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The age old FRM vs CFA debate; professional certificates have become a prerequisite for career success in the finance industry.
If you are aiming to advance your career in finance, the big question has always been which to obtain. Should you be a Chartered Financial Analyst (CFA) or a Financial Risk Manager (FRM)?
Understandably, you might have to choose which one to prioritize among these two because of time and monetary factors.
Nevertheless, these two courses are not mutually exclusive. They actually complement each other. You can pursue both of them or one after another to make to claim your designation as a respectable industry expert.
This post outlines top similarities between the CFA and FRM certification programs.
1. Salary prospects
One thing to note in this debate is that both can lead to higher salaries. You stand to gain a considerable return on investment after getting their respective certifications.
After accreditation, there is an assured pay rise as your job group gets revised upwards. Both endorsements attract higher salaries because one can take on complex tasks after receiving the charters.
Many professional in the finance sector have realized that getting a CFA or FRM certificate is the quickest way to earn better salaries.
It beats the other option which is tucking many years of experience under your belt for a small pay rise. Research shows that the lowest pay rise expected after gaining these accreditations is 25%.
Salary scales depend on the type of employer, and the job position and the location, but on average CFAs earn between $45,000 and $180,000 every year.
The FRM professionals have a similar salary range between $50,000 and $165,000 per year.
Among the qualifications and certifications that can help you increase your value in an organization, CFA and FRM rank at the top. With your new abilities come better salaries.
These certifications might both take time and as well as commitment to attain, but they will give you a competitive advantage in the market.
2. Prospects for a higher positioning the workplace
No one likes to stagnate in one place. In this academic struggle, both will strategically position you for career advancement.
These professional certification courses are focused on improving your skill set and abilities in finance and risk management.
The quantitative and analytical skills the courses foster are in high demand across the industry.
Top finance jobs now require a threshold set of competencies that both titles promote. After the certification, you become a financially sophisticated person ready to take on more responsibilities.
If there is no space to move up in your company, more opportunities will open outside. Unlike in the past where moving up the corporate ladder in the financial industry didn’t require much, competition is now stiff.
These credentials differentiate you from the jack-of-all-trade experts in your organization. These certifications aim at sharpening your skills in finance and risk.
Many organizations often reserve leadership and managerial roles for such qualified individuals. These qualifications designate an individual that is skilled and knowledgeable enough for successful performance in higher job roles.
Both can be a positive contribution and add value to the organization. Employers and clients understand that you can adapt to changing environments. And you are skilled enough to respond to various financial challenges.
The two certifications sharpen critical thinking skills, analytical skills, and overall industry knowledge. These are the factors that will propel you high up the corporate ladder.
3. Add to your professional acumen
Individuals with these credentials are always highly regarded in the corporate sector since these finance certifications hold significant value.
Obtaining their respective certifications exhibits functional proficiency. The certifications equip the candidates with crucial decision-making skills, agility, and shrewdness when it comes to dealing with risks and opportunities.
The FRM certification is suitable for candidates who want to hone their skills as risk managers in the financial sector.
With the ever-changing economic conditions and increased business competition, companies need professionals who can expertly manage risk, investment and wealth.
FRM professionals have unique qualities that are valuable to financial companies. Risk management is an enlightened way of approaching decision-making in the finance sector.
The FRM course trains you on how to predict and allocate potential risks, neutralize them, and provide appropriate recommendations to key decision makers.
The CFA designation can be used for equity and investment analysts in the investment banking sector and is as good as an MBA.
Chartered Financial Analysts are attentive to details and can make sound decisions about stocks, industries, and companies to add value to the corporation.
CFA is considered the de-facto qualification that professional graduates pursue to advance their careers in investment.
4. Both will increase your knowledge
Another point that throttles the whole argument deals with that of knowledge. Getting any of these certificates is a surefire way to level up your competency and skills in different fields of finance.
Even individuals who graduate summa cum laude in their degree courses still need specialized knowledge that is industry focused.
These two certification courses allow you to broaden your understanding of different areas of investment and risk.
As you well know, career success in the finance industry needs continuous studying, reading, and seeking of information in your area of expertise. Pursuing the CFA or FRM designation helps you meet this requirement.
5. Both will add to your skill set
When it comes to analysis and quantitative skills, there is no significant difference between these two certifications.
The CFA program generally focuses on sharpening your investment management skills in economic analysis, financial reporting, corporate finance and more.
FRM hones your skill in quantitative risk analysis, risk management and general risk understanding.
Having such extra knowledge and qualifications in finance can exponentially improve your career. These certifications attract the best employers to you.
