As a student, it is important that you choose the right certification as clearing the exams for both the certifications to require a lot of effort and time. Further, these certifications also involve a lot of money and all these shouldn’t go as a waste. As a novice, you may think that there is hardly any difference between these two designations, but if you research well then you will realize that there is a vast difference. So, without further ado let us take a look at both these certifications, their scope as a career and their prospects.

WHAT ARE CFA AND FRM?

CFA stands for Chartered Financial Analyst, a certification regulated by the CFA Institute which is the governing body. CFA charter holders are trained to become experts in the field of investment management. They are offered a job in various profiles that primarily include portfolio manager, research analyst, and investment banker.

FRM stands for Financial Risk Manager, another certification that is offered by the Global Association of Risk Professionals (GARP). FRMs exhibit expertise in assessing organizational risk and developing strategies to mitigate it. As such, they are usually offered roles of risk analysts in banks, corporations, and asset management firms

WHO CAN APPLY

There are certain eligibility criteria for a candidate who wish to apply for the CFA program and they are:

  • A bachelor’s (or equivalent) degree or be in the final year of your bachelor’s degree
  • Four years of relevant full-time work experience

or

  • A combination of professional work experience and education that adds up to four years

On the other hand, the eligibility criteria for a candidate who wish to apply for the FRM exam and they are:

  • No educational or professional pre-requisites
  • At least two years of full-time relevant work experience

COURSE STRUCTURE

In order to become a CFA charter holder, you must pass a three-part exam that is divided into a level I, level II and level III. However, you should be cognizant of the fact that it is one of the toughest finance courses and the CFA Institute (the governing body) suggests aspiring candidates study a minimum of 300 hours for each level. Further, it is advised that you drill yourself with as many practice papers as possible as it will improve your understanding of the concepts and build you for the final exam day. In addition, appearing for mock exams will help you to get used to the whole exam process. The CFA program is primarily built covering the following topics:

  • Ethical and professional standards
  • Quantitative methods
  • Economics
  • Financial reporting and analysis
  • Corporate finance
  • Equity valuation
  • Alternative investments
  • Fixed income
  • Derivatives
  • Portfolio management

If you want to become an FRM certified professional, you must pass a two-part exam that is divided into part I and part II. In order to clear the FRM exams, you need to put in at least 200–240 hours of academic effort for each part. The preparation should be a combination of coaching classes and focused study. For this exam to you are advised to take as many practice exams as possible as it will help you build a solid foundation for the D-day. The FRM certification course covers the following topics:

  • Foundations of risk management
  • Quantitative analysis
  • Financial markets and products
  • Valuation and risk models
  • Market risk measurement and management
  • Operational and integrated risk management
  • Credit risk measurement and management
  • Risk management and investment management
  • Current issues in financial markets

CAREER SCOPE

By now you must have realized that CFA charter covers broader fields of finance while FRM certification is a little more specialized. In fact, the CFA charter is considered one of the must-do certifications for candidates who wish to become a successful professional in the investment and banking industry. Some of the major roles offered to CFA charter holder include:

  • Fund Manager
  • Portfolio Manager
  • Risk Manager
  • Financial adviser
  • Consultant
  • Accountant
  • Research Analyst
  • Hedge fund Research
  • Investment Banking

The FRM certification has been gaining ground with the increase in business competition and rapid changes witnessed in the finance industry. As such, businesses started to feel the need for professionals who can manage its risk efficiently and this has surged the importance of FRM certification. Some of the major roles offered to FRM certified professionals include:

  • Senior Risk Analyst
  • Head of Operational Risk
  • Director
  • Chief Risk Officer
  • Investment Risk Management

POTENTIAL COMPENSATION

The potential salary of any professional depends on three major factors – job title, years of experience and location. The CFAs in India can earn a salary between INR3,50,000 and INR20,00,000 per year with an average salary of more than INR 10,00,000. On the other hand, the salaries of FRMs in India are in the range of INR3,00,000 to INR 20,00,000 with an average salary of more than INR 6,00,000. The salary varies with position, experience, and industry. Further, location also plays an important is deciding your compensation as can be deciphered from the below table.

CONCLUSION

So, it can be concluded that these designations are equally respected both nationally and internationally. As such, neither of them can be said to be better than the other, rather they are simply different. The CFA program will offer you a broader scope in the field of investment management, while the FRM certification will make you an expert in organizational risk management. So, at this point in the article, you should have recognized that your choice of career path is totally dependent on your area of interest. Whether you choose CFA or FRM, if you can put in hard work you will surely be able to achieve your career goal.

Read more: Financial Modeling- A Stepping Stone Towards Cfa

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