CFA, CAIA CFP? Figuring Out the Right Designation for Your Career

Originally published on April 11, 2018

Most of us assume that when you want to get a pay increase, you go back to school and work towards a Master of Business Administration (MBA). however, it can be prohibitively expensive if your employer doesn’t chip in—on average, about $100,000 to $200,000 for a master’s degree. Even if your employer does pay a percentage or flat amount, the financial and personal undertaking of working towards an MBA can be rather daunting. So you may be wondering, is there another option towards this same goal? If you’ve ever applied for a job you’ve probably come across the “professional designations” drop-down tab on the application. Some professional designations you might already be familiar with. Take the CPA, or Certified Public Accountant, a pretty ubiquitous term, and synonymous with taxes. There exist designations for every industry, and if you’re not in the industry or new in your field you might not know them—like FRM or Lean Six Sigma Black Belt (no, that’s not a karate fraternity).

Professional designations are relatively cheap to get compared to MBA, only costing tens of thousands of dollars rather than hundreds. They also might be more suited for the job you’re  currently doing or your future career. It might make more sense if you’re going into the alternatives industry to get your CAIA designation (Chartered Alternative Investment Analyst). To get a better handle on what exactly these professional designations are and what they’re best suited for, let’s take a look at some of the most popular ones in the investment industry.

The Chartered Financial Analyst (CFA) program requires its candidates to have in-depth knowledge on broad scope of financial topics—economics, financial reporting, asset classes, portfolio management, and ethics to name a few. The CFA is often regarded as the “gold standard” and best prepares you for a career as a portfolio manager or research analyst. There are about 140,000 CFA institute members worldwide, and the top 11 investment firms in the world employs CFA charterholders. In addition, in some countries, having a CFA charter will waive licensing exams for other investment certifications. The program is also relatively cheap compared to an MBA program. Pursuing a CFA costs anywhere from $2,400-$4,590 depending on scholarships and application deadlines. Last, according to a study conducted in 2005 by the CFA Institute, the median salary of a CFA charterholder versus a non-charterholder was 54 percent higher.

However, the CFA charter is known for having rigorous exams. To receive the charter, you must have a bachelor's  degree, pass three separate exams, and have 4 years of experience in an investment decision-making position. The exams are rather tough, with the passing rate for the first exam hovering around 40 percent. The CFA institute estimates that it can take anywhere from 300-900 hours of self-study to prepare yourself for all three exams in total.

If you wanted to go specifically into alternatives, the Chartered Alternatives Investment Analyst (CAIA) designation might be best for you. Like the CFA, the CAIA gives you global credibility and is best for those looking to make a career in risk management, portfolio management or an analyst role in the alternatives field. In addition, there’s a relatively small group of charterholders worldwide—only about 9,000 individuals. The program consists of two tests that each take about 200-400 hours to prepare for. Unlike the CFA program, there is no work requirement to get your charter. The program is quicker than the CFA program, only taking about 18 months to complete, and has a much higher passing rate of 60 percent for both exams. The total cost of the program is about $3,000.

The CAIA and CFA prepare their participants for careers in investment analysis, however, there are certifications specifically for individual financial planning. The Certified Financial Planner (CFP) designation is best fit for those looking to increase their knowledge of insurance, investment and tax strategies for their clients. The CFP designation is usually sought after by current financial advisors or representatives.

The requirements are a little different for  the CAIA and CFA programs. The CFP program is broken down into four categories: education, CFP exam, work experience and ethics. Participants must hold a bachelor’s degree and have completed coursework in financial planning. This coursework aspect can be bypassed if you hold a CFA or CPA. Next, participants must complete an exam on financial planning material (insurance, investments, financial planning techniques, client-planner relationships). The exams’ passing rate is around 60 percent. Once the exam is passed, the participant must have at least three years of work experience in the field (either before, during or after the exam) and must adhere to the professional and ethical standards set by the CFP Board. The cost of the program is dependent on whether or not you have to take courses to fulfill your education requirement, and if your company pays for it.

While the CFA, CAIA and CFP are three of the most ubiquitous professional designations in finance, there also exists many more—the Financial Risk Manager (FRM), CPA, Certified Fraud Examiner (CFE), just to name a few. If you’re thinking about pursuing a designation or going to get your MBA, it’s always important to do your research before making a decision as many of these programs are resource and time intensive.

Sources:

“7 Reasons Why You Should Consider Getting the CFA Charter.” 300 Hours: Your Guide to the CFA Exams. Accessed March 10, 2018. http://www.300hours.com/1/post/2016/12/7-reasons-to-consider-the-cfa-charter.html.

“Certified Financial Planner (CFP).” Accessed March 10, 2018. https://www.investopedia.com/terms/c/cfp.asp.

“CFA vs. MBA.” Accessed March 10, 2018. https://www.cfainstitute.org/programs/cfaprogram/charterholder/Pages/cfa_vs_mba.aspx.

“Cfa_charter_factsheet.pdf.” Accessed March 10, 2018. https://www.cfainstitute.org/programs/cfaprogram/Documents/cfa_charter_factsheet.pdf.

“CFP Certification Requirements | CFP Board.” Accessed March 10, 2018. https://www.cfp.net/become-a-cfp-professional/cfp-certification-requirements.

“CFP- Examination Statistics.” Accessed March 10, 2018. https://www.cfp.net/news-events/research-facts-figures/cfp-examination-statistics.

“Charter Candidates | CAIA Association.” Accessed March 10, 2018. https://caia.org/candidates.

“Choosing a Program | CAIA Association.” Accessed March 10, 2018. https://caia.org/programs/comparison.

“Financial Risk Manager (FRM) |.” Global Association of Risk Professionals | The Only Globally Recognized Membership Association for Risk Managers | GARP. Accessed March 10, 2018. http://www.garp.org/#!/frm.

Ross, Sean. “CAIA vs. CFA: How Are They Different?” Investopedia, November 3, 2015. https://www.investopedia.com/articles/professionals/110315/caia-vs-cfa-how-are-they-different.asp.

“The CAIA Charter | CAIA Association.” Accessed March 10, 2018. https://caia.org/programs/the-caia-charter.