Wednesday, 19 March 2014

The Great Debate: CFA vs. MBA

One of the most hotly debated questions among finance aspirants is the perennial CFA vs. MBA deliberation. Which of these qualifications will give you a better shot at landing that prestigious full time Excel Monkey Investment Analyst role? In this article, we’re going to have a no-holds-barred, all-out face-off between the two, to settle the question once and for all.

Read on to get the drill down on one of the toughest professional examinations in the world, the Chartered Financial Analyst (CFA), vs. the timeless and reliable MBA (I’m not going to insult your intelligence by expanding that).

CFA:
For the complete novice to finance, CFA is a US based distance-learning program for which you need to give three exams, or levels, spread over 3 years. It’s considered one of the toughest professional examinations out there and can certainly give India’s CA a run for its money in terms of difficulty.

But most importantly, CFA is primarily geared towards asset (portfolio) management. The content and coursework are all meant for advanced asset management, 99% of which will be useless for investment banking and private equity. There are some hedge funds where you could put your CFA knowledge to use, but they’re rare and even in those cases, the majority of CFA content is not practically used.

However, CFA carries immense prestige value and you easily stand apart from the crowd. A “passed CFA L1” on your resume can be a pretty big leg up if you’re trying to gain entry into finance. But in the long run, the fact remains that its biggest benefit in anything other than asset management is the associated prestige and not the knowledge itself.

In case this sounds like something that you want to do, understand that CFA is a graduate level program, so you need to be at least in the final year of your undergrad to be eligible to appear for the exam. Also, it requires 4 years of relevant experience before you can add those prestigious three little letters after your name. And lastly, bear in mind that even if you are in undergrad right now, you’ll most likely be preparing for the last two levels while balancing a full time job. That is a task not meant for the weak willed, considering that CFA Institute recommends an average of 300 hours of studying for each level. That’s 300 hours you can’t devote to networking and maybe sleeping. Go figure.

MBA:
Considering that these days every other bloke you meet in India is armed with an MBA, it goes without saying that an MBA is useful only if it’s from a tier-I b-school. If you’re lucky enough to get selected in those haloed institutions, the biggest advantage that you gain is the network. Yes, that bloody word yet again.

Alumni networks of top b-schools are beyond any rolodex that you can get your hands on (unless you’re Akash Ambani). That alone makes it worth the astronomically high cost for an average Indian, to do an MBA from a top-20 b-school abroad. If you add access to top recruiters and invite-only events held by most investment banks for students, you get into positive territory pretty fast.

What most students don’t realise is that this alumni network is not a gateway to lucrative jobs; it stays with you long after you’ve left b-school. It’s perfectly normal for senior people to tap into their alumni network to get more insight on a particular industry or a situation. That is a resource which would generally take years and years to develop, if not for b-school.

Result: Knockout or victory by points?

Where CFA Wins:
·         Less expensive than MBA
·         Advanced asset management knowledge
·         Distance learning – study while working full time

Where MBA Wins:
·         Priceless network
·         Much, much less effort required to get in
·         Opportunity to interact and study with some of the brightest minds
·         Good for reinventing yourself if you have a non-finance background
·         Lot more focus on overall personality and business acumen development
  
Given the overwhelming value I put to a strong network, I’d say that even though it up a good fight, CFA loses by a knockout.

So MBA it is, folks! Let me know in comments below if CFA is a better contender than I think.

3 comments :

  1. Hi,
    What do you think about Masters in Finance (from a good foreign university ofcourse) in comparison to a CFA? Because I have never heard of a commerce graduate getting into investment banking after college in India. They mostly prefer MBAs. So is a masters in finance degree something worth looking at?

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  2. To tell the truth, I haven't seen any MSF graduates working in banking in India, either. If you're willing to pay for MSF abroad, why not just go for MBA instead, which will generally give you a better chance at least in India?

    If you still want to consider masters, or for that matter, any graduate degree, take a look at the placements section of your target universities. All universities of note have a section dedicated to the industries their alumni get placed in. The percentage of students getting jobs in finance will give you a good starting idea of your chances. If they seem good enough, see the class profile to find out what percentage of students are internationals, which will give you an even better idea. This is not very accurate, of course, but it should be enough to serve your purpose.

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  3. after completing my CA in 2012 i am working as internal auditor. i wanted to shift my career to finance and hence i recently joined CFA thinking that it will add some value. but after reading this article and few more in M&I i am feeling as joining CFA was not a good idea. what do you think CFA will have impact in my career shift as well as long term growth?

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