Finance professionals often pursue professional qualifications in order to advance their careers.
Certified Public Accountant (CPA) and Chartered Financial Analyst (CFA) designations are arguably the two most prestigious titles in their respective fields. What are the differences, and which one is better?
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The CFA and CPA titles cannot be compared apple-to-apple because they represent qualification in two different sub-sectors within the general accounting and finance field.
CPA is the “black-belt” in accounting. It is originally a designation for public accountants, but non-public accountants, tax accountants and finance professionals seek the CPA title to proof their number crunching expertise. In addition, the CPA license holder has statutory rights to sign audit report which makes the title special.
CFA, on the other hand, is the gold standard in finance and investment. For those who are looking for career as equity analysts, fund managers, and professionals in asset management or hedge fund houses, this is the best title you can get.
The CPA license is granted by each of the 55 states or jurisdiction in the United States. There is no centralized administrative body and each state has slightly different CPA exam and licensing requirements.
The CPA requirements are the most difficult to achieve among all finance related qualifications. Candidates must have at least a 4-year bachelor degree and in most cases, 150 credit hours (equivalent to 5 years of higher education) to sit for the exam.
Because of the high barrier of entry and complicated application process, it is quite a challenge for non-US candidates to take the exam.
CFA is a designation granted by CFA Institute, a global non-profit organization. The institute is based in the US, but there are 3 regional offices and 200 local chapters around the world. Candidates apply through the institute and application is relatively simple.
As long as the candidate has a bachelor degree or 4 years of practically any working experience, this person can sit for the exam. The candidate can even take the exam before graduation.
There are 4 exam sections: Financial Accounting & Reporting, Audit & Attestation, Regulation and Business Environment & Concepts.
You can choose to take the 4 parts one at a time, 2 at a time or even 4 at the same time. You can sit for the exam any time in the CPA exam testing window, which is the first 2 months of each quarter and at any prometric centers throughout the US. There are also testing centers in Japan, Brazil and 4 Middle Eastern countries.
The exam format is much less flexible for CFA. There are 3 levels of exam, and you need to complete one in order to move on to the next. Exam content is focused on financial analysis and portfolio management instead of accounting, audit and taxation.
There are many international testing centers for CFA exam in major cities and metropolitan areas.
The CFA exam has 3 levels. You must take the 3 exams sequentially, and each exam is offered 1-2 times a year.
Most candidates aim to pass the CPA exam within a year. Some who have the time and commitment can study all materials within 6 months, take all 4 parts of the exam in one go and pass.
Most state boards require 1 year of accounting experience before getting the license, and for most states this experience has to be supervised and verified by a US CPA.
Although technically candidates can complete the CFA exam within 18 months (Level 1 in December, Level 2 in June, Level 3 in June the year after), most candidates take 4 years to complete the exams. It takes much longer to become a CFA than a CPA.
4 years of relevant experience is required to get the CFA designation. Your supervisor, who will be verifying your experience, does not need to be a CFA. This adds a lot of flexibility in the process.
For CFA, most candidates take 4 years to complete the 3 levels, plus 4 years of relevant experience before you can become a CFA. The exam taking and experience can start at the same time.
Stephanie chooses to be a CPA only, but John is a CPA and CFA.
The CFA and CPA combo helps the professional to be seen as an accounting expert within finance, and a finance expert within the accounting field. In our case, this powerful combination helps propel John’s career to become the CFO of a private equity and later on the head of a reputable family office.
It took John a lot of time and effort to complete the two qualification, but when started early before family commitment builds up, it is actually quite doable. John was able to obtain the CPA and CFA titles after 5 years of graduation.
When deciding whether to go for CFA or CPA, the first and foremost consideration is the relevancy to your career. Other than that, CPA has more restrictive education and experience requirement, but once you get qualified, the process is much faster. CFA has a lower entry barrier but it takes much longer time to complete.
Would you be Stephanie, who goes for one qualification, or John, who goes for both? Which one are you going to start first? Pick one and explore further: