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CFA or MBA: Which is right for you?
Apr 18 2007
A lot of people are wondering whether they should seek a CFA in place of the more traditional MBA. In large part, the answer depends on your focus.
The Chartered Financial Analyst (CFA) designation has been enjoying a heightened profile and increased popularity in light of surging private equity activity. So far In 2007 - the program's 44th year - 140,000 people from 156 countries have registered to sit for the three exams that determine, in part, whether one is permitted to tag those three letters at the end of their signature.
A lot of people are wondering whether they should seek a CFA in place of the more traditional MBA. Which will get them ahead? Which will make them more marketable? Which will attract a bigger compensation package?
Whether you should seek a CFA, an MBA, or both has everything to do you’re your professional goals, says Joshua Wimberley, a client partner in recruiter Korn/Ferry's financial officers practice. Simply put, if your goals include anything but asset management, a CFA isn't for you.
Focus on Asset Management
"The CFA is of huge importance in the asset management industry," Wimberley explains. "An MBA is more for investment banking or business in general. It's the standard educational background on Wall Street. If you want to go into investment banking, there is no need for a CFA. It's really comparing apples and oranges."
In short, the CFA gives you the technical skills to succeed in investment management, while an MBA prepares you for a broad range of challenges in the business world. Even for those dedicated to investment management, the big-picture business know-how an MBA affords can propel your career and earnings.
Even executives with the CFA Institute encourage an MBA for those seeking their designation. Bob Johnson, managing director of the CFAI's education division, says the MBA and CFA are "complimentary, not competitive" designations. "I do realize people have a limited amount of time and need to prioritize what educational opportunities they avail themselves of," says Johnson. "For a young person who is preparing for a career in investment management, both educational opportunities are something they should consider."
'The Ideal Career Path'
Johnson lays out what he considers an ideal career path for a recent college grad committed to asset management: Enter the CFA program while working full-time. With the work experience and the CFA designation, enter a MBA program - also while working. "Think about it," he says. "You are 28, 29 years old with both a CFA and an MBA and six years of work experience." In addition, he notes, "most employers in the investment management business will subsidize the cost of a CFA program and an MBA."
Meanwhile, Korn/Ferry's Wimberley believes a junior-level asset management professional with a CFA alone should succeed. "If you're talented and a high performer and all you want to do is asset management, I would say get an CFA," he says, adding that the treasurers of many Fortune 1,000 companies, CFOs and controllers have Level 3 CFAs only.
To those who suggest the CFA is replacing the MBA, Dave Wilson, president and CEO of the Graduate Management Admission Council, says: "Not a chance." The CFA charter produces "first-class analysts," he says, but an MBA covers the fundamentals of business relevant to every type of organization, from entrepreneurial start-ups, to multinational corporations, not-for-profits, and government agencies. "An MBA prepares someone to work within an organization as it relates to margins, strategy, mission, marketing and human resource issues," he says. "That will always make the MBA a relevant degree."
The Costs
When it comes to the nitty-gritty, there are big differences in each designation. For one thing, the price difference is significant: CFA enrollment and exam fees are $2,200, compared to the more than $100,000 an MBA from a top school can cost. It takes a minimum of three years of coursework - at least 250 hours of self-guided study - before one can sit for the six-hour CFA exam. A typical MBA program, attended full-time, takes two years.
The CFAI limits the number of charters they grant yearly - in 2005 and 2006, 5,752 and 10,045 charters were awarded, respectively. (In 2005, 80,000 people sat for the CFA. In 2006, 91,000 people sat.) Today, the institute has nearly 78,000 members worldwide, with the numbers of registered applicants ballooning in India, China and Hong Kong.
As a holder of both I can unequivically say that the CFA is far more comprehensive/difficult and relevant than an MBA. Not sure I understand how the CFA is less relevant to investment banking; don't both analysts and investment bankers claim to be arbiters of value? Does corp. fin 101 prepare one for i-banking? Surely you can't be arguing that hashing out a few case studies somehow gives a ubiquitious MBAer greater insight into determining strategic direction of a co. or the appropriate discount rate for a DCF? If that is the argument, might I suggest VALUATION website and subscribing to the HBR. A savings of just $99,800.
The article should be really be about the dicotomy between the value proposition of an MBA and what amounts to a low ROI (intangiblly speaking). CFA teaches you hard skills and tests you on them. MBA teaches you soft skills. That does make them complimentary. Yet, make no mistake, the CFA prepares you for any capital markets challenge. An MBA does not. MBAs are about networks, rear view debating and getting past the gatekeeper. For reasons unknown, MBA still garner pull from the majors, despite the degree's inherent and growing irrelevance
Yawn..... 18 Apr 2007
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