CFA versus CFP

A reader wrote in to ask two related questions.

One, is the Chartered Financial Analyst (CFA) or the Certified Financial Planner (CFP) designation more difficult to obtain?

Two, which is the more “valuable” designation?

Interesting questions that I shall try to answer.

Apples and Oranges

First, be aware that the CFA and CFP designations usually attract different students.

The CFA tends towards those interested in financially analytical careers. For example, investment analyst, portfolio management, and corporate treasury functions desire CFAs.

The CFP designation is geared towards people wanting to provide financial planning advice to individual clients.

There is some overlap, but the differences are significant.

If you want to analyze securities or manage mutual funds, the CFA is the better program.

If you want to develop long-term financial plans for individuals, the CFP program would be preferable.

That said, as building investment portfolios and strategies is important in overall financial planning, the greater one’s investment expertise the more valuable you can be to clients.

Second, I would say that the CFP designation is more country specific than the CFA.

To provide proper financial planning, one needs to understand the tax laws and regulatory environment applicable in one’s country or region. Someone with a CFP designation in Australia should know Australian laws. But they likely will not have detailed knowledge of Canadian rules. An Australian wanting to move to Canada would need to re-qualify in Canada.

The CFA designation is more portable. There are some jurisdiction issues to know, but the fundamentals of financial analysis are quite universal. There would be less concern hiring an Australian CFA for a Canadian position than in trying to relocate an Australian CFP to Canada.

So whether one designation is more difficult to attain should be secondary to what career path you wish to pursue.

Third, the personalities of those seeking CFA or CFP designations often differs.

I think the CFA designation attracts more analytical people. You need to like accounting, statistics, and analysis for many CFA related positions.

The CFP designation usually requires more people skills. The ability to work closely with clients who do not have strong financial knowledge. Possessing the soft skills is an asset for the CFP holder. Less of a need with CFAs.

Of course, this is not a hard and fast rule. And I am certain some would say that I am neither analytical nor a people person. Yet I hold both designations.

More Difficult?

I can only give you my view  on this. Others may have had a different experience.

Both designations require a fair amount of time and effort by candidates. This is good for clients as tough disciplines tend to produce better caliber professionals.

To obtain a CFA designation, candidates must pass three separate exams and accrue 48 months of approved work experience. Each exam is six hours in length and shifts from multiple choice in Level I, to mini-cases in Level II, and mini-cases and essays in Level II. The CFA Institute states that “successful candidates report spending an average of 300 hours preparing for each exam.”

In contrast, the CFP program in Canada requires completion of two exams. The Financial Planning Examination Level 1 is four hours in length with multiple choice questions. The Financial Planning Examination Level 2 is six hours long and made up of short and long answers.  In addition to the official exams, candidates now must complete an approved study course by Capstone and accumulate three years of relevant work experience.

As both designations focus on different areas, personal aptitudes may make one designation seem less difficult.

While you need to put in the hours for both programs, I would say that the CFA requires more work. At least it did for me.

When I undertook the program, the raw amount of material covered was enormous.

I also found that having strong finance and accounting skills were important. Candidates are expected to have these prerequisite skills. If you do not, then you have to essentially learn twice as much to pass the different levels.

I think the competition level may be greater in in the CFA program. You are competing against students from around the world. Also, CFA candidates require post-secondary education, normally a bachelor’s degree or higher, so most exam writers will have an educational background in finance. I do not believe that CFP candidates require university degrees, which might lessen the academic backgrounds of fellow students in the program.

More Valuable?

Again, this goes back to what your career plans are.

If you want to develop financial plans, with emphasis on insurance, budgeting, and tax-deferred retirement portfolios, the CFP designation should be more valuable.

If you want to move to the Cayman Islands and work for a hedge fund analyzing investments and creating portfolios, the CFA designation is much better.

If you do want to work with individual clients, there are other designations you may wish to consider.

I will provide a link to a couple of articles in my next post and add another option I think is useful.

38 Responses to “CFA versus CFP”

  1. Nathan says:

    VERY helpful and insightful article! This is EXACTLY what I was looking for!

    My one question I had was are you able to get the CFA before getting your bachelor’s degree? I noticed you stated that stated one needs post-secondary education after receiving their CFA, but that seems to indicate someone could get their CFA and then get their Bachelor degree afterward?

    Is that possible? I’m just wanting to learn more as I delve into the official Finance and Investment world as a sophomore in college.

    Thanks so much for your time!

  2. JMW says:

    No, usually one requires post secondary education before being eligible for the CFA. You also require relevant work experience. As the program takes three years, you can start the program prior to completing all requisites. But you need to have them completed prior to getting the CFA.

