Thursday, July 7, 2011

Which is better, a CFA charter or an MBA?

Jennifer Swartz-Turfle posts in The Finance Professionals’ Post, a publication of the New York Society of Security Analysts an interesting article about the question: what’s better, a CFA charter or an MBA? This well-written article addresses the issue and offers some very interesting points.

[Dr. David Krause, AIM program director said, “I’m going to keep this article handy since I’m often asked the question by students and alumni. Basing this only on instinct and personal observation (and not on research), I believe that the ROI of a CFA charter trumps an MBA. However, I am biased towards the money management world and believe that an MBA might be better suited if you plan to run GE or Microsoft someday. The following article by Jennifer Swartz-Turfle will help those struggling with the question of CFA or MBA.” Note: Marquette University's AIM program is the first undergraduate institution to become a CFA Program Partner.]

The article can be accessed at “If you’ve ever visited finance or analyst forums, you will probably immediately recognize the debate: which is better, the Chartered Financial Analyst (CFA) designation or a Master’s in Business Administration (MBA)? Some argue the MBA is a waste of time and money unless it comes from one of the top-ranked MBA programs. Others claim MBA graduates have a flimsy grasp on finance compared with those with a CFA charter. MBA enthusiasts counter that CFAs have a deep knowledge of asset management principles but lack context about the broader aspects of business. Underlying these arguments is the answer: no one program is right for everyone.

Even the CFA Institute does not discount the value of an MBA. According to an article on, Bob Johnson, managing director of the CFAI’s education division, says the MBA and CFA are ‘complimentary’ designations. ‘For a young person who is preparing for a career in investment management, both educational opportunities are something they should consider.’ Furthermore, a recent study of portfolio managers, found no discernable difference in portfolio performance between CFA charterholders and MBAs.

So, should you start preparing for the CFA Level I exam or download a practice test for the GMAT? Analyst Forum, an online community focused exclusively on preparation for the various financial analyst examinations, has explored this question in depth, including (naturally!) a spreadsheet to compute the net present value (NPV) of both the CFA program and MBA programs. Although the CFA comes out ahead in this analysis with a NPV of $204,394 compared with $177,884 for the MBA, the author notes that ‘a change in assumptions can change the answer.’ Since the right program for you depends largely on your resources, your skill set, and what you ultimately want to do, the following are key considerations when making your decision:

Your resources and future earning potential. The difference between the financial investment in an MBA and the CFA Program is stark: most top full-time MBA programs cost more than $45,000 for a single year of a two-year program. The CFA Program, all-included, costs just a fraction of that at under $4,500 (more if you don’t pass exams on the first try). The time commitment for the CFA, however, is significant, as the average time to earn a charter is four years. Those already employed might consider part-time programs, as many employers will pick up the tab for the CFA Program or an executive MBA program.

In addition, while a CFA charter holds the same value for all who earn it, not all MBAs are created equal. And while the reputation of the MBA program matters to many employers, a US News article also stresses the importance of a program’s job placement rates after graduation. Should you decide an MBA is right for you, the following criteria, used by the Economist in its yearly program rankings, are important to consider:
  • Opening of new career opportunities and/or furthering of current career;
  • Personal development and educational experience;
  • Increase in salary; and
  • Potential to network.
Your commitment to finance. While the CFA designation has reached the status of ‘gold standard’ in the industry for asset management, the curriculum primarily teaches the technical skills required for investment management. An MBA, on the other hand, provides exposure across a broader field of study. If you’ve decided asset management is the thing for you, the CFA Program is a better investment. But if you’re still uncertain about a career in finance, an MBA might be a better long-term bet.

Your learning style. Because the CFA is a self-study program, candidates can move along at their own pace. For the self-directed, this may be an advantage. However, some learners may benefit from, or even require, the structure of classes, discussion, and ongoing evaluation that a master’s program provides.

A final thought to keep in mind: your credentials don’t make your career. Most firms choose candidates with relevant job experience in addition to their education. Whatever program you decide will work for you, it’s not just the initials after your name—but what you do with them—that really count.”

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