Certified Financial Planner® (CFP) and Chartered Financial Analyst® (CFA) are the two most talked about designations in the field of finance. Both of them serve different interests, and candidates will eventually perform work of a different nature. Both may sound similar but, in reality, they serve different purposes (although there is some overlap). Let us discuss CFP vs CFA separately and talk about the differences.
The field of corporate finance is a broad one and is comprised of lots of career tracks. There is no dearth of opportunities if you choose the right path and clear the obstacles to achieve your goals. Choosing a path that is aligned with your goals and interests is important, and this guide seeks to help you do that in regard to CFP vs CFA.
CFP vs CFA – the CFP
Financial Planning for Individuals
The CFP is for professionals who advise individuals on managing their personal portfolio and planning for the future. Certified Financial Planners advise people on many areas, such as investment management, estate and retirement planning, tax planning, personal cash flows, and insurance.
Some Certified Financial Planners may also form partnerships with people such as lawyers and tax experts.
The CFP Board of Standards sets the CFP requirements. To get the CFP mark, one must hold a bachelor’s degree, have at least three years of experience in financial planning, and complete the prescribed course. In some cases, one might be exempt from taking the course. CFP involves only one exam and can be completed in one year if cleared on the first attempt.
The courses include the following:
Financial planning (environment and process)
Fundamentals of insurance planning
Retirement needs analysis and planning
Estate planning fundamentals
CFP vs CFA – Careers
CFP’s work with clients, especially individuals investors. Success depends on how good and loyal the client list is – and that depends of the quality of service the CFP provides. Due to this, there is no set salary for a CFP. It depends on the relationships formed by the planner.
CFP vs CFA – the CFA
The exam to become a CFA focuses on developing professionals who can do financial analysis and manage large sums of money. The designation, which opens up opportunities for jobs that are otherwise difficult to get into, has a very broad scope.
The Program provides a strong foundation for investment analysis and portfolio management. It is sometimes compared to a Master’s Degree with various minors in topics such as economics, accounting, and statistical concepts.
The charter, given by the CFA Institute (headquartered in the U.S.), has a strong reputation due to a demanding series of examinations. Candidates need to study extensively to pass. It consists of three levels: candidates must sit a six-hour exam for each level. The Level 1 exam is administered twice every year (June & December) whereas, for the other two levels, the exam is given only once annually – in June every year.
The Level 1 examination has a focus on investment tools (Quantitative Methods, Financial Reporting and Analysis etc.), Level 2 increases the focus on asset classes analysis (Equity Investments, Fixed Income, Derivatives, etc.). The Level 3 exam has a stronger focus on Portfolio Management and Wealth Planning. All exams share a core section on Ethics and Professional Standards.
To get a charter, candidates need to fulfill all three conditions: hold a bachelor’s degree, clear all three levels of exams, and have four years of experience in the finance domain.
According to the CFA Institute Factsheet Charterholders primarily work as
Other roles that you may find Charterholders in are risk analysts, financial analysts, advisors, and traders.
CFP vs CFA – Overlapping careers
A CFP designation can be of help in getting roles such as a financial analyst, trading, equity research associate, or financial consultant, however, it generally only has a lot of pull for financial planning and financial advisor roles.
The CFA credential, on the other hand, can be used for both corporate roles (such as financial analyst, trading, equity research associate, investment banking, and private equity) and personal financial planning/advisor roles.
Both designations offer a wide scope of opportunities. Some opportunities overlap, but in general, they are meant for different paths. Choosing according to one’s interests and aspirations is crucial.
Financial modeling careers
Both are great options on your resume for careers that require financial modeling, but neither credential really teaches the step-by-step applied skills you need to perform financial modeling in Excel. The most effective way to learn modeling skills is on the job in careers like investment banking, equity research or FP&A.