  3. GAURAV PURI says:

    I am a CFP and go a call from HSBC, London for the position of International Wealth Manager.To my shock they rejected my application and said that CFP is neither recongnised by HSBC nor by UK.To my understanding, CFP certification is valid in 24 countries and UK is very well part of the group.So I don’t know if I have done a right thing in going for the so called highest international certification in personal finance business.Please advice.

  4. JMW says:

    The CFP designation tends to be country specific. If you are a Canadian CFP, you would have learned primarily about Canadian relevant issues. For example, tax rates/deductions/credits/etc. may differ between countries, so that financial planning opportunities may not be the same. Tax deferred savings plans (retirement, education, etc.) may also differ. As a result, many countries or companies may not put much weight on foreign CFP certification.

    Personally, I would give some credence to your CFP designation. Although your specific knowledge may not be correct for the UK, you did develop some general investment knowledge that will help in the position. Also, showing that you successfully undertook the program provides a glimpse into your personal dedication to improve your skills and your ability to learn those new skills.

    Note that the same is true to some extent with other professional designations. To the extent your skills are specific to a region, there will be less chance to use them in other locations. Law, tax, accounting (although with IFRS this is becoming less so) are a few areas where shifting across borders is not straightforward.

  5. Gaurav says:

    Awesome Post.

    I am an engineer in the financial services industry both Mutual and Life Licenced and am looking into other options for myself.

    Very well detailed and constructed article.

    Thanks

  6. Avisek Ghosh says:

    Awesome Post Sir

    I just started my CFP program and i am a small sub-broker with Shriram Insight.As i mainly deal with retail and individual and had hand on experiance on that i choose for CFP.But after reading your post and comment posted by Gaurab Puri i am little shaken and panicing.What is my target jobs for this degree.I am also doin my MBA from distance education.Will it help?

  7. JMW says:

    Good questions.

    CFP, MBA, CFA, etc. – in broad terms, all go after slightly different job segments. But there is a lot of overlap – for example, investment advice could be offered in varying degrees by a CFP, MBA, or CFA. And within each designation or degree, there is much variation. I know CFPs who sell mutual funds, others that work for insurance companies, others that provide estate planning, and so on. Some CFAs work in brokerage houses as analysts, others run mutual funds, and others work for companies in finance, M&A, or treasury functions. I suggest you look at the websites I link to on my Blogroll (bottom right of my homepage) for employment options. Investopedia often has articles on jobs in different fields as well. Find something that meets your personality and interests. And where there is a thriving job market in your location.

    I think at the end of the day, what you know is more important than the actual letters after your name. And, of course, your required skill sets will differ between position held. An investment analyst may need more quantitative skills to analyze data. A client advisor dealing with retail customers may need strong interpersonal skills and the ability to explain technical issues in layman’s terms. A CFP should have diverse financial planning skills, including likely insurance knowledge. A CFA running either a Treasury unit for a large company or equity mutual fund does not need detailed insurance knowledge. When I interview staff, I want employees that can do the work competently. I am less concerned with their degrees especially as there is much variance between different schools, programs, country standards, etc. So focus on knowing your area of choice very well. In the long run, that is worth more than the designations.

    As for panic, would not worry. Today’s economic conditions should serve as a reminder to the average investor that he/she needs technical support in his/her investing and retirement planning.

    Good luck.

  8. Julian says:

    This article was just what I was looking. I am a recent college grad working in foreclosure for a large bank, and currently looking for ways to increase my skills and value as a marketable employee. Thanks!

  9. Avisek Ghosh says:

    Thanx Sir for wonderful article. This is a big boost for me.Thanx again

  10. Dhanashree Dangat says:

    Can i do both cfa and cfp one after the other??

  11. Vijay says:

    Dear Sir,

    I’m working for a brokerage company, mostly inclined towards sales, for the last six years. Now i want to advance my career. After going through your article i’ve come to conclusion that CFP is more better for me than CFA. Coming from the brokerage industry dealing in sales most of the times, would you suggest me to go for a CFP? or a CFA? Please also mention the relevant reason. Thank you.

  12. JMW says:

    Thanks for the question. Two quite different designations.
    CFA – finance related, requires strong analytical skills, and ability to juggle numbers. CFA is a global designation, so you can easily work around the world. Often less client-facing than a CFP. If you want to analyze investments, work for a mutual fund, etc, where you deal more with data than clients, CFA may be preferable. Clients that you do deal with likely have some investment knowledge.
    CFP – financial planning with equal emphasis on risk management, tax issues, retirement and estate planning, succession planning, cash flow, insurance as well as investing. CFP is more local due to local laws concerning tax, insurance, estate, etc., so is less portable than the CFA. If you like dealing with clients (who generally lack sophisticated investment expertise) on a daily basis and developing comprehensive financial solutions for their needs, that may be the better route for you.
    So it depends on your personal aptitudes, interests, skills, as well as opportunities in your local markets.
    Good luck.

