CFP® vs CFA®
What is right for you?
What is right for you?
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 may be some overlap). Let us discuss CFP vs CFA separately and talk about the differences.
The field of corporate finance is a broad one and comprises 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.
The focus of CFP is to create professionals who can 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.
Visit the CFP website here -> http://www.fpsc.ca/
CFP requirements are laid out by the CFP Board of Standards. To get the CFP mark, one must hold a bachelor’s degree, have three years of financial planning experience and complete a prescribed course of study. In some cases, one might be exempt for 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:
CFP usually work directly with individual clients. Success depends on how good and loyal the client list is. Due to this, there is no regular salary for a CFP. It depends on the relationships formed by the planner.
The exam 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.
Visit the Institute’s website here -> https://www.cfainstitute.org/
The charter, given by the CFA Institute (headquartered in the U.S.), has a strong reputation due to a demanding series of examinations, that candidates need to study extensively to pass. It consists of three levels where candidates must sit a 6-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 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 Charterholder in are, Risk analysts, financial analysts, advisors, traders.
A CFP designation can be a small help in getting roles such as a financial analyst, trading, equity research associate and 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) as well as 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.
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.
Below is a screenshot of one of CFI’s financial modeling courses.
Below is a helpful table to compare more designations.
|Number of Levels||3||1||2||2||2||1|
|Costs||$4,000 to $5,000||$1,000 to $3,000||$3,000||$2,000||$1,500||$497|
|Exam Pass Rate||30-50%||40-50%||70%||67%||40-50%||70%|
|Content Focus||Portfolio Management, Investments||Financial Reporting, Audit||Real Assets, Alternative Investments||Financial Planning||Financial Risk Management||Financial Modeling, Valuation|
|Career Application||All Encompassing||Accounting and Finance||Asset Management||Retail and Wealth Management||Risk Management||All Encompassing|
|Study Time (hrs)||300 - 350 per exam||Varies||200 per exam||Varies||200 - 300 per exam||100 - 200 total|
|Completion Time||3-5 years||2.5 - 5||1-2 years||4 years||<1 year||<1 year|
|Work Experience||4 years||1 year||1 year||3 years||2 years||n/a|
This has been a guide to CFP vs CFA. To learn about other designations and career paths, check out these additional resources:
Advance your career in investment banking, private equity, FP&A, treasury, corporate development and other areas of corporate finance.
Get certified as a financial analyst with CFI’s FMVA Program.