CFA® vs. GMAT

I'm going to start off by saying this is not another CFA® vs. MBA thread. The purpose of this thread is to address a completely different issue. I'm trying to figure out what percentage of the college educated population is even capable of passing all three levels of the CFA® and what percentage of the college educated population is capable of getting a 700 gmat score.

MBA: Looking at gmat practice tests, I get the impression that it is more an aptitude test than a test of knowledge. If someone's raw score is 500, no matter how much they study, odds are they're never going to get a 700.

CFA® : From what I've read (can't find it now) ~7% of the people that originally sit down for level 1 of the CFA® actually end up passing all three levels. That's a pretty low number, but to be fair, there are quite a few considerations bringing that number down. A large number of the people that sit down for level 1 are people trying to break in from other industries, a lot of people just give up after they figure out how much material the CFA® covers, and a lot of people simply decide to invest their time into other endeavors. From my brief experience studying the CFA® level 1 material and looking at practice tests, it seems to me like the CFA® is a test of knowledge, rather than a test of cognitive ability. I think if you put in the time, effort, and are willing to keep trying after failed attempts, odds are you're eventually going to pass.

In conclusion, if you have a relatively average IQ and want to work in the investment management industry, I think the CFA® is the way to go. Opinions monkeys?

CFA® vs MBA difficulty

It is worth considering that only 10% of applicants who take the GMAT score in the 90th percentile or the 700+ range. On the other hand, the amount of applicants who pass all three levels of the CFA® is about 8 percent. Here are some thoughts from the community on the GMAT vs the CFA® .
from certified user @Going Concern"

I agree...if I spent the same amount of time studying for the GMAT as I did for the CFA® (let's call it 400+ hrs), I would be expecting a solid 800.

from certified user @Marcus_Halberstram"

What percentage of college educated people are capable of passing CFA® or scoring over GMAT 700? Capable of? How would you even begin to measure that?

I'd venture to guess close to 100%. Are they willing to dedicate the time and resources to hit either of those thresholds... thats impossible to say. And stupid to debate.

It's not PhD in fluid dynamics from MIT... some people just don't have the mental horsepower to do that.

What the GMAT tests more than anything else is how motivated the test taker is to achieve a high score. Its at its worst high school math with some time constraints and tricky wording.

CFA® is tests knowledge. With enough time spent studying, there's no reason you can't learn the material and pass it. Is it more work than the GMAT? I'd certainly hope so, you take it across several years.

from certified user @oreos"

I love these threads which boost my CFA® ego.

Personally, i agree that the exams are totally different. You are (to an extent) born with the equipment to get high GMAT (or not, as the case may be), but you can just learn the CFA® (again, assuming you can tie your shoelaces etc.).

Recommended Reading

 

As someone who got a 700+ and is sitting for Level III, I can say that passing all 3 levels is miles tougher. I find it truly hard to believe that if you are capable of learning everything well enough in the CFA curriculum to pass, that there is no way you can't master basic grammar and addition/ multiplication well enough to get a 700+

 
FutureBanker09:

As someone who got a 700+ and is sitting for Level III, I can say that passing all 3 levels is miles tougher. I find it truly hard to believe that if you are capable of learning everything well enough in the CFA curriculum to pass, that there is no way you can't master basic grammar and addition/ multiplication well enough to get a 700+

I agree...if I spent the same amount of time studying for the GMAT as I did for the CFA (let's call it 400+ hrs), I would be expecting a solid 800.

 

Sure, the people capable of scoring a 700 on the GMAT can do so without much effort, relative to passing all three levels of the CFA. The point I'm trying to make though is that the people who scored a 500 or below on their initial GMAT attempt are unlikely to ever touch 700, whereas I think passing all three levels of the CFA is something most people can do with enough time and effort.

Competition is a sin. -John D. Rockefeller
 

I've taken the GMAT and passed CFAI and I agree with this last comment. The CFA, as grueling as it is, is about memorizing formulas and concepts whereas the GMAT is a live exam that has more of an IQ element to it and the questions are increasingly complex as you answer them correctly. Someone who couldn't even crack 600 on the GMAT could pass the CFA if they have the discipline and will power, but not necessarily vice versa.

I only studied for 6 weeks for CFAI and passed comfortably, but I did not break 700 on the GMAT. The CFA measures your understanding of finance, GMAT measures mental aptitude.

