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An MBA is better than a CFA if you want to make MD in banking

MBA or CFA for investment banking

An MBA is more likely to take you to the top

It’s the perennial debate: should you get an MBA or a CFA if you want to get ahead in banking? An MBA from the sort of top tier school banks like to hire from will cost you a small fortune and mean that you need to give up work for two years. A CFA will not – and will mean that you can keep on working.

Over the long term. however, the discrepancy between the two qualifications becomes apparent.

We looked at the 13,000 resumes in the eFinancialCareers global CV database which belong to people with the words “managing director” or “MD” on their CVs. The implications, as shown in the chart below, are clear.

The higher you aspire to climb in an investment bank, the more worthwhile it may be to spend $160k+ on a top MBA instead of scrimping and studying the CFA Program. Naturally, there are caveats – ‘CFA’ could simply mean that someone has studied CFA Level I, rather than completing the full CFA Charter.

Comments (11)

  1. Hi Sarah,
    I would suggest that the CFA is a worthy attempt to raise standards. HOWEVER, because it is such a tough exam, at the time when people are also expected to be working long hours for their banks, in fact it becomes a way for senior staff to not promote their juniors. When I worked at Credit Suisse David Mathers (now CFO) said he would not promote anyone who didn’t have the CFA, and then many of those who did study for the exam were made redundant anyway. That’s investment banking for you.
    By the time you have done the CFA, and worked 80 hours per week for at least 3 years, you are very close to burn out in my view.
    However, if you have done an MBA, you’ve spent a lot of money, and had a relatively easy last couple of years. You are really motivated to put in the hours. Does that mean the MBA is a better qualification? I have heard from people that have both that CFA is much tougher.
    Ironically the candidates don’t benefit though.

  2. How many MBAs are there in banking and how many CFAs?

    There are 190k MBAs EACH YEAR, a decent percentage of which enter banking. There are only 120k CFA charterholders worldwide in TOTAL.

    Ofcourse there will be more MDs with an MBA than a CFA as more people have an MBA. It does not mean an MBA is more likely to lead to becoming an MD in banking.

    Sarah – the implication is NOT clear. Simple cause and effect relationship has not been substantiated.. come one think about what you write…

    StupidConclusion Reply
  3. @StupidConclusion – that’s a fair point, but I also checked the % of CFAs and MBAs with >10 yrs’ experience who were MDs compared to the average for that cohort.

    On average, 13.5% of people with >10 yrs’ experience are MDs. 14.1% CFAs are and 18.3% of MBAs are.

    So, it looks like an MBA has an impact and a CFA doesn’t. Whether that impact is worth $160k is questionable though.

  4. Fair article and it makes a valid point, whilst I’m no fan of MBAs it seems to me that the CFA is for desperate dreamers. So no surprise to see a bitter comment from a disillusioned CFA holder who’s no doubt realised that there’s no investment banking pot of gold at the end of the CFA rainbow. Whilst the CFA is a useful qualifcation it won’t transform your career and it’s not worth the long hours and stress.

  5. Most MBAs I know did an MBA to get out of corporate drudgery and start a business. Of course you dont need an mba for that but daddy usually pays for it anyway. In my view, an MBA helps you talk the talk, a CFA helps you walk the walk. Both are pretty damn easy and there are far harder courses out there.

  6. The premise of the article is like discussing what are the best high-tech horse shoes you can put on your horse to help your buggy move quicker – just before the introduction of the automobile. The existing financial services model is old, old news and it’s fading very quickly, thanks to people catching onto low cost investing of index funds and some ETFs, financial innovators like Betterment and Wealthfront, and Obama’s pushing the industry-killing regulations (created, ironically, by two guys at the heart of causing the financial crisis: Dodd and Frank).

    But the entire industry is dying slowly now, and almost everyone inside it has the gnawing suspicion this it is not going to end pretty.

    The MBA and CFA should still be relevant because recipients are learning very good information that can be applied to the new financial and other industries. One thing needs to change, though. Most people who attain these degrees do so to “manage” money and outperform passive indexes or the “market.”Yet the books used in the curricula of both programs are written by the Nobel Prize winning experts who say this is not possible. Let’s start telling the truth once and for all on this issue.

    Party’s Over Reply
  7. @stupid conclusion – I disagree with your position.

    Although it might sound correct to posit that investment banking attracts more MBA holders, it’s important to realize that the fact that more people have an MBA does not immediately imply they go into banking – unless there is a study to back this, which I’ll be happy to see.

    Okay, okay, let’s assume it’s true that investment banking attracts more MBA holders relative to each of the other available sectors. Does this in any way imply that there are more MBA holders in investment banking than there are CFAs (students and full charter holders)? Not necessarily!

    The truth of the matter is that there are very many places that MBA holders can work besides investment banking. For all you know, the number of MBA holders entering investment banking in a given year ‘could’ well equate the number of CFAs entering investment banking. I’d only agree this scenario is impossible if figures of MBA holders and CFAs in banking are provided.

    That said, I agree that the article would require more information to support conclusion reached. This notwithstanding, the conclusion reached is far from stupid, given the available information.

  8. guys, banking is not rocket science.. everyday they do the same stuff like pieshop.. so take it easy mate

  9. I just want to address one thing when you say. Naturally, there are caveats – ‘CFA’ could simply mean that someone has studied CFA Level I, rather than completing the full CFA Charter.

    That is actually wrong. you need to check your facts. One cannot simply put CFA at the end of their name and it becomes ambiguous. The only was you can became a fully fledged CFA is if you’ve done all three levels and completed the required related financial work experience!

  10. I have an MBA and have also completed the CFA Program. In my opinion, the two complement each other but offer very little overlap. The CFA Program is considered ‘generalist’ but would certainly be a special focus within an MBA. In comparison, an MBA spends a great deal of time covering marketing, management, operations, and IT as well as finance, accounting, and economics. The intent of an MBA program is to prepare future managers to be able to communicate with, and understand, the various department leaders within an organization while the CFA Program is designed to prepare individuals for roles in investments. It makes sense to me that a Managing Director would have value for an MBA given that s/he is running an organization and needs to be well versed in management, marketing, and operations.

    As for difficulty – my opinion is the CFA Program is more rigorous while an MBA covers more breadth of material. And neither offers any value unless you get an opportunity to apply what you’ve learned.

  11. both are easy, so which are challenging in your opinion?

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