CFA vs. CFP: What These Professionals Do and Where an MSF Degree Fits In

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When people need help, they turn to the experts. A Chartered Financial Analyst (CFA) or Certified Financial Planner (CFA) both qualify as such experts. Money is an ongoing concern for millions of people, but those who have turned to a CFA or CFP for guidance say the skills they learned to better manage their money are truly priceless. These credentials are what people look for to know that the guidance they’re getting is first-rate.

If you’re looking to enter the financial services industry to help individual clients with wealth management, budgeting, or estate planning, you may wonder what the difference is between a CFA and a CFP.

You can prepare for either the CFA or CFP credentials through Northeastern University’s D’Amore-McKim School of Business. The program is designed to provide you with the tools and knowledge to take your career to the next level, whether as a financial analyst, financial advisor, research analyst, or several other job titles. And with several online classes centered around financial management (such as International Finance Management and Portfolio Management), the coursework can help you decide which credential — CFA vs. CFP — is right for you.

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What Is the Difference Between a CFP and CFA?

CFP

When the CFP Board confers the CFP designation, it’s an indication that the recipient has satisfied the educational and ongoing training requirements necessary to effectively assist clients with personal financial planning. A CFP credential establishes that they:

  • Have a bachelor’s degree from an accredited university (normally in finance or a related field)
  • Have no fewer than three years of experience in financial planning
  • Have completed the CFP Board Registered Program (which usually takes between 12 and 18 months)
  • Have completed 6,000 hours of professional experience related to financial planning or 4,000 hours of apprenticeship experience that meets additional requirements

There are many aspects to financial planning: A CFP specializes in several of them, including tax, estate and insurance planning, specifically life insurance. Estate and insurance planning are tasks that most people recognize are important for them to address but procrastinate in doing, figuring it’s something they can always do later. The impact of COVID-19 changed that way of thinking for a number of Americans. In a recent poll conducted by LIMRA, a financial services and professional development organization, close to 33% of respondents said the coronavirus crisis made it more likely that they would obtain life insurance before the year is out. This inclination was particularly strong among millennials, 45% of whom said COVID-19 affected their appreciation for life insurance.

Because life insurance is a highly customizable form of coverage — e.g., the appropriate amount for one person may be insufficient for another — a CFP can offer guidance on the right type and amount.

Before they can lend their expertise, however, aspiring CFPs must demonstrate that they know what they’re talking about. The CFP Board requires that they participate in an exam testing their knowledge on a variety of relevant topics. The test is lengthy — approximately 170 questions, all multiple choice — and is broken into two parts of equal length. Participants have three hours to complete each. The questions all involve some aspect of financial planning, such as tax, estate, investment, and education planning, among other topics.

The exam isn’t easy, which makes successful completion of the CFP Board Registered Program that much more important. For instance, in March 2021 — the most recent period in which data is available —2,686 people registered for the CFP exam across the U.S. Of these, 1,694 passed on their first try, for a pass rate of 63%. Since 2015, the pass rate among first-time test takers has been in the 60% to 65% range. The highest was in 2015, when 70% of participants passed.

CFA

Professionals who earn this credential from the CFA Institute have a broader, more diverse range of expertise. Whereas a CFP traditionally provides financial planning services for individual clients, CFAs may lend their services to large corporations, investment banks, or hedge funds. CFA charter holders may also assist with portfolio management and investment analysis.

Much like the CFP credential, the CFA title is earned, not given. Widely viewed as the “gold standard” for financial analyst recognition, CFA charter holders must complete a rigorous training program and comprehensive examination. Some of the requirements are similar to those of CFP. The prerequisites include:

  • Having a bachelor’s degree from an accredited college or university (or four years of professional work experience)
  • Having no fewer than three years of relevant work experience that focuses on investment decision-making processes (or the equivalent of 4,000 hours)
  • Successful completion of a 750-hour self-study program
  • Participating in and passing three comprehensive exams

What Test Is Harder: The CFA or CFP Test?

Similar to the CFP exam, the CFA exam is quite difficult. Some contend that it is more challenging than the CFP. There are a few reasons for this, starting with its length. Both the CFP and CFA exams come in three parts, but the CFA exam consists of three levels spread out over at least 18 months, rather than a single day. The rigorous assessment process means exam takers must progressively pass each of the three levels. The CFA Institute stipulates that test takers cannot take the next in the series until six months have passed from their most recent one. Thus, the exam portion of the CFA certification process is a year and a half.

