If you are competing for a position in investment banking, a Master of Business Administration (MBA) degree may be marginally preferable over the chartered financial analyst (CFA) designation, but only if the business degree is awarded by a top B-school.
Key Takeaways
- The CFA focuses on the kind of number-crunching skills that are most needed in investment banking.
- The CFA designation requires experience as well as study.
- The MBA is an impressive credential if it's from a top-rated business school.
In any case, CFA certification is a solid credential for many investment jobs. It's well worth considering if you are aiming for an entry-level job in investment banking. In fact, it will probably serve you better than an MBA from any business school other than the top 20. (The schools in the top 20 may vary a little from year to year and source to source, but not by much.)
MBA vs. CFA
If you're just starting out in investment banking, you're probably going for a job as an analyst. This position demands great expertise in number-crunching and financial modeling, skills that are best imparted by the CFA program rather than an MBA.
About the CFA
The CFA is awarded only by the CFA Institute, an organization that was created to educate investment professionals and to maintain ethical standards for the industry.
The CFA has just about the best return on investment of any educational program. The total cost of all three levels of the program amounts to a few thousand dollars. In return, successful candidates who obtain the CFA charter can look forward to a significant boost in earnings over the course of their careers.
The difficulty of the CFA exams is nearly legendary.
Compare that to an MBA from one of the top schools. The average cost is about $140,000 for a two-year program, plus two years off for study unless you take courses at night while continuing to work.
Not that obtaining the CFA charter is a walk in the park. Candidates are required to pass three levels of exams, which take a combined 1,000 hours or so of study. They also must possess 4,000 hours of qualified experience that involves investment decision-making.
The CFA exams are almost legendary for their level of difficulty. According to the CFA Institute, pass rates for Levels I, II, and III hover around 41%, 45%, and 52%, respectively.
The MBA Edge
Completion of an MBA degree can get you direct access to investment banking jobs since the major firms recruit on campuses. It also can get you a good network of contacts.
These benefits are not available with the CFA, which is primarily a self-study program.
So, if you are fortunate enough to get into a top B-school, and you can afford it, the MBA should help you get your foot in the door. But the CFA has become a viable alternative to jumpstart a career in investment banking, not least because of its scarcity value.
As of 2020, total CFA charter-holders worldwide numbered just over 190,000; in contrast, something like 120,000 students graduated with MBA degrees.
