If you’re not a recent graduate and you want to show your mettle to financial services employers, you’ve traditionally had two main choices: the CFA or the MBA. Or if you’re in London, you’ve had three: the CFA, the MBA, or the Masters in Finance from London Business School.
However, both an MBA and the LBS Masters in Finance are expensive. And some say the CFA Charter has less door-opening potential than it used to now that so many people have achieved it.
Maybe now is therefore the time to consider an alternative. Maybe now is the time to consider the FRM, the Financial Risk Manager’s Qualification.
What is it?
The FRM is a US-based, but global, qualification run by the Global Association of Risk Professionals (GARP).
Consisting of two parts, it is open to anyone with at least two years’ ‘professional full-time work experience’ in financial services risk management, trading, portfolio management, faculty academia, industry research, economics, auditing, risk consulting, and/or risk technology.
It will cost you around $650 and require around 400 hours in study time.
The syllabus covers everything from risk measurement and management (predictably) to quantitative analysis techniques, valuation models and financial markets and products.
Why the FRM and why the FRM now?
The FRM isn’t new. It’s been around since 1997, but grew monumentally in 2008 following the financial crisis. Last year, 23,324 people took the two exams worldwide – vs. 140,000 in June alone for the CFA.
There are 26,000 existing FRM holders worldwide (vs. 87,000 CFA Charterholders).
Alastair Graham, managing director of Europe the Middle East and Africa for GARP, argues that the FRM exam is poised for growth in London in the same way that the CFA was a decade ago: “In the past, the only qualification you could take as alternative to an MBA was the CFA. Now people are increasingly looking at the FRM,” he says.
Needless to say, the FRM is mostly suited to risk managers. However, Graham says it’s also taken by salespeople and traders.
There are no figures for how much people with the qualification earn, but Graham says he’s confident it can, “significantly enhance someone’s earning power.”
Like the CFA, the FRM is not easy: the pass rate for both exams last year was around 54%, thereby conferring kudos on candidates who pass successfully.
Aside from the fact that the employment market in London is less saturated with FRMs than with CFAs, you may also wish to take the FRM with an eye to the likely resilience of risk jobs. As we said last week, US banks are being instructed by the SEC not to dump risk staff in forthcoming redundancies.
“The FRM is a global qualification,” says Sheldon Paul at risk recruitment firm Cameron Kennedy. “When I see it, it tells me that a candidate has a little more focus. I’ve got some clients that really do insist upon it.”
Why not the FRM now?
On the other hand, the FRM is no magic career bullet and you would be foolish to think it is.
The fact that only 26,000 people have the qualification worldwide (and that many of them are currently in the US) means the network of alumni who’ll be rushing to hire you is small.
“Our main problem is still awareness,” says Graham. “When you talk to recruiters and HR people in banks, many of them aren’t aware of the FRM. A lot of people still take the CFA by default, but that’s changing,” he adds.
Priya Mariannie, senior consultant in risk at recruitment firm PSD Group, says clients sometimes mention the FRM but that none specify it as a must-have. “It’s a plus and will attract interest, but clients don’t request it – unlike the CFA,” she says.
Equally, if you do the FRM with a view to getting into a front office position, you may find yourself pigeonholed in risk. Given the current state of front office hiring, this may be no bad thing, however.