As someone who is interested in finance and
business and want to enhance your professional value, you likely will have a
dilemma: MBA versus CFA – which one is better to have?The answer depends on the type of career you want to pursue in the next five to ten years. In a nutshell, CFA is finance focused while MBA allows you to work in multiple industries. There are differences in the skills acquired, career paths, costs, time committed, compensation, brand image and value perception, and network.
Skills and career path
A CFA develops skills in securities analysis (equities or bonds), portfolio management, and asset allocation, which are suitable for a buy-side investment management firm job or a sell-side (investment banks and brokerages) financial analyst, portfolio strategist, or a corporate finance career. An MBA curriculum covers management, finance, organization, marketing, accounting, strategy, and in some schools, entrepreneurship, giving you a wide set of skills for various industries, and not just finance. However, a study by the London-based Efinancial Careers found that in a database of 17,000 resumes, 13% of the Managing Directors at Investment Banks have CFAs while 18% have MBAs, making MBAs more likely to land a higher-powered Investment Banking job.
Time and costs
It takes on average four years (and about 300 hours per year) to pass the three levels of the CFA exams. To get the CFA charter, you also have to work in the investment-related field for four years before, during, or after passing the exams. As of June 2015, the pass rate for the three levels were 42%, 46%, and 53% respectively, which means that about 50% of the candidates need to retake at each level, making the length of completion often longer than four years. Full-time MBA takes two years to complete, and you get a degree at the end. The pass rate on average is over 90%. The catch is that CFA only costs about $4,500 for the three exams and about $300 per year to be a CFA Institute member, a requirement to maintain your CFA charter. A two-year MBA degree today costs anywhere from $60,000 to an eye-popping $200,000 to obtain.
Compensation
So which qualification earns more? According to Business Insider and PayScale, the median pay for someone with a ten-year plus experience is $132,000 for a CFA without an MBA, $119,000 for an MBA in Finance without a CFA, and $105,000 for a general MBA without a CFA. A dual CFA and MBA holder earns an even higher $148,000. There are now schools that prepare you to get the dual qualifications.
Brand and perception
Based on the information from PayScale, employers in finance and investment clearly value CFA charter holders highly, arguably higher than the MBA counterparts. The CFA qualification is perceived the same everywhere in the world given the curriculum and exams are standardized. This is not the case for the MBA schools, with the powerhouses such as Stanford, Harvard, Wharton, MIT, Northwestern, and Chicago perceived higher by the recruiters. These schools likely have large endowments to mitigate the students’ debt load also. An MBA degree from the top ten schools also comes with better brand image and recognition, which means if you want to get the best overall “value” from your MBA, you should go for the very best schools, an extra decision to make.
Network
While a CFA charter earns you respect in the finance field, your network is nevertheless contained in this one field. However, with your MBA degree, your alumni network spreads across various industries and countries, in government and private. Perhaps the biggest argument to get an MBA is the ability to expand your professional network, making a career transition easier.
Conclusion
If you specifically want to stay in finance and investment, than a CFA charter is likely better than an MBA. However, outside of finance, to gain a broader sets of skills and to move between industries, an MBA especially from the top schools is the way to go. Increasingly, many have pursued one first, followed by the other, which is highly valued by the employers.
