CFA vs MBA: Which is the Best Certification for You?

After years of working in the finance industry, many practitioners may decide to pursue a self-improvement plan to advance their career, especially those who wish to start their own business. The common question among these professionals is whether they should take a Chartered Financial Analyst (CFA) test or get a Master of Business Administration (MBA) degree.

Both certifications offer a range of benefits and limitations, and your choice will depend on what you intend to achieve in your career. In this article, we will take a closer look at the factors to consider when deciding which certification to pursue.

1. Cost

Obtaining an MBA degree from a top university can be an expensive and high-cost self-enhancement project. The all-in cost of a two-year MBA program can range from $275,000 to $325,000, taking into account tuition fees, modest living expenses, forgone salaries, and other costs.

In contrast, the cost of a CFA is much lower, at about $1,000 to $1,500 per level, with an average of less than $8,500 for all three levels if you take additional prep classes.

2. Time

If you want to obtain an MBA certificate, you will need to spend two years studying full-time. This means that if you are not ready to quit your job to focus on your studies, it may be difficult for you to pursue an MBA.

Alternatively, the CFA program requires at least 250 hours of self-guided study before you can sit for the six-hour exam. You may, therefore, view the CFA program as a part-time task to complete at your own pace.

3. Content

The purpose of both certifications is different, so the content is, therefore, different. Obtaining an MBA certificate means that you will undergo comprehensive and inclusive training and knowledge in management analysis and strategy. An MBA covers various courses like accounting, finance, marketing, and human resources.

In contrast, the CFA program focuses on delivering specific and specialized skills and concepts in asset finance exclusively.

4. Application Procedure

To apply for an MBA program, you need to prepare several items, including an online application, recommendation letters, a resume, admission essays, university transcripts, GMAT or GRE score reports, and English language proficiency.

For the CFA, you only need an international travel passport, and you need to meet one of the three requirements for CFA application: four years of professional work experience (which does not have to be investment-related), a bachelor’s degree or equivalent, or being in the final year of your bachelor’s degree program.

5. Teamwork

Unlike the MBA, which requires group tasks, the CFA has no teamwork requirement. You can study individually and complete all the CFA programs independently.

6. Pass Rate

The pass rate for the CFA test is relatively low, with an average of 60% of test-takers failing across all three levels. In contrast, 95% of Harvard MBA test-takers can pass the MBA test.

7. Job Prospects

Obtaining an MBA degree offers broader job prospects and career choices. Reputable MBA programs will give you the opportunity to connect with a vast alumni network, which can be useful in your future career.

A CFA certificate, however, delivers specific and specialized knowledge in the finance industry. As such, obtaining the CFA certification narrows down your career choices to financial institutions. “An MBA can take you into all sorts of industries,” said Skiddy von Stade, CEO of financial recruiting firm OneWire. “A CFA is for a stock picker that really wants to an analyst. The CFA carries a lot of weight with asset managers. It’s an analytically driven test.”

8. Benefit/Compensation

It is essential to know the return on investment of both certifications. According to PayScale, a compensation research firm, the compensation for CFA and MBA holders differs significantly. For example, the median pay for CFA holders with 0-5 years of experience is $72,000, while it is $87,000 for those holding both CFA and MBA. The median pays for MBA holders with no CFA certificate is $57,000, while those with an MBA in finance and no CFA certification earn $63,000. These differences continue for CFA and MBA holders with 5-10 years of experience.

9. Learning

Some CFA certificate holders have reported that MBA programs teach things that could be learned in college classes, while CFA programs deliver knowledge that cannot be learned from college.

10. Partnering Relationships

CFA Institute has partnered with various business schools to offer CFA exam material in their courses. This trend will result in a reduction of the CFA test difficulty, making it easier for more students to take Level I of the CFA exam directly after graduation.

11. Achievement

The founder of the CFA Institute is Benjamin Graham, one of the most legendary and valuable investors. With the profound knowledge gained from passing the CFA tests, you could become the next Benjamin Graham. In contrast, the broader coverage of MBA makes it difficult to achieve mastery in a specific area.

In conclusion, both the CFA and MBA certifications have their advantages and disadvantages. Your decision should depend on your career aspirations and goals. While the MBA offers broader career choices, the CFA certification delivers specific, specialized knowledge in the finance industry. Ultimately, it would be best to consider all the factors mentioned above before deciding which certification to pursue.