 
Industry84:

I've taken the GMAT and passed CFAI and I agree with this last comment. The CFA, as grueling as it is, is about memorizing formulas and concepts whereas the GMAT is a live exam that has more of an IQ element to it and the questions are increasingly complex as you answer them correctly. Someone who couldn't even crack 600 on the GMAT could pass the CFA if they have the discipline and will power, but not necessarily vice versa.

I only studied for 6 weeks for CFAI and passed comfortably, but I did not break 700 on the GMAT. The CFA measures your understanding of finance, GMAT measures mental aptitude.

Level I is a joke, come back after you've attempted II and III. Of course passing Level I is easier than a 700 on the GMAT, but that's not the question.

And as someone who's taught the GMAT it is formulas and rules, i.e. paralellism, subject verb agreement, triangles, basic permutations. A hell of a lot less than all that has to be learned and applied to pass level II Financial Statements. I've also yet to sit for III but from what I've read so far and heard there are hardly any formulas, and III is mainly application.

 

The CFA is useful, the GMAT is useless. It is simply a quick and dirty way to eliminate people when it comes to admissions. Same thing with IQ tests.Honestly, all of these standardized tests are nothing more than a necessary evil. They define people when they shouldn't.

 

I love these threads which boost my CFA ego.

Personally, i agree that the exams are totally different. You are (to an extent) born with the equipment to get high GMAT (or not, as the case may be), but you can just learn the CFA (again, assuming you can tie your shoelaces etc.).

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

Oreos, I'm guessing you have your CFA charter, so congrats. The GMAT can be easily taught and beat by anyone, and I really don't consider it an IQ Test. Now if you would have said getting a 170+ on the LSAT that's a different story. I consider the LSAT to be much more fair comparison as opposed to the plug and chug GMAT.

 

Have to agree with TNA. I don't expect that anyone with average IQ couldn't do well on these. It's much more a function of how focused and how much time you spend on learning/practicing the things that matter.

If you have above average IQ and do poorly, then you have only your poor work ethic to blame.

Get busy living
 

What stupid question/debate. What percentage of college educated people are capable of passing CFA or scoring over GMAT 700? Capable of? How would you even begin to measure that?

I'd venture to guess close to 100%. Are they willing to dedicate the time and resources to hit either of those thresholds... thats impossible to say. And stupid to debate.

It's not PhD in fluid dynamics from MIT... some people just don't have the mental horsepower to do that.

What the GMAT tests more than anything else is how motivated the test taker is to achieve a high score. Its at its worst high school math with some time constraints and tricky wording.

CFA is tests knowledge. With enough time spent studying, there's no reason you can't learn the material and pass it. Is it more work than the GMAT? I'd certainly hope so, you take it across several years.

 

Long-time lurker here; finally had to chime in... I passed all 3 levels on my first attempt (ethics note: this does not mean I make better investment decisions) and scored 740 on the GMAT. The GMAT is much, much, much easier. I have to side with FutureBanker, you can learn to ace to GMAT, so it's not a pure IQ test. I'm pretty sure most people would break 700 if they put in the 1000+ hours require to pass all 3 CFA levels.

 

Haven't looked into the cosmetology certificate, so I can't speak to that. All I'm saying is that I disagree with OP's impression that the GMAT is "more an aptitude test than a test of knowledge." To FutureBanker's point, the GMAT has a finite amount of information that it can test on. In my opinion, that amount is less than the amount that can be tested on the CFA exams, and is therefore easier.

 

^I laughed.

Reminds me of arguing with my friends about grades vs. test scores. It just reveals biases.

Better SAT than GPA? Obviously the SAT is a better measure of awesomeness, classes are for drones.

4.0 GPA but average SAT? Good luck making it in the real world without any work ethic, dipsh*t.

Fill the unforgiving minute with 60 seconds of run. - Kipling
 

I think there's some biases here because most of the people here are smart people to begin with. How many people score a 450 on the GMAT and then score a 700 after multiple attempts and hundreds of hours of tutoring/studying? From what I've found, most people only end up scoring ~100 points higher than their first attempt, even after extensive studying. That test tries to trick people and under the pressure of the clock, certain people are just not capable of scoring a 700.

