Financial Consultants: Should You Earn the CFP or CFA?

by David Dierking

4 min read

Earning a professional designation is one of the surest ways to establish yourself as a subject matter expert in your chosen industry. It shows people that you’ve demonstrated the knowledge or work experience needed for your profession and gives potential customers a degree of comfort knowing they are working with a skilled business person. It can also lead to additional business and the ability to charge higher rates. Many financial professionals choose to pursue the Certified Financial Planner (CFP) designation or earn the Chartered Financial Analyst (CFA) charter. To earn either one, candidates need to pass a rigorous examination process, meet minimum work experience requirements, and demonstrate high ethical conduct. If you’re already a financial consultant or just looking to break into the industry for the first time, you may be considering one of these career paths. Both of these designations carry a great deal of prestige, but which one will deliver the biggest bang for its buck and be most appropriate for your personal career goals?

What Is the CFA?

The CFA is administered by the CFA Institute and is geared toward individuals looking to pursue careers in investment management, research, or portfolio management. The CFA Institute claims more than 142,000 members in 159 countries around the world. The CFA program is considered one of the more rigorous programs in the industry, and it takes a minimum of three years to complete all requirements. Many investment research jobs at the biggest financial firms require the CFA charter as it demonstrates proof of expertise, a pledge to continuing industry education, and a commitment to maintaining high ethical standards.

CFA Requirements

To earn the CFA charter, candidates must meet minimum education requirements, have several years of relevant work experience, and complete the CFA’s examination curriculum. To be eligible to sit for the exams, candidates must have a bachelor’s degree or equivalent and a minimum of four years of broad financial industry experience. The CFA program also requires the completion of three distinct exams covering different areas of investment management. The Level I exam is offered annually in June and December, while Level II and Level III are offered only once in June. The Level I exam focuses on investment tools and quantitative analysis, Level II covers asset valuation methods, and Level III concentrates on portfolio management techniques.

Careers for Individuals With the CFA Charter

The largest percentage of CFA charterholders have jobs as investment managers and analysts. As of January 2016, 23% of charterholders listed their occupation as portfolio manager, and 16% had jobs as research analysts. Other occupations of CFA charterholders include financial analysts, financial advisors, and risk managers. The top global employers of CFA charterholders are big banks, such as JPMorgan Chase, Bank of America, and Merrill Lynch.

What Is the CFP?

The CFP certification is administered by the CFP Board and targets individuals seeking a career as a financial advisor or financial planner. There are approximately 170,000 CFP professionals across 26 territories around the world, with around 17,000 of those coming from Canada. Careers in financial planning continue to be in great demand. Individuals holding the CFP designation demonstrate the ability to successfully guide their clients toward their financial goals through a commitment to high educational and ethical standards.

CFP Requirements

Like the CFA, requirements for the CFP certification include an education component, a work experience component, and the successful completion of the CFP exam. CFP candidates must not only have at least a bachelor’s degree but are also required to complete a capstone course covering the basics of financial, investment, tax, and retirement planning. CFPs must complete one of two work experience requirements. Most complete the standard requirement of 6,000 hours of standard work experience in a planner, supervisor, or support role. The other choice is the apprenticeship option requiring 4,000 hours of experience done under the direct supervision of a CFP. The six-hour CFP exam must also be passed successfully. This exam is offered during a short window three times a year and covers estate planning, risk management, education, and ethics. The pass rate of the CFP exam is generally around 60 to 70%.

Careers for Individuals With the CFP Designation

The vast majority of those with the CFP certification work with clients directly on their financial planning goals. According to the CFP Board, 89% of CFPs work as a planner, with another 8% working in a supervisory role. Less common career paths include working in support, operations, and as a financial educator.

Making a Decision

Which designation to pursue largely depends on your chosen career path. The CFA charter may be more appropriate for those wishing for a career in investment management and research, but it is also more broadly applicable to many jobs within the financial services industry. Those desiring more of a client-facing career and working directly with individuals may find more value in earning the CFP certification. It also tends to be specific to a career as a financial planner.In either case, the successful attainment of either of these professional designations demonstrates a firm knowledge of many aspects of the financial industry and a commitment to highly ethical behavior.

References & Resources

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