Although in many respects, investment professionals may have it made in life, they still do work in a highly competitive field and need to keep updating their resume. For personal-finance advisors and hedge fund managers, a choice often emerges between getting either a Chartered Financial Analyst's certification or a Master's in Business Administration.
An MBA and a CFA are two completely different ways to approach gaining investment expertise. While MBA degrees do allow students to concentrate on various areas of business - manufacturing, finance and so on - the knowledge they offer tends to be somewhat broad-based.
A CFA, on the other hand, is far more specialized - it is specifically directed at analytical expertise. It grants the investment professional the highly technical skills needed in jobs at private equity firms or for starting hedge funds. It is much more demanding and can take an individual years to finish.
The kind of job each prepares you for
The CFA Institute, the authority that conducts CFA examinations, hasn't been around for long. Businesses aren't as familiar with this degree as they are with an MBA. With an MBA, you gain access to a wider range of jobs. Should you ever wish to move out of the investment profession, an MBA would help you better than a CFA.
Since the CFA concentrates on a narrow set of skills, there is less demand for it. They do make more, though. CFA's have the analytical skills that are very useful to investment firms. Demand is expected to pick up soon. At this time, Wall Street-type businesses are in cost-cutting mode and show a slight preference for MBAs.
What these degrees cost
Depending on where you go for your MBA degree, getting one can be as expensive as $90,000 each year (at Harvard, Yale or Columbia). In comparison, the CFA is unbelievably affordable - under $3000 for each test. These tests are so tough, though, that only between 30% and 50% of test takers pass. Statistically, you would need about three attempts to get through. Since there are three levels, you would need about nine attempts to make it. At $3000 a test, it would cost you in the region of $27,000 to get your certificate.
How do you make the choice?
If you are interested in devoting yourself to a career in investment, holding both a CFA and an MBA should give you the best opportunities and pay. The median income for someone starting out in investment banking with both certifications hovers in the high 80s. Individuals with a higher appetite for risk who opt for starting their own hedge funds can earn exponentially more, but can also suffer massive losses too.
Whether or not you should study for CFA certification depends entirely on where you wish to work. If your interest lies in stock analysis and stock picking, a CFA qualification is your only choice. If you aren't particularly attached to analyzing the stock market, an MBA could be a more sensible choice. Given the costs and effort required to attain either a CFA or an MBA, students should carefully evaluate their options and consider which course of action will enable them best for the career of their choice.