CFA Vs. FRM: Which Designation is Right for You?
This is one of the most commonly debated questions among students who have made up their mind about furthering their career and adding a designation such as CFA, FRM, or CAIA to their name.
Making the right choice can be crucial for a couple of reasons: 1) Each of these certifications are expensive, for example, you will end up spending more than $1,500 just to complete one level of the CFA exam. 2) You are going to devote a very long time to complete the program. While FRM has only two levels compared to three levels in CFA, most candidates will agree that FRM is much harder because of its quantitative nature.
So, you don’t want to have spent money and time, and then get the feeling that this wasn’t the right designation for you.
Let’s look at some of the important points that can help you decide whether you should go for CFA or FRM certification.
I think more than anything else, how you want to shape your career and what kind of job you want to see yourself doing should be the most important factor while making a choice.
A Chartered Financial Analyst (CFA) is a generalist in nature, while a Financial Risk Manager (FRM) is a specialist in nature. The field of finance is very broad and has huge scope. Financial analysis, investments, research, risk all are a part of the finance field. The CFA designation has broad scope and gets you ready or have a decent knowledge platform for a whole variety of roles. For example, if you want to be in equity research CFA is probably the right designation for you. In terms of careers and job opportunities, investment bankers are also mostly looking for CFAs apart from MBA Finance. However, if you are looking for building a career as a risk manager or join the treasury/risk department in a bank or a corporation, then FRM is the best designation. While these designations are not mandatory to land into any of these jobs, they provide you the right orientation, skills, and knowledge needed to perform these jobs better. As a simple example, if you are a portfolio manager, then CFA equips you with tools and knowledge you need to construct and manage portfolios. You may want to know about the risk limits or about calculating value at risk, but these may not be the core skills that you require to perform your job. However, a risk manager needs to ensure risk controls are in place, and how much risk the firm is facing from its trading activity and for him knowing about the same concepts of risk limits and value at risk are essential to perform the job well.
Apart from this, CFA is also looked by many as a great resume enhancer especially if you don’t have a strong background in finance. Say for example, you are coming from a non-finance background, and what to make a move to a career in finance, then CFA does help. There are many people who first do their CFA and then opt for FRM which provides them specialized skills.
Now, let say that you don’t really have a preference in terms of what job you want to do, and instead want to play safe and go for a career that is more in demand and hence choose a designation that will help you get in the jobs that are more in demand. In such a situation, your best friend is the CFA designation. CFA has much broader scope and wide industry acceptance. For many jobs such as a portfolio manager or an equity research analyst, a CFA is all that you need. In terms of careers, you can also compare CFA with MBA in Finance from a reputed institute (not literally as MBA has many other advantages). The whole curriculum is awesome. It exposes an individual to all the relevant areas that impact financial decision makers. Even if you have no experience in finance, just by following the curriculum you can learn a lot and be ready for a wonderful career. The same cannot be said for FRM, that is, unless you are sure that you want to be in risk management, FRM is not a certification of choice. But within risk management, FRM is by far the most popular and widely accepted.
This content is for paid members only.
Join our membership for lifelong unlimited access to all our data science learning content and resources.