  13. JMW says:

    Yes. Two different designations. For CFA, there are prerequisites before being able to undertake the designation. Depending on your jurisdiction, there may also be prerequisites for your local CFP program, but I expect they will be less onerous than the CFA.

  14. atul salhotra says:

    very comprehensive topic about cfa and cfp.
    topic to be go through.

  15. Jim says:

    Thank you for this article. If you go to the CFA Institute’s website it states that one does not necessarily have to possess a bachelor’s degree in order to take the exam and earn the designation. Four years of professional work experience in any sector also qualifies you. see. http://www.cfainstitute.org/cfaprogram/process/Pages/index.aspx

  16. JMW says:

    Very true. That is why I say “usually” rather than definitely. I know a few CFAs without university degrees. They obtained their experience and skills in Europe where apprenticeships are still offered and the firms train staff directly. However, the CFA program is not simple. It is definitely an asset to have a strong financial and/or accounting (possible economic too) background prior to entering the program. As such, a degree in one of these areas will aid in passing the program.

  17. Crystal says:

    Great article!
    One question – it looks like both CFA and CFP are serving individual clients, what about companies? Can they also provide financial advice to companies? Can they work in a normal companies instead of consultant companies?

  18. Jordan Wilson says:

    Thanks for the comment.

    I would say that CFAs tend to work for companies rather than dealing with individual clients. They often are stock pickers, investment analysts, CFOs, M&A work, etc. for companies and less in direct client facing functions. That is not to say that a CFA cannot be involved in a business that deals with individual clients. But if one only has the CFA designation, he/she will more likely work for a corporation.

    A CFP tends to be more individual serving, but that does not mean a CFP cannot gear his/her practice towards companies. Depending on the specific CFP’s skill set, one could advice business on succession planning, employee pensions, business or asset valuations, tax issues (assuming they also have tax expertise), insurance, cash management, equities/debt issues, etc. But many of these require other skills or greater expertise than a generalist CFP may typically possess.

    If you look up the CFA Institute, you can get a better idea as to career opportunities. Here is a link to some CFA career breakdowns by country. http://www.newcfa.org/#/professions

    And if you google your national CFP society, it will also provide ideas on jobs.

  19. Matt says:

    Great article! I am currently enrolled in the CFA program and am sitting for level 1 in June. I have the qualified work experience, but have not finished my bachelors degree (im about half way through). If I obtain the CFA charter, do you think my lack of a bachelors degree will hold me back in the job market? I know many positions state a degree is required, and I’m not sure if most employers would accept the CFA in place of it.

  20. Jordan Wilson says:

    Thanks.

    Good question. Some companies are sticklers for the stated job requirements. So if a degree is required, you run the risk of missing out. Most firms though use some common sense. If your other technical skills and experience meet most of the other requirements (say 80% match), wise companies will not worry about a missing degree. For me, I want staff that can actually do the tasks. Whether you have the right degree means much less. And in my experience a bachelor’s degree in Commerce does not prepare graduates for accounting, finance, etc., professions. Only the groundwork.

    Down the road though, your firm may want you to get an MBA to add to your value, so you may want to not give up on finishing your bachelor degree.

    Best of luck in June and with the other levels.

  21. pooja mishra says:

    i need to know that if i go for a CFP course for now and can i even appear for the CFA course in the future? can a person take both the qualifications ?

  22. Jordan Wilson says:

    Yes and yes. I have never heard of any finance/accounting/banking professional designations where you cannot get multiple designations. You just need to have the prerequisite skills, education, and experience.

  23. David says:

    Hi,
    Great article! I am a Canadian working in the Middle East. I would like to do an online course in Financial planning to learn all in this et of skills to be able to do my own financila planning. Any advice?
    Best regards.

  24. Jordan Wilson says:

    It depends on your personal objectives and long range plans. If you are still a Canadian resident for tax purposes or plan to resume residency after returning to Canada, a Canadian financial planning skill set is useful due to the tax knowledge you require for proper planning skills.

    If you want to become a financial planner in Canada, I suggest you look at the requirements at the Financial Planning Standards Council. https://www.fpsc.ca/earn-certification

    If you just want to take a course or two, consider some of the course component providers. https://www.fpsc.ca/core-curriculum-educators/legacy

    Or if you want to focus on investing, consider the Canadian Securities Course or other more investment related offerings from the CSI. https://www.csi.ca/student/en_ca/home.xhtml

    Many of the courses can be completed remotely, although you may need to physically sit exams in a Canadian city.

