CFA vs MBA
Updated: Jul 31, 2020
If you think that only a graduate degree will be enough for you to excel in your choice of career, then you are totally wrong. Additional education after college has become a prerequisite for career advancement in all fields. We will discuss the career relating to finance and investments here. For those considering a career in investments, the great debate has been whether to obtain a Master of Business Administration or The CFA Institute’s Chartered Financial Analyst designation. Both have their pro’s and con’s and thus choosing between the two makes for a rather difficult decision.
CFA – Chartered Financial Analyst - Chartered Financial Analyst is one of the most reputed financial qualifications from around the globe. It is offered by the US based CFA institute. It is a three level post graduation course. However, all the three exams have pass rates that are less than 50%. The content learned from the CFA program is directly applicable to investing. Though, it won’t necessarily make you a better investor, but it will give you the building blocks to become one. The main issue with the course is the absence of practical application based knowledge which is normally present in MBA.
MBA – Master of Business Administration - If you ask any student ‘What after Graduation?’, the obvious answer is MBA. Since a long time MBA has been the favourite finance degree for everyone. It gives a holistic and practical view about the current market scenario. It is also a great place to network and make strong contacts. Most of the MBA schools have an extremely talented faculty helping in soft skill development of all the students. However, unless you are already in an investing track, an MBA won’t make you a better investor. Now we will speak about some factors that differentiate the two qualifications.
When can you start? Students can start preparing for their CFA L1 from their 2nd last year of graduation and appear for L1 in the final year of graduation. (You can register for the exam only once your final year has started). Similarly for MBA students can start preparing for their entrance in the penultimate year of graduation and appear for the test earliest in their final year. Though, for an MBA, it would always be preferred that the student works for a couple of years post their graduation. So the ideal time to start your entrance classes would be once your graduation ends and job starts.
Demand-The demand for CFA exams is gradually increasing since the past few years. 8 years back India was not even a centre for CFA examinations and now CFA exams are held in a lot of cities in India. Also, a lot of financial institutes are increasing the number of CFA intakes in India but sadly the increase in job opportunities is lesser than increase in the number of candidates. The major reason for a lower rate of increase in jobs is due to the lack of practical skills possessed by CFA’s in general. Globally CFA is the most reputed finance qualification and has a very high demand. The demand for MBA is extremely high in India but there is a catch. People think an MBA will automatically open doors, but people really need to go to the best school they possibly can. The good schools have connections with employers across a range of industries and top firms are actively recruiting these graduates. So plush packages are offered only to MBA’s from the top B-schools around the globe and not every MBA graduate.
Flexibility and Time Commitment-CFA is a correspondence course while MBA is normally a full time course. So CFA can be done with a job which is not the case with an MBA. CFA examination requires attendance of coaching classes normally for level 1 and 2. These classes happen on weekends at most of the places and thus don’t hamper normal job timings. The amount of time required for preparation for every level is around 250 hours. The CFA charter is received after a student finished his 3 exams and then has 4 years of work experience in a relating field. For MBA there are around 9 month coaching classes before the entrance exams and once the entrance exams are cracked, the main course takes 2 years. Students are not able to work during these two years of MBA.
Pattern of study and examination- CFA exams are extremely conceptual exams. Focus is given more on concepts and less on practical knowledge. While MBA is an extremely practical course with a lot of industry exposure. The main place where an MBA has an upper hand is here. The campus experience, the practical education and the networking scope is something which CFA does not offer. There are 3 levels of exams in CFA. Level 1 and 2 are MCQ based without any negative marking while level 3 is half MCQ based and half subjective.
MBA stresses more on presentations and case studies. The entrance exams of MBA is MCQ based. Most of the entrance exams have negative marking. Some of the important entrance exams are CAT, NMAT, CET, GMAT, SNAP and XAT.
Cost comparison- The monetary cost of CFA is around Rs. 2,00,000 and additional Rs. 55,000 for every re exam you need to take. Tuition classes are normally available for all the levels having a total fee of around Rs. 1,00,000. When you compare this against the cost of doing an MBA, it is extremely low. The fees for the MBA entrance exams coaching is around Rs. 50,000 and the college fees range from Rs. 8,00,000 per year to 25,00,000 per year in India. Normally MBA’s are 2 year courses so you can double the cost. If foreign universities are chosen, the cost can add up over a crore rupees. Adding the opportunity cost of not working for a typical 2-year MBA makes the CFA qualification much, much more cost efficient however you see it.
Entry/Exit barriers-To obtain a CFA degree, u need to pass three difficult and conceptual examination levels. There is no entrance exam for the course, so the entry is easy but the exit is difficult. Whereas on the other hand to get into a good Business school, you need extremely good marks in your CAT exam or any other respective exam and then crack the GD/PI but once you have cleared it, rest everything is manageable.
Work experience-Work experience is very important if you choose to do an MBA as all the top business schools would prefer a person with 2-3 years of work experience over a fresh graduate. Also, a person needs to do a summer internship during his MBA.
Whereas there is no work experience required to do CFA, infact you can appear for your CFA level 1 exam in the final year of your graduation. But to get the CFA charter, 4 years work experience in the finance field is required.
Pay scale- The starting pay of a CFA in India is around Rs. 5-7 lakhs whereas an MBA in India earns a starting pay of around Rs. 10-12 lakhs per annum. But if you count the flexibility of working while doing your CFA which is not available with an MBA, the difference is covered up for. There is a significant difference in pay scale if you are planning to settle abroad. The average pay of a CFA charter in US is around Rs. 80-90 lakhs whereas the same of an MBA is around Rs. 60-70 lakhs.
Career Paths- Both CFA and MBA are related to finance and investments but ideally a CFA makes you ready to work in the back and mid end while an MBA makes you ready to work in the front end. So if you’re a person who prefers reading, forecasting and number crunching, CFA would fit you well but if you want to be a people’s person in the field of finance and have good convincing/presentation skills, an MBA would suit you well.
I have tried and explained both the courses in detail. One thing which students need to know that its not always an OR, sometimes it can be an AND too. You can surely do CFA and MBA both if you plan your career and education well.
The main problem that CFA students have to counter is the lack of practical application based knowledge. If they are able to counter that, their value in the market increases massively. Students can gain such knowledge by doing various practical skill based courses privately or join classes that provide such a training. Visit CFA Elite Edge for details about such training based classes.