As a financial professional you will have a designated title that signifies authority in the different aspects of your job. Both are gold standards in the finance industry job market.
6. Both exams will be challenging
Another similarity in the deliberation deals with that of exam difficulty. The pass rates for both are in the 40 percent range.
This pass range, however, does not in any way imply that passing the examinations will be impossible for you. The pass rate is that low because these top-level certification exams are required to be tough.
Why is this so?…Because experts are being crafted. Getting the two certifications entails investing a considerable amount of time in study and sitting for different sets of examinations.
Both are multi-level exams that take many hours of study to prepare. These certification exams are focused on creating a highly skilled expert who can function above average in different risk and investment scenarios.
You can expect that both exam questions will be complex and drawn from various topics in the course syllabus.
After the exams, both candidates need to demonstrate work experience to receive the titles. To enroll to the CFA Institute, candidates must pass a three-level exam covering varied topics.
You will be studying ethics, accounting, portfolio management, fixed income, corporate finance, equity investment, and fixed income.
7. The long study hours
Typically it takes about 300 hours to study and prepare for each level of the CFA exam. After passing the exam, candidates are required to demonstrate four years of work experience in a CFA levelled position.
You will then be required to join their Institute to receive a charter.
Similarly, attain the FRM credentials, you must pass a two-level exam that touches on various topics. The areas for you to consider include risk management, risk analysis, quantitative analysis and operational risk among others.
On average it takes at least 150 hours of study to pass each level of the FRM exam. Additionally, these candidates need to demonstrate two years of related work experience to receive accreditation.
8. International recognition
Certification is earned through the CFA Institute. Similarly, FRM is a certification earned through by the Global Association of Risk Professionals. GARP and their certification are internationally recognized.
Both of these certifications designate experts who are highly skilled in funds and equipped for financial management.
The Institute has the vision to raise the standards of professionalism in the global investment management industry. The program, therefore, lays the foundation by inspiring professional excellence.
They also have high ethical standards in candidates worldwide. The Institute’s stronghold has more than 150,000 charter holders from about 165 countries and regions.
The Institute also has 150 member societies and eight offices around the world. The organization has headquarters in Charlottesville, Va.
Not so different from CFA, GARP’s vision is to become the best professional association for risk managers.
The organization is committed to advance the risk profession through research, education, research and the promotion of best standards globally. The FRM program is known and respected all around the world.
There are more than 150,000 members in about 190 countries and regions across the globe.
9. Both signify you are serious about advancing yourself
Both of these professional certificates are a voluntary commitment to the field of finance. They are an indicator of industriousness which builds trust among employers and clients.
The CFA charter has rigorous eligibility criteria. One has to pass three six-hour exams at each level. That takes years of learning. Less than 20 % of these candidates pass all three levels of the exam in the first attempt.
A CFA professional invests a lot of time and effort to better their skills and knowledge to serve their clients better.
However, it doesn’t stop at the examination level. You will need to demonstrate work experience and professional excellence. You also have to adhere to the CFA Code of Ethics and the professional standards codes.
In the same manner, a risk manager certification will be in your reach after passing two difficult examination levels offered by GARP.
The exams are curated by the FRM Committee whose members are world-leading risk experts. The course and exams reflect the current trends and demands of the industry.
During the training, professionals get a deep understanding of credit risk, market risk, and risk models.
10. Well-established programs
Both certifications add immeasurable value to your career profile because they have an accepted global recognition. These qualifications are proof of dedication to the established principles work.
FRM and CFA credentials have become a necessity in finance and also a cross-cutting to various industries.
The whole range if operational and soft skills that the programs foster can be of use in any industry. As a CFA accredited person, you will receive membership in the CFA Institute.
This is a globally recognized association of investment professionals. This Institute dates back to 1947. It was then known as the Association for Investment Management and Research (AIMR).
The first Chartered Financial Analyst exam was administered to 284 candidates in 1963.
The FRM certification started in 1997. Since its inception, the designation has increasingly grown in popularity, with a higher enrollment rate year after year.
After the global financial crisis of 2008, there was a massive demand for FRM professionals. This lead to record enrollment to the program.
11. Both have a growing list of students attempting them each year
Currently, there is an increasing sense of insecurity in the global economic environment. Business establishments have to take risk management with the attention it deserves to deal with any unforeseen circumstances.
Thus, there is a growing need for FRM professionals. GARP states that the FRM Program enrollment increased at a steady rate of 15 % from 2010. They passed the 90,000 mark in 2020.
The organization also says that membership has spread to more than 190 countries. Currently, there are more than 50,000 certified FRMs across the world.
