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Is this going to become the new transformative qualification for careers in financial services?

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.

Comments (19)

  1. Now that CFA is useless we can spend on another qualification that too will be rendered useless in 3-5 years.

  2. can you please explain why only Masters in Finance from London Business School is going to help?
    there are many other good colleges like LSE/Oxford/Cass/Imperial which provide similar degree and are equally recognised.

  3. @? – I mentioned the LBS MiF in particular because it’s pitched at experienced people rather than people just out university.

    Sarah, Editor, eFinancialCareers Reply
  4. I honestly think that nothing will get you a job faster than a couple of years’ part-time trading/investing experience (with your own money!), even with a tiny CFD/spread betting a/c. Even blowing up your a/c a few times will give you something to talk about in the interview…

    Most people in the City have no idea how markets work… (I have 18 years research/trading experience, as well as the CFA, MA Finance, BA economics)

  5. I agree Scott. Trading myself the market and looking for a trading job, if u can help ;). Have not blown up anything YTD and not doing bad I think.

  6. Unfortunately Scott, IBs and HFs stay well clear of that sort of experience.

  7. When speaking to 7City they said that they had stopped offering the FRM and CAIA because people were losing interest in them

  8. FRM is more specific than CFA.

  9. Have you ever heard of the PRM from PRMIA?
    There are two risk management qualifications

  10. Because the machines do all the work

  11. Why leave out Professional Risk Manager(PRM) qualification.

    Gingerbreadman Reply
  12. What makes the FRM better than a PRM from http://prmia.org? From some research that I have done on the net, the two degrees look like they cover the same topics, with the PRM specialising a bit more in risk than the FRM

  13. Oh man another type of degree in finance like if we dont have enough already..CFA/ FRM and also the degree of Willmott CQF….+ MBA (where honestly you dont learn anything)……..why all this? why dont we just focus on masters and PHds..

  14. should recruit quality people, not monkeys jumping through hoops. That said, the CQF is a good quant-training for risk-jobs … what other quality jobs are there in risk? op risk is dull as dishwater. If you are going to spend your life doing boring stuff then leave the city.

  15. agreed Mr S!! I can see a puzzled interviewer now, saying that they decided not to offer you the job because you have so many bits of paper in a desperate bid to get in that you obviously aren’t very good. And you must be very boring to boot lol! As I always say when I CFA bash, if you can’t show me a statistically significant improvement in risk-adjusted investment returns then the CFA is actually worthless. As for having door-opening ability, it never did because when nobody had it, most of the employers were ignorant as to what you learned and insisted on recruiting ACAs …

  16. prm is better

  17. Any views on the ERP, the new qualification by Garp?

  18. I looked into both the FRM and the PRM, both looked good and covered similar subjects but chose the PRM because a) it is more quantitative, b) it is more flexible (you can take the exams any business day of the week) and c) it is more closely affiliated with academic institutions / uni’s.
    I believe that PRMIA was set up by members of GARP at the time that GARP moved from a ‘not for profit’ to a ‘for profit’ organisation.
    The PRM is split into 4 exams (financial theory instruments and markets, maths, risk and the last is case studies) which you can take any time and in any order as long as you pass them all within 2 years of each other. Most take a year or so to get them all. Pass rate just over 50%.
    Both are worthy though and although they have one eye on risk, they cover all aspects of finance and financial maths, and the risk balance is about right for anyone in front or middle office these days.

  19. Anyone who holds the FRM has passed the FRM exam. Or if they passed recently: both FRM exams.

    With the PRM, it’s anyone’s guess as to which exams people actually passed. The PRM has a puzzling range of cross-over exemptions and exemptions for exams taken at certain universities.

    The beauty of the CFA and FRM structure is that it’s exactly clear to everyone what was needed to pass. However relevant or irrelevant the programme content is to the job in question, at least you know what people actually did to get the qualification / become charterholder.

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