since I last looked at the numbers, but I think that a majority of the test takers are foreigners who are looking for a stepping stone to better jobs. Using similar logic, the top MBA programs would only take the highest GMAT scorers and not ask for things like resumes, transcripts, interviews, recommendations, or career goals. I think the screening process that goes into top MBA admissions produces a smaller, more diverse group of driven leaders who will be capable of running organizations in the future.

Think of it this way: How many CFAs would trade in their charter for a Harvard MBA? How many Harvard MBAs would trade in their degree for a CFA charter? I think we all know the answer to this question.

Gun Control Discussion

Going Concern's picture

wannabeaballer: I wouldn't

(King Kong, 1,706
 
Points)
 on 12/14/12 at 2:44pm
wannabeaballer:

I wouldn't recommend research to someone I hated

Haha, are you saying that you have no idea what bros in their 20s do at hedge funds, or that working at a hedge fund isn't worth doing?

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

YellowRanger's picture

Second WannaBeABaller's

 
Points)
 on 12/14/12 at 2:56pm

Second WannaBeABaller's comments,

I took the plunge three years ago and tried L1 as well. There is a reason why a lot of people don't even show up to the test. For me, I realized two main points after studying many MANY hours. I reached my conclusion midway through a study session. Didn't even finish my second cup of coffee.

1.) Read the following quote very carefully.

"The CFA is the qualification if you’re looking to build a successful careers in asset management, private wealth management, equity research or in ratings advisories in financial institutions."

When you get a CFA outside that sub-set, people are like, "Wow, you must be real smart". That's about it... I don't understand why the CFA is clinging to an industry(s) which will likely never see large headcount increase ever again, but that's another debate ( or thread, hint hint, 300 Hours).

2.) Work smarter, not harder

If numbers are your thing, go for it. Have fun. But I don't know too many people who love analyzing the difference between US GAAP and IFRS. If you're getting the CFA, just to get the CFA, just stop now, and figure out if the CFA aligns with your long-term goals.

At the end of the day, anyone can be a number cruncher. I noticed that the people who are in the CFA 'preferred' positions already have degrees from target schools. Which led me to believe, it's not what you know, but who you know. So I opted for the MBA.

Common man, everyone knows the U.S. meritocracy will only get you so far!

duffmt6's picture

300 Hours: The shortest time

IB
(Neanderthal, 2,329
 
Points)
 on 12/14/12 at 2:59pm
300 Hours:

The shortest time period you can hope to complete your CFA exams is 18 months. And that is only if you start in December for your Level I and pass all your exams on your first try (which happens to about 4% of candidates)

Just wondering what the source is for this information? Empirically I find it difficult to believe.

"Social cohesion and puritanical morality place roughly on my list of concerns between whether I'll pick up jock itch at the gym this week (not likely, since I don't go the gym) and whether it'll rain in Christchurch, New Zealand next Tuesday."
-Eddie

Going Concern's picture

YellowRanger: I took the

(King Kong, 1,706
 
Points)
 on 12/14/12 at 3:04pm
YellowRanger:

I took the plunge three years ago and tried L1 as well. There is a reason why a lot of people don't even show up to the test. For me, I realized two main points after studying many MANY hours. I reached my conclusion midway through a study session. Didn't even finish my second cup of coffee.

You needed two cups of coffee for a Level 1 study session? Level 1 is basically the equivalent of intro level undergrad courses in finance, accounting, economics, and statistics/probability. I think I'm starting to see now why you don't like "meritocracy", haha.

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

McGurk's picture

duffmt6: 300 Hours: The

O
 
Points)
 on 12/14/12 at 3:05pm
duffmt6:
300 Hours:

The shortest time period you can hope to complete your CFA exams is 18 months. And that is only if you start in December for your Level I and pass all your exams on your first try (which happens to about 4% of candidates)

Just wondering what the source is for this information? Empirically I find it difficult to believe.

Pretty sure that it was meant to break it down like the following example:

December 2012 Level 1
June 2013 Level 2 (+6 Months)
June 2014 Level 3 (+12 Months)

If by some godsend you were able to pass Level 1 without studying, you can technically do things in 18 months minimum, no?

Going Concern's picture

duffmt6: 300 Hours: The

(King Kong, 1,706
 
Points)
 on 12/14/12 at 3:21pm
duffmt6:
300 Hours:

The shortest time period you can hope to complete your CFA exams is 18 months. And that is only if you start in December for your Level I and pass all your exams on your first try (which happens to about 4% of candidates)

Just wondering what the source is for this information? Empirically I find it difficult to believe.

I think he meant that 4% of candidates finish all the exams on the first try. Approximately equal to 35% x 35% x 35%, although those are a little lower than actual historical pass rates for each level. More like 8% using most recent pass rates.

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

duffmt6's picture

Going

IB
(Neanderthal, 2,329
 
Points)
 on 12/14/12 at 3:30pm
Going Concern:
duffmt6:
300 Hours:

The shortest time period you can hope to complete your CFA exams is 18 months. And that is only if you start in December for your Level I and pass all your exams on your first try (which happens to about 4% of candidates)

Just wondering what the source is for this information? Empirically I find it difficult to believe.

I think he meant that 4% of candidates finish all the exams on the first try. Approximately equal to 35% x 35% x 35%, although those are a little lower than actual historical pass rates for each level. More like 8% using most recent pass rates.

That method ignores conditional probabilities. I would estimate the actual amount to be much higher than 8%.

"Social cohesion and puritanical morality place roughly on my list of concerns between whether I'll pick up jock itch at the gym this week (not likely, since I don't go the gym) and whether it'll rain in Christchurch, New Zealand next Tuesday."
-Eddie

imallcash's picture

I've never heard a charter

IB
(Monkey, 57
 
Points)
 on 12/14/12 at 3:30pm

I've never heard a charter holder, or even a person who had passed at least level II, bash the program. Go figure that all of the whining comes from people who "attempted the level I exam." MBA, CFA, CPA are all extremely credible and should all be considered depending on where you are and where you want your career to go.

