There comes a time in a Wall Streeter’s life when he or she must make a decision about how to advance their career.
For many that means deciding whether to head to Business School for a Masters in Business Administration, or to take the Certified Financial Analyst exams — the CFA.
These are two completely different ways of skinning a cat, and there are pros and cons to each.
People get MBA’s in specific fields — finance, operations, etc. — but they tend to come out of school with broad-based knowledge and a wider variety of opportunities open to them.
A CFA certification is more niche. CFA chart holders are investment professionals, and the skills they pick up are super analytical. They tend to stay on Wall Street and head to a hedge fund, private equity firm, or bulge bracket bank.
A full time MBA program generally consists of two expensive years surrounded by one’s peers studying various aspects of business from management, to operations, and finance.
The CFA, on the other hand, is a gruelling, individual journey. There are three levels, and it can take years to get through all of them.
You’ll have to decide what matters to you.
Taking the CFA is much cheaper than getting your MBA. Each test costs between $1,000 and $1,500 depending on how early you register (the earlier, the cheaper). That cost includes a prep book, but some people elect to take a class as well, which will cost you extra, of course.
So without a test prep class, you’re looking at a $4,500 bill. Another thing to factor in to that cost is the fact that most people fail at least one of the three CFA tests and have to decide whether or not they want to retake it and continue on track.
How many people fail? Only 37% of test takers passed December 2012’s CFA Level I exam. In June 2012, 38% passed Level I, 42% passed Level II and 52% passed Level III.
As for Business School, it’s no secret that Wall Streeters aim to get into the best programs in the world — we’re talking Wharton, Columbia, Harvard, Stanford, Yale. Some employers will help foot the bill for these studies, but it’s still a very expensive for full-timers.
The CFA Institute recommends that you study for 300 hours before you take one of their tests — it’s a big commitment, especially since CFA candidates rarely quit their jobs.
All exams are offered in June, and Level I is offered in December. That means that at a gruelling pace you could finish a year and a half. Since most people fail at least one test, it usually takes longer — between 2.5 and 3 years.
Most Business School programs are two year programs. If you’re doing it part time, it could be longer.
To get a better idea of where an MBA or a CFA can take you, Business Insider contacted some Wall Street recruiters working at ground zero.
We’re told that while the CFA Institute is growing its network, Business School is still better for those who want to find new opportunities and widen their prospects.
“An MBA can take you into all sorts of industries,” said Skiddy von Stade, CEO of financial recruiting firm OneWire. “A CFA is for a stock picker that really wants to be an analyst. The CFA carries a lot of weight with asset managers. It’s an analytically driven test.”
Not only are the skills CFA chart holders posses more niche than those you get from MBA training, but they’re also more expensive for employers. That’s why, according to Jesse Marrus, founder of job placement firm StreetID, Wall Street may be showing a temporary preference.
“We’re seeing more demand for MBAs,” said Marrus. “Mostly I see it as a sign of the times as people cut costs. CFAs are more seasoned candidates… you have to pay them more than MBAs. That’s more sell-side, though. Buy-side seems more interested in CFAs if they can get them.”
So if you know you want to be an analyst, or work at a hedge fund, you may want to go CFA on this one. If you want to be able to dip into a wider range of fields in finance, a MBA may be better for you.
It’s important to know what, on average holders of these certifications/degrees make. To get that info, Business Insider contacted compensation research firm PayScale for the numbers.
Here’s the break down (YE means years of experience):
As you can see, people that are only CFA chart holders tend to make $27,000 more than people that only have a MBA, and $13,000 more than people that only have a MBA in Finance.
If you really want to kill it though, get both.
“The combination is phenomenal,” said von Stade. “It’s like a 1-2 punch.”
Getting both probably feels like one too.
What you should think about
Ultimately, whether or not you get your MBA or take the CFA depends on what you want to do. If you want to network and take a broad set of skills to the business world, consider taking the expensive leap into Business School.
However, if you know that you want to be an analyst, go for the CFA. You can take those skills to say, Disney’s corporate development department, but for the most part this test is for Wall Street lifers. And they’ll get compensated handsomely for it.
Copyright 2012, CFA Institute. Reproduced from the Inside Investing blog with permission from CFA Institute. All rights reserved.