The CFA has way more material to cover but the questions are straight forward. If you memorized all the formulas and rules, you're probably gonna pass.

My 2 cents anyway.

Competition is a sin. -John D. Rockefeller
 
Hooked on LEAPS:

The CFA has way more material to cover but the questions are straight forward. If you memorized all the formulas and rules, you're probably gonna pass.

My 2 cents anyway.

You know nothing, again as has been echoed please go sit for Level II and III. Trust me you need to apply these formulas, and there are 20x more than what you would need to know for the GMAT. Also Level II and III are intentionally deceptive in the wording and phrasing of questions. I'm sorry I even wasted time in this thread.
 

I need to disagree, you can learn the GMAT. In the UK we study maths until 16 then it is optional. Taking the test a few years on you forget all the concepts that are asked in the GMAT so would score about 400. After re-learning the concepts it is then possible to score hundreds higher.

 

The CFA level 3 also has hands down the highest pass rate.

Another thing I completely forgot to mention is that a GMAT score in the 95th percentile gets you into MENSA. Anyways, I sort of feel this is turning into a chicken or the egg argument.

Competition is a sin. -John D. Rockefeller
 
Hooked on LEAPS:

The CFA level 3 also has hands down the highest pass rate.

Another thing I completely forgot to mention is that a GMAT score in the 95th percentile gets you into MENSA. Anyways, I sort of feel this is turning into a chicken or the egg argument.

Well done for steamrollering over the obvious survivorship bias of L3 passes.
"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

Come talk to me when you take the MCAT, now that is probably the most rough exam of them all. I knew so many pre-meds that the path too hard after their first year of college, switched major over to finance, and were literally beasting the classes while barely pulling Bs in introductory chem, bio, and physics classes.

 
Best Response

Why would you study for the GMAT now? Are you going to apply for the MBA anytime soon? Get some real work experience first.

People that discredit the CFA for PE do not know what they are talking about. I currently work in PE and am a CFA charterholder. I use what I learnt all the time. Level 1 and 2 are certainly relevant, level 3 less so, but still helpful. Of course it's not critical but still gives you an edge.

Why would you even compare GMAT to CFA? GMAT is useless unless you want to apply for the MBA. You actually would learn something from the CFA.

 

OK, for the sake of specificity, let's say my goal is to be employed at a NYC boutique equity brokerage/research firm (seeing as buy-side is a bit far fetched right out of UG).

What's my preferred course of action?

 

From what I understand, most analyst recruiting is done in the fall (at least this is how it is at BB's I've talked with). I'd say take GMAT over the summer so you can actually put your score on your resume for the fall recruiting season. Taking the CFA in June would probably be too late to impress anyone with.

Of course, if research is your thing, and you get a job in research in the fall, then take the CFA in June so you can be prepared well for your research job.

looking for that pick-me-up to power through an all-nighter?
 

Lol, pussinboots is absolutely correct. Pull up the alumni directory and start shooting those emails. Find alumni that have fewer people on their asses and set up informational interviews. Get them a bj afterwards and they'll hand in your resume, as simple as that. If they don't help you, offer a second bj. But after a second no, then you're fucked...

 

I'll disagree and say CFA. Just my opinion-do it while your finance coursework is fresh in your mind. If you're only taking part-time classes you should have plenty of time to study.

N.B.-Strictly speaking all IB is sellside finance; they are intermediaries who "sell" investments to the "buy" side. Banks may have buyside arms such as a PWM division or an inhouse hedge fund, but that's not really what is meant by IB on WSO.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 

I'd also say do the CFA. There's a lot of overlap on L1 with undergrad, so the sooner you can do it the better. It won't give you a huge advantage, but if you can handle a bit more studying I say do it.

Of course you'll still have to wait 5 years until you can get your designation b/c of the 4 year work experience requirement. But hey, that will be one less year studying in the future.

 

Study for the GMAT.

Chances are you will eventually go to Bschool, chances are you will never utilize level 1 of the CFA. You should have enough time to study, take the GMAT, restudy and retake it if you think you can do better.

Regards

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 

Study for the CFA...

You're probably not going to go to grad school right out of undergrad anyway. You'll have plenty of time to take the GMAT later on, and Level 1 CFA could help you get a job out of undergrad. Also, as people have already said, a lot of the Level 1 material is covered in your undergrad classes, so you would be doing yourself a favor by taking Level 1 now.

