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?