If you are thinking about pursuing a financial career, you’re in good company. There are more than a dozen different financial specialist occupations, collectively employing well over 2.7 million American workers, according to the United States Bureau of Labor Statistics (BLS). While a bachelor’s degree in finance is a great start for preparing for any of these possibilities, there are different professional certifications that go along with the distinct career paths. Two of the most popular credentials in the field of finance are the Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) certifications. While both credentials require candidates who meet education and experience requirements to demonstrate their expertise in the field by passing professional exams, they are awarded by different professional organizations and are intended for different job roles.
The Chartered Financial Analyst Credential
The CFA charter, awarded by the CFA Institute, is the standard when it comes to professional qualifications for financial analysts. Financial analysts are the finance professionals who analyze opportunities for investments, including stocks and bonds, and use their analyses to help both individuals and business organizations make smart investment decisions, the BLS reported. Financial analysts hold many job titles, including investment analyst, securities analyst, risk analyst, ratings analyst, fund manager and portfolio manager.
Candidates for the CFA charter credential must have a combination of education and full-time professional work experience. Before the candidate can finish the certification process, he or she must complete a bachelor’s degree. Generally, four years of work experience is expected, but that experience does not have to be directly related to investments. To attain the CFA credential, you must take three graduate-level professional exams. These exams test your knowledge of ethics and professional standards, investment tools, asset classes and portfolio management and wealth planning, with the different exams focusing more on different categories of knowledge.
Taking these three exams can require more than four years. The CFA Institute recommends studying for more than 300 hours for each one of these tests. About three-quarters of test-takers report using the CFA Institute’s own curriculum, but more than half of candidates surveyed found non-CFA materials valuable, either along with or instead of the CFA Institute’s program. If you choose to go to graduate school, you can prepare for the CFA exams and earn a Master of Finance degree in as little as a year.
One-third of CFA candidates cited opportunities for career advancement as their primary reason for pursuing the credential, while 21 percent wanted to increase the competency, 13 percent wanted to join the global network of CFAs and 12 percent liked the challenge.
The Certified Financial Planner Designation
Another career option in the field of finance is personal financial advisor. In this role, you use your knowledge of finance to help individuals, rather than companies, with planning for a wider range of financial activities. Personal financial advisors might help their clients plan for every financial occasion from purchasing insurance to saving for college or retirement, the BLS reported. You must attain the proper licenses required to buy or sell any of the financial products that you handle directly for your clients.
You don’t need professional certification to become a personal financial advisor, but having the credential has some big advantages, like boosting your reputation. Getting certified can often bring new clients into your firm, which is especially crucial since 24 percent of personal financial advisors are self-employed, the BLS reported.
The Certified Financial Planner (CFP) certification is offered through the Certified Financial Planner Board of Standards. Before you achieve this designation, you must meet education, experience, ethics and professional exam requirements. In addition to attaining a bachelor’s degree from an accredited college, you must complete coursework in eight required areas of personal financial planning as well as a capstone course in financial plan development. The standard pathway includes an experience requirement of 6,000 hours – or, according to the BLS, three years of full-time work. To meet the ethics requirement, you must agree that you will meet all ethical standards delineated in the CFP Board’s Standards of Professional Conduct.
The CFP exam itself is a lengthy computer-based exam that is only available during brief testing windows in the months of March, July and November. Over the course of two three-hour sessions separated by a 40-minute break, students answer 170 questions, all in multiple-choice format. The test includes questions about financial planning principles, debt management, risk management, insurance planning, income taxes and retirement planning, employee benefits planning, investment and real estate planning, emergency fund reserves, planning liability and statistical modeling, the BLS reported. Generally, the overall CFP exam pass rate hovers around the range of 56 percent to 66 percent. Aspiring CFPs should plan on spending hundreds of hours preparing for the test and might find it helpful to enroll in a live exam review program offered by a reputable college.
The Certified Financial Planner Board of Standards also requires candidates to meet a set of Fitness Standards, which refer to acceptable professional conduct and outline behaviors, such as felony convictions for financial and violent crimes, that are deemed unacceptable.
Additional Resources
What Degree Do I Need to Be a Financial Analyst?
What Degree Do I Need to Be a Financial Advisor?
What Is the Difference Between the CFA Certification and a Master’s in Finance Degree?
