So, let us straight move onto the most important question “Which is the right option for you?” First of all, you need to appreciate the fact that both CFP and CFA® are two of the most demanding designations in the field of financial advisory. However, the steps and the professional paths they follow to arrive at the gateway to a career in financial advising are quite different. CFP focusses on developing your skills in financial planning and wealth management, while CFA® prepares you for investment management skills that include investment analysis, asset allocation, portfolio strategy, and corporate finance. However, this is just a brief introduction to these certification courses. So, without further ado let us take a look at both these certifications and their scope in more detail in the following sections.
WHAT IS CFP AND CFA® PROGRAM
As a CFP (Certified Financial Planner) you will be responsible for helping individuals in planning their future financial well-being. A CFP’s primary focus is investment planning through which they make sure that their clients are able to achieve their respective long-term financial goals. Examples of such financial goal include savings for retirement fund, purchase of residential property and savings for child education. The CFP Board is the governing body for CFP mark.
On the other hand, a CFA® (Chartered Financial Analyst) handles investment portfolios for large investment firms on both buy-side and sell-side as part of mutual funds and hedge funds. Further, CFA®s are also adept at providing internal financial analysis for corporates that are outside the purview of the investment industry. The CFA® Institute is the regulating body for CFA® charter.
WHO CAN APPLY
In order to be eligible for CFP, you must have a bachelor’s degree in any field and are required to complete coursework in six essential topics, which include financial planning, income taxation, fundamentals of insurance planning, investment, planning for retirement needs and fundamentals of estate planning.
To be eligible to appear for CFA®, you must have either completed a bachelor’s degree in any field or should have at least four years of relevant professional experience. However, CFA® offers some flexibility in the eligibility criteria wherein you can combine education and professional experience to add up to four years. Please note that part-time experience doesn’t count.
The exam structure is fairly simple for CFP as it is conducted as two 3-hour sessions on the same day. The multiple-choice exam is designed in such a way that it tests the applicant’s ability to apply the broad financial planning knowledge to real-life situations. According to the CFP Board education requirements, the following major personal financial planning areas should be included in the course curriculum:
The CFA® course curriculum involves exams that are conducted on three levels. Although each of the three levels has some overlapping topics, Level I primarily deals with the financial principles, Level II revolves around financial analysis and accounting, and Level III focusses on building skills for portfolio management and decision-making. The CFA® charter program is primarily built around the following topics:
Once you become a CFP professional, you will be primarily offered career options in the role of financial planners or financial advisors. However, if you are interested in becoming wealth or estate planners, then the CFP mark can open the doors to these niche career profiles too. Additionally, as a CFP professional you can get into the profiles of trading and research associate, financial representative, financial consultant, financial analyst, etc.
On the other hand, the CFA® charter also opens up career opportunities in the field of finance and investment. As a CFA® charter holder, you can end up becoming a portfolio manager, consultant, research analyst or a corporate financial analyst. Further, the CFA® charter can also help you get into the profile of a relationship manager, investment banking analyst, financial advisor etc.
The potential compensation is a function of three major factors in any professional field – job title, years of relevant experience and location. In India, the CFPs have earning potential primarily in the range of INR2,00,000 and INR9,00,000 per year with average salary of close to INR4,00,000. On the other hand, the Indian CFA®s earn salaries are in the range of INR3,00,000 to INR20,00,000 per annum with an average salary of more than INR6,00,000. Further, it can be seen from the below table that the compensation also varies with years of experience in the industry and location.
Overall, it can be seen from the above analysis that the CFP program is relatively shorter and less-rigorous as compared to the CFA® program. Nevertheless, both CFP and CFA® are the preferred certification courses for financial advisors. Both the CFP marks and CFA® charter will train you to become skillful in handling a client’s financial future. So, based on your career aspiration you can choose either of the courses and thrive on an exciting career in the field of finance and investment to become a successful financial advisor.
Read more: 9 Top Skills For Financial Analyst