FYI, I recently passed CFA Level 1.

 

I am in the same position as you. I am leaning toward the GMAT because that is the last thing I want to be studying for once I start work, but I would hate to study / take the GMAT if I don't end up at business school. Are you set on b-school? In my position, I would rather not go to b-school, but come from a non-target and I am starting out at a boutique(non-elite) where I plan on lateralling out of, so I think I will need b-school to brand my resume. I guess the answer is where you see yourself after your analyst stint.

 

Study for the GMAT. School math and verbal is fresh in your mind and you can devote a solid couple of months to it. The score is good for 5 years so you will have plenty of time to use it.

CFA can come with time. If you already have a job L1 isnt going to help you much.

 

I would postpone it for the following reasons:

1) Studying for the CFA generally requires sacrifices (in and out of the office) and you should spend the first year at your bank learning as much as you can and building a great rapport with your team.

2) If your near term goal (after several years of work experience) is to attend a top b-school you should focus your time and energy on putting together the best application that you can including: a 700+ GMAT, extra-curricular / leadership roles outside the office, drafting solid essays, and building relationships with mentors who will write recommendations for your applications.

3) The CFA will not make you, as a finance guy, more well-rounded although it will provide you with a broad knowledge base (a significant portion of which will be irrelevant to an IB career). Your time may be better spent pursuing other interests/passions to the extent that your true goal is to become more well-rounded from a general b-school application and life perspective.

With that said, L1 is not that difficult (given that you were a finance major) to the extent that you are able and willing to log the necessary hours. The good thing is that if you take L1 in December you can then sit for L2 next June but say goodbye to your social life.

Best of luck to you.

 

No, but obviously I am in the very prelim stages of choosing and exploring both options. All the searching I did on here and elsewhere just compares which one you should go for, not so much if there is overlap in the study process. It seemed different, just looking to see if people who actually did both found similarities. Thanks for your answer though

 

Because they are complimentary and Bschool doesn't teach you the same content as CFA will. Unless OP was referring to MSF., which usually take GRE anyways (though I'm sure they take GMAT as well)

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
 

CFA and MBA are NOT complimentary. This has been covered at length. Most positions that require the CFA do not require you to have a MBA to break in, and most positions that require MBA aren't well-served at all by the CFA designation.

Pens, go read the M&I articles on the MBA and CFA.

in it 2 win it
 

How aren't they complimentary? I think I wasn't being clear. They both cover different aspects of finance and are therefore respected differently by the various industries in finance. While hedge funds may be more interested in CFA, and PE/IB more in MBA, the two paired together make a more rounded candidate for the entire field. While HF may like CFA, I'm sure that they'd appreciate someone with a top MBA, and likewise with the CFA for PE.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
 

No reason you can't prep for both. GMAT shouldn't take more than a couple months of studying. CFA Level 1 is not that difficult if you already know the basics of financial markets, valuations, and economic theory. I think ultimately CFA is more useful for Asset Management, and MBA is more useful for corporate strategy/development. Even if you pursue an MBA, having the knowledge of the broad material covered in CFA curriculum cannot really hurt. That said, you should really figure out what you want before spending the time and money on either.

 

I did GMAT first, then CFA.

I think actually did it in similar timing...I studied for GMAT from the beginning of November through the middle of January, then took that.

Afterwards I took a couple weeks off and then started studying for Level 1 in the beginning of February, which gives you more than enough prep time.

I'm still undecided on b-school, but regardless of whether I end up going or not, I am glad I took the GMAT. I went to a non-target undergrad and I believe my gmat score (which turned out pretty solid) provides a baseline indicator of aptitude. A lot of people will probably disagree with that, but for me it has just served to build credibility -- in a similar (but perhaps less impactful) manner as "CFA Level 3 Candidate - June 2015."

 

From a return on investment perspective, the CFA would appear to me to win out. 150k is just too big an outlay for something where the benefits are not that readily visible. But my perceptions are shaped by my experiences in the Australian finance/investments industry where people doing post-grad after attainment of our bachelors degrees are quite rare. I'd go the CFA route not knowing what tangible benefits either that or the MBA might bring given its lower cost and credibility amongst investment professionals.

 

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