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Should I take the FRM or CFA program?
The financial industry is a broad field with diverse opportunities for individuals of different qualifications.
There are numerous certifications you can pursue to climb the financial ladder towards commanding a higher salary and position.
Two of the most recognized professional certifications in the financial industry the world over are FRM and CFA. Both of these certifications have the potential to propel you to the top of your profession.
Which should you go with? Many professionals struggle to choose which one to pursue between the two (the really smart ones choose…both).
Below we share clear cut differences in these two certification courses to help you in you decision making.
Course Details
FRM
The Financial Risk Manager course demands at least 150 hours of study time. This program is heavily skewed towards the understanding of risk and its management.
To get their globally acclaimed accreditation, you will have to complete one hundred multiple-choice questions in level 1 and eighty questions for level 2.
This course includes free access to webinars on Risk Management subjects.
Towards the end of the course, you will get access to fifteen hours of summarized course content that will help you adequately prepare for the examination.
The Global Association of the Risk Professionals (GARP®) is responsible for administering the program worldwide.
CFA
The CFA or Chartered Financial Analyst course is one of the most known investment industry certification and is offered by the CFA Institute.
The CFA Institute controls the format of the course including curriculum and exams plus charter awards. Candidates who go through the program and clear all three levels of exams are eligible for the CFA charter.
The CFA course material entails topics surrounding ethics, fixed income analysis, equity analysis and derivatives among other things.
In addition, the course demands at least 300 hours of study to pass the three levels of the CFA exam.
Course enrollment requirements
FRM
You don’t need any educational qualification or work experience to sit for this exam. The exam questions are well designed to touch on both practical and theory.
Real-world problems within the financial industry are a highlight for the examinations.
Nevertheless, after sitting for the exam, you will only become certified if you demonstrate a minimum of 2 years of professional experience risk-related positions such as risk consulting.
CFA
To get started on the CFA level 1 course, candidates need to have at least a bachelor degree or be in their last year on their degree program during the time of their CFA enrollment.
Alternatively, you can qualify for the CFA level 1 enrollment if you have demonstrated at least four years of professional experience in the financial world.
You are also eligible if your combination of work and college experience total up to the four years required.
Over and above the education/work experience requirements, to receive the CFA charter one has to become a CFA Institute member.
You will have to follow the code of ethics of CFA and professional standards. You are also required to have four years of related CFA work experience to receive certification.
Course Contents
There is a distinct difference between these course contents. Whereas CFA covers varied subjects in Finance such as Accounting, Corporate Finance, and Portfolio Management, FRM focuses on Risk Management.
FRM Study Topics
The course program by the Global Association of Risk Professionals covers subjects such as:
- Risk Management
- Credit Risk Analysis
- Risk Valuation
- Quantitative Analysis
- Operational Risk Analysis
- Market Risk Measurement
This course creates financial risk managers and is specialized, focusing on topics relating to risk management as seen above.
CFA Study Topics
The CFA program offered by the Charted Financial Institute entails questions on:
- Accounting
- Ethics
- Equity Investments
- Corporate Finance
- Portfolio Management
- Fixed Income Analysis
The CFA program involves a wide range of topics as previously mentioned. By the time you go through all that, you will be quite the rounded individual.
The CFA certification course is more generalized and ensures that students can handle differing facets of the financial industry.
Course Duration
A great advantage of the financial risk manager course is that you can complete both exams in the same year. In fact, you can complete both sittings; one right after the other in the same day.
Most candidates finish the CFA program in 3 years, but depending on your work and family situations you can take a longer time in completing the program.
Exam Details
Getting the two certifications entails investing a considerable amount of time in study and sitting for different sets of examinations. Both pass rates are both in the 40 per cent range.
FRM
This program entails two levels of examinations. The exams entail multiple choice questions in the English language. To receive the designation, one must complete the two-part exams that are held in May and November.
Each exam lasts for 4 hours. Part 1 of the test has 100 multiple-choice questions while part 2 comprises of 80 multiple choice questions.
Session 1 of the exams is held in the morning and session 2 in the afternoon. You can only get your part 2 paper after you successfully clear part 1.
This certification exams are focused on creating a highly skilled risk expert who can function above average in assessing and controlling risk scenarios.
You can expect that your questions will be complex and drawn from various topics in the course syllabus.
The fact that the pass rate is in the 40% range means that this test isn’t a walk over.
GARP deliberately makes its exams challenging so that by the time you receive the certification, you will be able to handle harsh work conditions.
However, as a certified professional, you must be ready to deal with varying forms of risks.
