07 Jan CFA vs FRM: Which Certification is Better?
This is one of the most frequently asked questions that students have when deciding to advance their careers in finance. Your choice is important because each of the certifications takes lot of hard work, money and time. The choice can be difficult if you are not aware of its key differences.
Is CFA or FRM Better for Your Career?
The primary difference between the CFA and FRM certifications is the topics that are covered. CFA covers a broad range of topics in finance like corporate finance, portfolio management, accounting, fixed income, and derivatives. On the other hand, FRM is a specialized in risk management. Also, CFA prepares you well for careers in investment banking, portfolio management, financial research. The FRM is suited for those who want to make a career in risk management in banks, treasury department or in risk assessments.
What is a CFA?
CFA stands for Chartered Financial Analyst and is a certification earned through the CFA Institute. CFAs are specialists in investment management. Some popular job titles held by CFAs include portfolio manager, research analyst, and investment banker. They also tend to work in corporate finance.
What is a FRM?
FRM stands for Financial Risk Manager and is a certification offered by the Global Association of Risk Professionals. GARP and the FRM certification are internationally recognized. FRMs assess an organization’s risk and develop strategies to minimize or offset it. They can be found working in banking, corporations, asset management firms, and government.
CFA vs FRM: Certification Requirements
In order to become a CFA, you must enroll in the certification program offered by the CFA Institute. To enroll in the program, you need a four-year degree or combination of education/work experience and pass a three-part exam covering the following topics:
- Portfolio Management
- Corporate Finance
- Fixed Income
- Equity Investments
It takes about 300 hours of study time to pass each level of the CFA exam. Also, to receive the charter, you need to have fours years of related work experience under a CFA. You must also become a member of the CFA Institute.
If you want to become a FRM, you must pass a two-part exam administered by the Global Association of Risk Professionals (GARP) covering the following topics:
- Quantitative Analysis
- Value at Risk
- Credit Risk
- Operation Risk
- Basel Norms
It typically takes FRM candidates at least 150 hours to study for each exam level and GARP encourages FRMs to take 40 hours of continuing education every two years. While the GARP does not call for any specific four-year degree requirement or minimum number of credit hours, to hold a job in risk management it is necessary to have a bachelor’s.
To earn either certification, be prepared to invest considerable time in study and exam preparation.
CFA vs FRM: Career Path
It’s typical that CFAs have more career opportunities than FRMs because of their broad studies and skills, especially in managerial positions. CFAs specialize in managing and maximizing a firm’s investments, which can cast a wide net career-wise. CFAs typically work in hedge funds, investment banks, and corporate finance doing investment banking, portfolio management, and equity research.
On the other hand, FRMs are much more specialized focus on analyzing risk and figuring out ways to minimize it within a company or portfolio. FRMs typically hold managerial and executive level positions who concentrate on risk and investment risk.
CFA vs FRM: Certification Costs
The CFA exam has a one-time program enrollment fee of $450. The total exam fees for each level typically cost $930. CFA candidates can expect to pay $1,100 to $1,700 to obtain their charter.
To take the FRM exam, you need to pay a $400 enrollment fee in addition to the costs of each exam. Part I costs $875 and Part II costs $475. You can expect to pay $1,050 to $1,500 to become a FRM.
Pass rates for both exams are in the 40 percent range.
CFA vs FRM: Salaries
Salaries for any profession depends on the job title, years of experience, and location.
CFAs can earn a salary between $45,000 and $180,000 per year depending on their position, experience, and industry. The FRM salary range is very similar to the CFA salary range. FRMs typically earn $50,000 to $165,000.
So, Which is Better for You?
Both designations are equally respected all over the world and neither one is better than the other. They are simply different.
While the CFA designation is broader in scope and focused heavily on investments, the FRM specializes in assessing and managing the risk of an organization. Your decision between the two is totally dependent on where your interests lie and what you enjoy doing more. If you want to learn more about the best CFA prep courses you can go here.
There is no reason why you can’t have both. It all depends on what you want to do with your career. The most logical scenario for having both a CFA and FRM certification is if you are a CFA and would like to specialize in risk management. Remember, the FRM designation is way more specialized than the CFA. So, it could be advantageous to have both.
I would recommend that look at what you want to do with your career and pick one. Then after you start your career, you can decide if it would be beneficial to pursue another one.