300 Hours your content is always great. keep it coming.

It's all manipulated with junk bonds. You can't win.

Going Concern's picture

duffmt6: Going

(King Kong, 1,706
 
Points)
 on 12/14/12 at 3:43pm
duffmt6:
Going Concern:
duffmt6:
300 Hours:

The shortest time period you can hope to complete your CFA exams is 18 months. And that is only if you start in December for your Level I and pass all your exams on your first try (which happens to about 4% of candidates)

Just wondering what the source is for this information? Empirically I find it difficult to believe.

I think he meant that 4% of candidates finish all the exams on the first try. Approximately equal to 35% x 35% x 35%, although those are a little lower than actual historical pass rates for each level. More like 8% using most recent pass rates.

That method ignores conditional probabilities. I would estimate the actual amount to be much higher than 8%.

I think you're right, although probability was probably my weakest area of the CFA's subject soup. It's assuming that someone passing an exam is an independent event, whereas in reality the chance of you passing all three exams on the first try is higher if you already passed one or two levels on the first attempt? What I'm more interested in knowing is the percentage of the pool of bros that sign up for Level 1 and ultimately end up getting their charter. I'm guessing it's somewhere around 20-25%, but I don't have all that much to base it on.

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

Oreos's picture

I'm aiming for both. never

HF
(Neanderthal, 2,459
 
Points)
 on 12/14/12 at 3:46pm

I'm aiming for both. never stop self improvement

YellowRanger's picture

LOLz, Did you study for the

 
Points)
 on 12/14/12 at 3:48pm

LOLz, Did you study for the CFA?

If you can remember all those formulas, I raise my glass to you good sir.

RiskyBizness's picture

duffmt6: 300 Hours: The

IB
(Orangutan, 275
 
Points)
 on 12/14/12 at 3:52pm
duffmt6:
300 Hours:

The shortest time period you can hope to complete your CFA exams is 18 months. And that is only if you start in December for your Level I and pass all your exams on your first try (which happens to about 4% of candidates)

Just wondering what the source is for this information? Empirically I find it difficult to believe.

Empirically or anecdotally?

I passed the L2 exam but am going to worry about the GMAT in the near term. Will def do L3 at some point, came too far not to. Also, while it's not applicable outside of finance, it's helpful outside of the specific roles quoted earlier ITT. I've seen a surprising number of people in IBD with it, especially considering the rap it has on here, and I think it is looked at as an either/or for the CPA in many corp roles.

Oreos's picture

YellowRanger: LOLz, Did you

HF
(Neanderthal, 2,459
 
Points)
 on 12/14/12 at 3:49pm
YellowRanger's picture

There are a flurry of holders

 
Points)
 on 12/14/12 at 4:00pm
YellowRanger's picture

"me? yes." (Raises glass,

 
Points)
 on 12/14/12 at 4:04pm
Going Concern's picture

YellowRanger: Quit Early and

(King Kong, 1,706
 
Points)
 on 12/14/12 at 4:05pm

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

suchislife's picture

I'm going to chime in with my

PE
 
Points)
 on 12/14/12 at 4:29pm
Oreos's picture

suchislife: I'm going to

HF
(Neanderthal, 2,459
 
Points)
 on 12/14/12 at 4:35pm
Boothorbust's picture

Mostly really well made

O
(King Kong, 1,130
 
Points)
 on 12/14/12 at 5:12pm
n1cktm's picture

How about the CPA, is the

(Orangutan, 304
 
Points)
 on 12/14/12 at 6:29pm
300 Hours's picture

I'm assuming you're enquiring

O
(Orangutan, 339
 
Points)
 on 12/15/12 at 3:34am

CFA Blog - 300hours.com | Twitter | Facebook

See my other WSO posts

YellowRanger's picture

suchislife: The thing is,

 
Points)
 on 12/15/12 at 6:59am
Going Concern's picture

300 Hours: I'm assuming

(King Kong, 1,706
 
Points)
 on 12/15/12 at 10:15am

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

suchislife's picture

YellowRanger: suchislife:

PE
 
Points)
 on 12/15/12 at 5:28pm
R0bin's picture

Let's keep this in mind, not

(Orangutan, 292
 
Points)
 on 12/19/12 at 4:47pm

Baby you're the perfect shape, baby you're the perfect weight. Treat me like my birthday, I want it this way and I want it that way. It makes a man feel good baby.

sharkridingbear's picture

Long time lurker first time

(Chimp, 1
 
Points)
 on 12/19/12 at 4:49pm
AQM's picture

I don't know if this has been

IB
(Orangutan, 331
 
Points)
 on 12/19/12 at 11:25pm
suchislife's picture

AQM: I don't know if this has

PE
 
Points)
 on 12/20/12 at 10:19am
Callmeking's picture

Too much quals + not enought

 
Points)
 on 12/23/12 at 6:43am
xmasboy's picture

The average time for a CFA

 
Points)
 on 12/26/12 at 10:01am
inkybinky's picture

I'm a Level 2 Candidate and

AM
 
Points)
 on 12/26/12 at 2:14pm
LBObuyout's picture

I have nothing against CFA,

IB
(Baboon, 174
 
Points)
 on 12/26/12 at 3:10pm
jonkil's picture

Hi guys, found this post

(Chimp, 1
 
Points)
 on 3/12/13 at 9:43am
Boothorbust's picture

jonkil: Hi guys, found this

O
(King Kong, 1,130
 
Points)
 on 3/12/13 at 2:58pm

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