You are wondering whether you should go for a CFA or MBA. Which offers the best chance for you to break into investment banking? Which will get me ahead? Which will make me more marketable? Which will attract a bigger compensation package? Which one is more prestigious? The Financial crisis of 2007–2009 has raised new challenges and questions regarding the MBA degree. Graduates of MBA programs have a reported tendency to go into Finance shortly after receiving the degree. Is it worthy paying $80,000 at a top business school and ending up in finance with someone who only paid $2,000 for CFA, probably far more knowledgably in finance? I hope this analysis would help you.

Chartered Financial Analyst (CFA)

Chartered Financial Analyst (CFA) is an international professional designation offered by the CFA Institute (formerly known as AIMR) to financial analysts who complete a series of three examinations. In order to become a CFA Charterholder candidates must pass all three six-hour exams, possess a bachelor's degree (or equivalent, as assessed by the CFA institute) and have 48 months of work experience in an investment decision-making position. CFA charterholders are also obligated to adhere to a strict Code of Ethics and Standards governing their professional conduct. 

The CFA designation is a qualification for finance and investment professionals, particularly in the fields of investment management and financial analysis of stocks, bonds and their derivative assets. The program focuses on portfolio management and financial analysis, and provides a general knowledge of other areas of finance.

From 1963 (when the CFA designation was first awarded) to 2006, approximately 78,000 people from at least 126 different countries have been awarded the right to use the CFA designation, 68,000 of them in the years since 1990. As of 2006, more than 116,000 people are currently enrolled to take one of the examinations. Some eminent finance professors have stressed on the importance of the CFA designation.

Master of Business Administration (MBA)

The Master of Business Administration (MBA) is a master's degree in business administration, which attracts people from a wide range of academic disciplines. The MBA designation originated in the United States, emerging from the late 19th century as the country industrialized and companies sought out scientific approaches to management. The core courses in the MBA program are designed to introduce students to the various areas of business such as accounting, marketing, human resources, operations management, etc. Students in the MBA program have the option to select an area of concentration and focus approximately one-third of their studies in this area.

Accreditation bodies exist specifically for MBA programs to ensure consistency and quality of graduate business education, and business schools in many countries offer MBA programs tailored to full-time, part-time, executive, and distance learning students, with specialized concentrations. There are many types of MBA programs including:

  • Two year MBA programs normally take place over two academic years
  • Accelerated MBA programs are a variation of the two year programs. They involve a higher course load with more intense class and examination schedules.
  • Part-time MBA programs normally hold classes on weekday evenings, after normal working hours, or on weekends. Part-time programs normally last three years or more.
  • Executive MBA (EMBA) programs developed to meet the educational needs of managers and executives, allowing students to earn an MBA or another business-related graduate degree in two years or less while working full time.. 

Whether you should seek a CFA, an MBA, or both have everything to do you’re your professional goals and a few other factors listed below:

MAJOR DIFFERNCES BETWEEN CFA AND MBA

Costs of the course

Fees for the CFA exams range from $600 to $930, depending on the date at which the candidate registers to take the exam. Total CFA program course ranges between$1,800- $3,000. The cost of an MBA course at a really good business school is actually more than the average wage in the UK or USA. The average cost is $40,000 for a year (or $80,000 for two years). Some MBAs are $60,000 a year, and with MBAs the more you pay the more you get. It’s not just the instruction, it’s the brand. You can take an MBA for as little as $8,000, but you can’t expect that to be a good one!! 

Entry Requirements

The basic requirements for participation in the CFA program include holding or being in the final year of a university degree (or equivalent as assessed by the CFA Institute), or having four years of qualified, professional work experience in an investment decision-making process. In order to obtain the charter, however, a candidate must have completed a university degree (or equivalent) and four years of qualified, professional work experience, in addition to passing the three exams that test the academic portion of the CFA program. However there have been recent concerns, that with the level on new CFA holders, the CFA institute has over eased the requirements to sit for the exam.

Most programs base admission on the Graduate Management Admission Test (GMAT), significant work experience, academic transcripts, essays, references or letters of recommendation and personal interviews. The Graduate Record Examination (GRE) is also accepted by some schools in lieu of the GMAT.Schools are also interested in extracurricular activities, community service activities and how the student can improve the diversity and contribute to the student body as a whole. All of these qualifications are important for admission; however, some schools do not weigh GMAT scores as heavily as other criteria. In order to achieve a diverse class, business schools also consider the target male-female ratio and local-international student ratios. 

Level of Difficult

CFA Exams are much more challenging than MBA, with an approximate average of 35% passing the Level I, 46% passing Level II, and 50% passing Level III exam in any year.

Easy of penetrating investment management

Getting into investment banking is quite a task. There are many other factors that affect your ability to be recruited in investment banking. I know people with both CFA and MBA still struggling to get into the investment banking industry. However generally coming from a top MBA school is an advantage. 

Focus

Generally it’s fair to say CFA is excellent in preparing you for the technical skills to succeed in investment management and research areas, 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 them for higher levels. 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." 

Career progression

The main benefit of the MBA is the contacts and networking that comes from attending class at a graduate level as opposed to the random acquaintance at a CFA study group. Hence MBA is great for a career changer. 

Technical Knowledge

It has been my experience that CFA charterholders are more diligent and knowledgeable about finance, economics and investments than MBA holders, even from top 10 business schools. The MBA in finance provides good introductory training in financial theory, but it is mainly used for networking. CFA program better provides the tools for candidates to produce creative solutions for complex financial problems. 

However a growing number of prestigious business schools, such as Oxford's Said Business School, London Business School, HEC Paris, UNC, among others, have included approximately 70% of the CFA curriculum in their graduate programs. 

Conclusion 

While both Accreditations have the following benefits: 

1. Recognized all over the world

2. Highly respected accreditation

3. Offers opportunity to lead teams

4. Offers specialized skills within an increasingly service-orientated global economy

5. Flexible study arrangements: full-time, part-time and online/distance programs

6. Offers fast-track entry into business and corporate management

7. Offers opportunity to shape direction of entire organizations

8. Offers intellectual management and leadership challenges

9. Job fulfillment and satisfaction

10. Lucrative pay structure and financial security 

Having mentioned all of this, if you are interested in trading, asset management, risk management, quantitative analysis and research, it is best to have a combination of a MBA from a top school AND a CFA designation. An MBA is still a useful degree to have, but in the fields I have just mentioned, it is no match to the CFA designation. I believe CFA gives more in depth knowledge of Corporate Finance, Valuation, and Asset Management from a financial perceptive rather than from a strategic perceptive. However both MBA and CFA are complimentary.