MBA vs CFA: The Finance Professional’s Dilemma

The Masters of Business Administration (MBA) vs. the Chartered Financial Analyst (CFA) has been one of the most talked about choices for individuals in the financial industry. While both of them are intense study programs in their own sense, one involves more commitment to learning all areas of management while the other one is more finance or might I add, investment focused. Hence my goal through this article is to throw some light upon this topic and hope to if not educate you then give you some interesting points to ponder on, which would help you in making your decision that much easier. So read on!

Masters of Business Administration

The MBA has been regarded as one of the most coveted degrees to have for ambitious individuals that seek to move up the corporate ladder. This primarily holds true in the corporate world but the emerging trend is for entrepreneurs to complete an MBA as it serves as an unparalleled networking platform for meeting like-minded individuals. Individuals with an entrepreneurial mindset that attend top programs around the world have been utilizing their universities’ low acceptance rates to attain exclusive access to the cream of the crop. So if that’s something you wish to achieve as part of the educational experience, then this program might just be the one for you.
A typical MBA will take around 18 months- 24 months to finish when worked upon full-time. Top universities would charge about a $100,000-$120,000 on average for this program which turns to a sizeable bearing if you factor in the opportunity cost of lost income above the base fees. Most MBA schools require applicants to have about 3 years of work experience in the industry and any subsequent extra-curricular activities & volunteering would make for a stronger candidate. MBA schools typically require a GMAT score, which is used as an important distinguisher between candidates, drawing a close resemblance with the SAT for undergraduate degrees!

Historically graduates from top tier universities usually see a return on their investment in about 3-4 years, which seems like a pretty good trade-off for being away from the work-force. An MBA also really helps individuals that wish to enter the financial industry from engineering or the arts as it equips them with knowledge in various fields such as Marketing, HR, OB, etc. Having said that an MBA sees it’s limitations in areas where an individual isn’t able to get into a top-tier university and still has to pay a sizeable amount for tuition fees. Moreover not every candidate that wishes to have this degree beside their name can afford to pay expenses in those two years without the likes of stable income. As a result individuals opt to enrol into a part-time MBA program that takes longer to complete and limits the networking opportunities that are a vital part of acquiring the degree. Moreover if one is not good at standardized tests such as the GMAT, he/she is limited to tier-B schools and having the greatest work ethic, experience or university grades will not be able to compensate for this limitation.




Chartered Financial Analyst

The CFA designation covers varied topics such as derivatives, ethics, Quants, etc. but is primarily catered for individuals that are interested in pursuing a career in Portfolio Management. It is an intense study program that can only be worked upon after the completion of the undergraduate degree with a few exceptions for finance students. Topics covered vary greatly from ethics to derivatives, as the program is a great mix of theory and quantitative analysis that prepares you for a career in the financial industry. For an individual to be called as a CFA charterholder, he/she has to clear three exams (Level I, Level II & Level III) along with the minimum work experience requirements. Average charterholders have taken anywhere from 3-5 years to earn this designation.

The CFA exam is considered as the hardest exam for finance professionals and hence holds its value globally. The complete cost for the program can vary from $5,000-$7,000 depending on the number of attempts you take to clear each level and whether you require third-party study materials. Recommended study for each exam is between 300 – 400 hours although this is completely dependent on individual grasping power & prior knowledge on the subject area being tested. Individuals that do not aim to work in the Investment Management profession can consider this designation as another degree and is well comparable to MBA from an educational perspective. Therefore working towards this charter would greatly serve you in the form of an educational refresher and an additional degree that you could add after your name on your new flashy business cards!

Now that you have a better idea about the two choices I’d like to pose some questions that would help you choose which path is the right one for you.

  • In my opinion studying for the GMAT is about 50%-60% of the time taken on average to study for CFA Level I. If that thought ever crossed your mind, why not study for Level I before committing funds towards an MBA?
  • What stage are you at in your life in terms of fixed expenses, dependent others & age?
  • How much time can you carve out in 1 week for study time after work and your other responsibilities?
  • What are your career aspirations and do you see yourself in the financial industry in 5 years time?
  • What’s your financial status? Can you afford to take a few years off to polish your existing qualifications?
  • Have you clearly mapped our your career path and/or a specific job you wish to have or are you still in the process of figuring out what field would really suit your skill-set & lifestyle?
  • Do you feel you need to brush up on other aspects of Management to better your results in the financial industry?

Answering most of these questions would if not indicate which alternative is better for you, then at-least get you thinking on what it takes to achieve either of these degrees. Another important aspect to note is apart from ambition & career objectives, circumstances will play a significant role and often make the decision for you. To have this as a choice rather than a compulsion, one has to start thinking about these exams early on and the goal of this article was to encourage you to do so, so as to leverage either of these degrees/designations to realize your professional goals.

Conclusion

Some individuals decide to complete both of them which makes for a deadly combination and helps develops skills that are highly sought after in the financial industry. Although the upfront cost of completing both these degrees is steep, most people experience a significant return on their investment in terms of compensation and job profile if completed at the right time or from a top university. However this choice may not be in the cards for quite a few us and accepting this fact is completely alright. There are a lot many other ways to enhance your qualifications in order to become a strong candidate for jobs in the financial industry.

Finally, they might teach you about the correct investments strategies in the CFA and/or in the MBA program, but the best investment you will ever make is an investment in yourself! So while you decide whether to be the next banking tycoon or the CEO of the next hottest Fortune 500 company, always remember an investment in yourself will always earn the highest rate of return, granted you can afford the upfront costs!

You may also be interested in: How to Network Like a Pro: 7 Tips


Writer: Umang Bengali

Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.