    Hope that helps.

  25. will says:

    A very good and insightful article.

  26. Vikas says:

    Hello Sir,
    Well iam a Sub-broker and have done my Technical Analysis course,and wanted to flurish myself more into Capital Market,so just wanted to know which one suits me more,either CFA or CFP?If not both thn which course u suggest to do me sir?

  27. Jordan Wilson says:

    If you intend to work in Capital Markets, as opposed to help individual clients financial plan, I believe that the CFA program is likely the better option. The CFA is focussed on investing (analysis, portfolio construction, product creation, etc.) whereas the CFP field is more on the entire planning process (wealth management, cash management, retirement planning, etc.).

  28. Pooja says:

    i am currently doing c.a articleship in india.can cfa be started before graduation?can ca article training be counted as professional qualification that is required for either cfp or cfa?

  29. Jordan Wilson says:

    I do not know the requirements for Indian CA nor CFP designations. You will need took to your local institutes for guidance. As for the CFA, the CFA Institute lists work experience guidelines. They also provide a self-assessment tool and some good examples as to what may or may not constitute acceptable work experience. Good luck. http://www.cfainstitute.org/about/membership/process/Pages/work_experience.aspx
    http://www.cfainstitute.org/about/membership/process/Pages/work_experience_assessment.aspx
    http://www.cfainstitute.org/about/membership/process/Pages/work_experience_descript ions.aspx

  30. bela says:

    Hi,

    Thanks for detail information!

    I am confused whether I can go for CFA now or not, pls help.
    I have done an MBA in marketing with B.Com with 7 yrs of exp and working as team leader in back end operations.
    Now I am looking for AM/Manager level job in finance stream.. Pls advice if it is good for me?

    Tks

  31. Jordan Wilson says:

    Please check out my CFA posts this week for more information on the CFA designation. In general, I think a CFA designation adds value, especially if you wish to build a career in AM (or finance). That said, it requires a fair bit of effort – study time and only annual exams – and you need relevant work experience. If you get into the AM functions you probably will accrue the work experience.

  32. mustafa javed says:

    what if i do cfp and start working !!and dan do cfa ???is it a wise OPTION??because cfp is for 5 mnths and cfa takes atleats 2.5 yrs !!

  33. Jordan Wilson says:

    What is right for one may not be best for another. The two designations are very different and usually lead to different career paths. You need to decide what is best for you – long term interests, aptitude, personality, etc. – and choose the best option for you.

    Personally, I always find the question of time required to be a weak one (unless you are in your 60s). Yes, the CFA will take at least 3 years (usually more) and the CFP can be shorter in length. But if you are 25 and intend to work for another 30 years, really what is the extra time, if it puts you on a career path that brings more fulfillment? You must decide what type of career you want first, the required time to complete the program should not be a big issue.

  34. Mathias says:

    Great great article!

    I read through all the comments as well. I am surprised what kind of questions were asked as 80% of the questions were clearly answered in the article.

    Mr. Wilson you are a good person for taking the time answering all these questions. Again, great article keep them coming!

  35. Tim says:

    Hi Jordan,

    Thanks for your very informative blog. I understand that time difference between the designation shouldn’t be an obstacle towards one’s long term career path. However, I am in a position where income would be an essential consideration.

    I am just wondering would the work experience as a CFP be recognised relevant work experience for the application for CFA? In other words, can I start a career as financial planner and use the same work experience to apply for CFA?

    Cheers,
    Tim

  36. Amit says:

    Hi,
    This gives a lot of information.. but is there someway to find out if the CFP has any weightage in Australian Market .

  37. Jordan Wilson says:

    Possibly, but I would lean towards no. It all depends on the specific work performed as a CFP as to whether it qualifies for CFA appropriate experience. The key criteria is that you need to spend the majority of your work “Directly involved in the investment decision-making process; Engaged in responsibilities and/or producing a work product that informs or adds value to that process”. Many CFP roles are not that heavily involved in investment decision-making.

    http://www.cfainstitute.org/about/membership/process/Pages/work_experience.aspx

    For examples of what qualifies and what does not:
    http://www.cfainstitute.org/about/membership/process/Pages/work_experience_descriptions.aspx

    Good luck.

  38. Jordan Wilson says:

    Not sure what “weightage” means. But in today’s world, where individuals need to save and invest for their retirement, combined with volatile financial markets and a huge offering of financial products, there is definitely a significant role for financial planners and investment advisors.

Leave a Reply



© 2009-2014 Personal Wealth Management All Rights Reserved