What also speaks to the challenging nature of the CFA exam is the pass rate. The CFA Institute maintains the performance records of test takers dating back to 1963. The highest pass rate occurred in 1965 when 649 of the 767 were successful with the Level 1 exam (85%). The rate has never been that high since. In fact, the last time more than 50% passed the Level 1 exam was in 2000. In February 2021, just 44% passed, slightly above the average between 1963 and 2021 (42%).

As for what the three CFA tests cover, it depends on the level. According to the CFA Institute’s website, Level 1 topics are split into several blocks, including ethical and professional standards, quantitative methods, economics, and financial reporting. The second part of Level 1 asks questions pertaining to portfolio management, equity investments, derivatives, and alternative investments.

The test itself is taken on a computer and is split into two phases, each containing 90 multiple-choice questions each. The sessions are timed at approximately two hours and 15 minutes, leaving test takers about 90 seconds to work on each problem. Thus, time management is a crucial skill for this exam, helping you better ensure each question is given your due attention.

This past February was the first time the exam was administered via computers. Previously, the exam questions were filled out on written materials.

What Degree Do You Need to Be a Financial Advisor or Financial Analyst?

Like most other white-collar professions, most financial advisors and financial analysts have a bachelor’s degree, usually in finance, accounting, business, mathematics, or economics.

But to obtain a CFP or CFA certification, you’ll need more than a bachelor’s degree. This doesn’t mean that you need an official master’s degree but rather that the special programs are in addition to an undergraduate degree. As noted by the U.S. Bureau of Labor Statistics, prospective financial advisors and financial planners end up pursuing a master’s degree because it further establishes their credentials, and may give them a leg up on their competition for managerial positions. For instance, one finalist for an opening has a bachelor’s degree and the other has a master’s degree — and all the other qualifications are the same — the one with a master’s has a better chance.

How Much Money Do CFAs and CFPs Stand to Earn?

According to PayScale, the average base salary for certified financial planners nationwide is approximately $67,800.

CFPs can easily make much more than this, particularly when compared to financial planners who don’t have the CFP designation. In a study done by Aite Group, the average solo CFP earned 40% more revenue; the typical CFP with experience earned 80% more. PayScale noted that the top 10% of CFPs earn over $116,000.

The same goes for CFAs; earning potential is significant. According to the Corporate Finance Institute (CFI) and CFA Society, the average total compensation among CFAs in the U.S. is $300,000. “Compensation” refers to salary, cash bonuses, and equity. The median base salary among CFA charter holders is $180,000.

Several factors contribute to financial advisors’ annual income, aside from their level of experience and how many years they’ve been in the industry. These include location and role. For example, the median total compensation for corporate financial analysts is $80,930, according to the CFI. For portfolio managers, it’s $253,250.

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How D’Amore-McKim School of Business Can Help Advance Your Career

CFA vs. CFP: What will you choose? Only you can decide. With an Online Master of Science in Finance from the D’Amore-McKim School of Business at Northeastern University, the coursework is custom-designed to prepare you for both roles, providing you with the practical tools that will help you excel in the respective CFA and CFP programs as well as in your dealings with clients. From mutual fund analysts to chief financial officers, the positions available to you with a master’s degree are limitless, made possible by the informative curriculum taught by leading experts in the finance field.

For more information on the program and career outcomes, visit the website.

Recommended Reading
Is Earning a Graduate Certificate Worth It?
Financial Consultant: Job Responsibilities and Salary

Sources:
Bureau of Labor Statistics — Personal Financial Advisors
Aite Group — Building a Wealth Management Practice: Measuring CFP Professionals’ Contribution
Corporate Finance Institute — Total Compensation and CFA Salary Guide
Corporate Finance Institute — CFA vs. CFP: What Is Right for You?
PayScale — Average Certified Financial Planner Salary
LIMRA — Study Finds COVID-19 Spurs Greater Interest in Life Insurance
Smart Asset — CFA vs. CFP
CFA Institute CFA Institute Successfully Administers First Ever Computer-Based Testing of Level I of the CFA Program
CFA Institute — Level I CFA Exam Structure
CFA Institute — 1963 to 2021 Candidate Examination Results
CFP Board — Exam Statistics
CFP Board — About the Exam