Among the recognized certifications within the financial sector, the CFP and the CFA are the two major ones. Both share some differences in terms of career path and specialties, so you would better know what suits your aim to join a particular career. This blog post therefore goes into detail regarding the key differences and similarities between both certifications.
What Do You Know About CFP and CFA?
- Certified Financial Planner (CFP)
CFP is essentially a professional certification in personal financial planning. CFP allows professionals to manage and guide people and families on effective financial planning, involving the realms of retirement planning, tax optimization, estate planning, and investment management. The said certification requires the candidate to fulfill the experience requirements and pass a comprehensive examination, followed by the completion of a financial planning program.
- Chartered Financial Analyst (CFA)
The CFA designation is focused on large-scale investment analysis and portfolio management. Generally, it is taken up by investment professionals working in investment firms, banks, or corporate finance. The CFA program is divided into three levels of exams covering a range of topics from ethics to quantitative methods, economics, financial reporting, and asset valuation.
Differences Between the CFP and CFA
1. Areas of Emphasis
CFP: The CFP curriculum puts emphasis on personal finance. It helps the practitioners prepare in making thorough financial plans tailored for individual clients’ needs.
CFA: The program offered under CFA is based on investment analysis and management. It is intended to help candidates work in institutional finance or investment management.
2. Examination Structure
CP: The exam contains eight main financial knowledge topics, and the candidate has to pass just one single test. The passing rate for the CFP exam is approximately 66%, which shows that there is quite a higher success rate than the CFA.
CFA: In the CFA program, there are three levels of exams to be taken successively. The passing rate is approximately 49% for Level I. Each level requires preparation of nearly 300 hours in the study for each level.
3. Career Opportunities
CFP: Graduates typically take up employment as financial planners, advisors, or consultants in wealth management firms or independent practices. Their work usually reflects a partnership with the client in bringing out unique financial plans.
CFA: CFA charterholders are typically found in investment analyst, portfolio manager, or financial consultant roles in banks, hedge funds, and asset management firms. Their work is usually concerning market analyses and investment portfolio management.
4. Salary Scale
Salary can vary significantly based on experience and location for both certifications:
CFP:
- Entry-Level (Freshers): Approximately ₹2 Lakhs to ₹3 Lakhs per annum.
- Mid-Level Professionals: Around ₹5 Lakhs to ₹6 Lakhs per annum.
- Senior-Level Professionals: Typically between ₹7 Lakhs to ₹15 Lakhs per annum.
- Average Salary: The average salary for a CFP in India is approximately ₹5 Lakhs per annum.
CFA:
- Entry-Level (Freshers): Starting salaries around ₹4.5 Lakhs per annum for CFA Level 1 holders.
- Mid-Level Professionals: Approximately ₹10 Lakhs per annum for those who have passed CFA Level 2 or 3.
- Post-CFA Charter Holders: Salaries can exceed ₹20 Lakhs per annum, with some reports indicating a range up to ₹44 Lakhs depending on the position and organization.
- Average Salary: The average salary for a CFA in India is reported to be around ₹6.8 Lakhs per annum.
5. Eligibility Requirements
CFP
- To become a CFP, one must meet the following requirements:
- Bachelor’s degree
- Completed a professional certification program in financial planning
- Passed the CFP certification examination
- Gained relevant work experience-most require three years
CFA
- To become a CFA charterholder, you need to have the following:
- A bachelor’s degree, or equivalent
- Four years of qualified professional work experience in a position where you implement investment decisions
- Successfully pass all levels of the CFA exams
CFP or CFA Which Certification Is Right for You?
Ultimately, it will depend on your goals:
- If personal finance, wealth management, or advising people is your area of interest, then the CFP is the more appropriate way.
- If you are more bent towards an area of investment analysis, portfolio management, or working in an institutional finance setting, then the CFA is more suitable.
- What’s more, many people like to obtain the two qualifications as they expand their skills and improve their hiring chances in different areas of the finance industry.
Conclusion
Overall, CFP and CFA certifications carry a great deal of value, making them wonderful routes to fall into professional interest and career paths. In this regard, the difference is that CFP is inclined toward personal financial planning and advisory roles, while CFA accentuates investment analysis and portfolio management on a corporate level.
Decisions regarding pursuing such certifications or additional education in the finance field can be made more efficiently by turning to institutions like The WallStreet School. Knowing your interest and career goal will help determine which of these two respected credentials are the best for you.