There are no other gradations for your exams except for Pass and Fail. There is no wrong marking for incorrect answers either. After sitting for level 1 or 2 tests, you will get the results via email in about six weeks.
CFA
On the part of CFA certification, the program entails three levels of exams. Each level ends with a 6-hour written exam. These are concurrently held in more than 160 locations within the world.
The exams are offered in the English language. To receive the CFA title, you must pass all three exams sequentially.
During registration for the CFA exams, you will be required to select your preferred test center location- a city near you. You will also have the flexibility of changing your test center location before the exam date.
The examination is split between two sessions; one during the morning and another in the afternoon. The exam duration in each session is 3 hours and candidates have to attend both of the sessions.
You will receive your CFA results in about 8 weeks.
Certification Costs
FRM
To sit for this exam, you need to pay an enrollment fee of US$300 plus exam fees. Part 1 of the study costs about US$475 and part 2 costs around US$875.
In the end, by the time you get the certification, you can expect to have parted between US$1,050 and US$1,500 in fees.
CFA
To be allowed to sit for the CFA exam the first time, you need to first enroll for the CFA program costing an initial enrollment fee of US$450 plus additional registration fees that range between US$800 and US$1,170.
However, for level 2 and level 3 exams, you will not be required to pay an enrollment fee. By the time you get the CFA charter, you can expect to have spent between US$1,200 and US$1,700 in costs.
Job Prospects
The CFA course program touches on a broader range of topics in the financial services industry as compared to its competitor. As a direct result, the CFA charter opens you up more career options.
Chartered Financial Analysts work to manage and maximize a company’s investments. Additionally, highly lucrative career options for CFAs are in hedge funds and investment banks.
Unlike its counterpart, the financial risk manager program has a narrower scope and focus. This, as you will have specific career opportunities in risk management for the financial industry.
FRM salaries are relatively high and include roles in risk management or assessment.
CFA Roles
As a charter holder, qualified roles and job positions may include:
- Portfolio Manager
- Fund Manager
- Financial Adviser
- Corporate Financial Analyst
- Investment and Research Analyst
- Hedge Fund Manager
- Investment Banker
- Investment Manager
- Relationship Manager
FRM Roles
After receiving your certification, career positions you can fill may include:
- Chief Risk Officer
- Risk Manager
- Senior Risk Analyst
- Enterprise Risk Manager
- Head of Operational Risk
- Senior Operational Risk Manager
- Investment Risk Manager
- Risk Management Consultant
- Operational Risk Analysts
- Commercial Risk Manager
Competing Certifications
There are no directly competing certifications for the CFA exam. CFA certification is the sole path for a colorful career in Investment and Portfolio Management.
However, when it comes to the risk manager examinations, you can get a similar qualification by sitting for the Professional Risk Manager (PRM) exam.
Background Knowledge
You will have an easier time in going through the CFA program if you have a background in finance, investing and accounting. With FRM, you will have it a bit easier if you have a quantitative and risk-related background.
Can I Have Both?
If you already have one title, you can pursue the other to further your career in the Finance sector. As a result, you can exponentially grow your career and remuneration with both of these certifications.
There is no law against pursuing both accreditation. In a scenario where you are already a CFA and want to specialize in risk management, it would be logical to pursue the risk manager certification as well.
You can get the best of both worlds.
Pros and Cons
CFA Pros
- You gain a broad skill set in finance
- Huge career growth potential
- Exposure to varied topics
- Higher salary prospects
CFA Cons
- It takes many more hours of study to achieve certification
- High exam difficulty
- Many topics to cover and master
- Varied topical sections will create issues for many students
FRM Pros
- Highly specialized skill set in the Risk segment
- You get access to an elite group of risk professionals around the world
- Higher salary options
FRM Cons
- Your focus will be on risk analysis and risk management
- You must demonstrable two years of work experience to receive certification
- Exams have a high difficulty
The Takeaway
The CFA curriculum widely covers a broad range of topics in finance. FRM on its part focuses on specialized topics for gaining skills in Risk Management.
The CFA certification is beneficial for professionals that want to pursue a career in Portfolio Management, Investment Banking, or Financial Research. It is also a great way to broaden your educational scope.
However, FRM certification opens you up to jobs in Risk Management in banks, insurance companies and related environments.
We are quick to note that ever since the financial crisis of 2008, there has been an enormous demand for FRM professionals globally.
Ultimately, your choice between these two should be informed by the career path you want to follow. Nevertheless, you cannot go wrong with having both designations!
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Wishing you all the very best,
The QuestionBank Family