CFAs are also in high demand. In 2018, the CFA Institute reported that a record 227,031 candidates registered for level 1, 2 and 3.
This was across 286 test centers across the world. The institute said that this was a 20 % increase from the exam registrations in the previous year. There are more than 154,000 chartered professionals in the world.
12. Multiple exam centers worldwide
The CFA exam offered by the CFA Institute takes place in various locations around the world.
The FRM exam provided by the Global Association of Risk Professionals Exams also takes place across multiple testing centers around the world.
Candidates sit for CFA exams in more than 170 cities in June. And approximately 70 cities in December. When registering for the exams, one requests an exam location near them.
Similarly, FRM has multiple exam centers around the world. You will be able to take the exams twice per year.
Your CFA exams can be taken every June and December. Whilst you can take the FRM exams in May, July and November every year.
13. Both are great if you are seeking prospects in the financial industry
An additional point here surrounds the targeted individual. In finance and investment, FRM and CFA charters are the two main qualifications that candidates prefer.
If you have career prospects in finance or risk, then these two certifications can help you advance your professional frontier in finance.
Clients and employers value them highly!
These options typically have extensive career opportunities than non-certified individuals. These professionals specialize in managing risk and maximizing a firm’s investments, which casts a wide net of careers.
Chartered Financial Analysts typically work in investment banks, hedge funds, and corporate finance carrying out portfolio management, investment banking, and equity research.
Financial Risk Managers can work as risk qualification managers, regulatory risk analysts, corporate risk directors, operational risk analysts, and other managerial and executive positions.
14. Course content
Both certifications have similar course content when it comes to quantitative topics. The two programs also cover the same financial education such as CAPM theory and basics of option and similar models.
Also, when it comes to fixed income and valuation, both FRM and CFA share some topics such as bonds, convexity, yields, pricing and duration, pricing, among other concepts.
15. Exam costs
In the CFA vs FRM argument, both fees can be a little costly, mainly because the programs comprise of more than one level of comprehensive exams.
Beyond the exam costs, candidates also need to factor in other expenses such as the cost of course materials.
For CFA, candidates pay a one-time enrollment fee of $450 when registering for the first Level I exam.
You can consider this to be the application when applying for the CFA exam.
For the subsequent tests, early registration fee (9 months before the exam) is $650 while the standard registration fee is $930. Late registration fee (3 months before the exam) is $1,380.
For FRM, candidates similarly pay a one-time enrollment fee of $400 when registering for the first level I exam. For the exams, early payment fee is $350.
The standard exam fee is $475 while late exam registration fee is $650. On average by the time a candidate gets the CFA charter, they would have parted with between $1000 and $1500.
It is the same range for FRM, costing candidates between $ 1000 and $1400.
Becoming a CFA chart holder or an FRM designate is a significant career investment that will position you for higher salaries.
In both cases, there are better opportunities, and recognition that professionals in the finance industry need.
That is why people are still taking the exams despite the costs. Both courses are cheaper than the average MBA.
16. Course duration
Both have relatively similar course duration. The FRM level 1 and two exams take an average of 1.5 years to complete assuming you don’t re-sit any of the exams.
For the CFA program, it takes an average of 2.5 years to finish all the exams at the first go.
The duration with which you complete these two courses, however, depends on your work and family demands. The best thing about pursuing a CFA or FRM qualification is that you can work full time and study part-time.
Many employers are also encouraging their staff to get these finance certifications.
They are slowly becoming a mandatory job requirement.
17. A stepping stone for fresh graduates
After completing a college degree, many young professionals will need relevant industry knowledge and training to fit in their place of work, or to find employment.
You can get a head start by first obtaining a CFA or FRM certification before you step into the job market. These two courses are like an intermediary between college and the financial world.
After taking either of the two certification courses, you can be sure to have a colorful professional profile in the industry.
18. Global professional networks
Pursuing either the CFA or FRM certification enables you to connect to a network of many other professionals in the field of finance.
The sharing and collaboration in these networks are what will make you the best in what you do.
These two qualifications will always place you ahead of the curve in your profession, exposing you to opportunities on a global scale.
Their membership societies help you to access critical industry information and stay updated at all times. Being a member of these networks helps to enhance your optics. Everyone will regard you as an expert in your field.
Summary and Conclusion
As mentioned earlier, the CFA and FRM accreditation are not mutually exclusive. One can get both of them. Both packages share several similarities not only when it comes to the study programs but also in the course of work.
In that regards, an FRM or CFA charter holder can go back to pursue the other course for hybrid proficiency in risk and finance.
We truly hope that you enjoyed reading about the FRM vs CFA points presented here.
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