Cfa Exam Level 1 Study Hours Without A Finance Background CFA or FRM: Solving the Dilemma for Students

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CFA or FRM: Solving the Dilemma for Students

CFA and FRM are two of the leading financial certifications in India. Many MBA students seek these financial certifications to improve their financial knowledge. GyanCentral catches up with Aditya Ahluwalia, expert CFA trainer to find answers to CFA or FRM dilemma and also career options after CFA and FRM.

What advantage does an MBA student with a CFA degree have over an MBA specializing in finance?

I personally did both degrees. I did my Master of Business Administration (MBA) from FMS Delhi. In my opinion, the MBA finance degree covers about 20% of what is covered in the entire CFA curriculum (in terms of financial knowledge). An MBA degree is more holistic for management as it will also cover non-financial subjects such as HR, systems, marketing and general management. CFA is a certification dedicated to the field of finance. In my opinion, no exam is as thorough and comprehensive in finance as the CFA.

What are the job opportunities for MBA students after CFA?

Opportunities in the world of finance in India, while growing, are becoming extremely competitive. Many MBA students compete for the same job. During on-campus internships, companies don’t have time to review each and every resume or interview every candidate. Students who are selected for campus placements are students who have an extra boost in their resume. A CFA degree also gives the recruiter the perception that the student has more financial knowledge than just an MBA finance student. Hence, CFA supports a lot to get shortlisted for MBA placement interview stage. Even after the internship, the knowledge gained by a candidate is useful for his future assignments.

What are the profiles that an MBA in Finance with a CFA degree will offer?

CFA is a comprehensive exam in finance. So whether it’s investment banking or portfolio management or equity research or strategy consulting in the financial realm or corporate finance in a manufacturing company, CFA concepts will be directly applicable to your work. For anyone interested in a career in finance, the CFA designation gives an advantage and adds value to your knowledge and resume. A CFA qualification today is more of a requirement than an advantage for a career in private equity investment banking. Taking a CFA today is not a guarantee of finding a job in investment banking or private equity, it depends on your financial understanding and communication skills.

What is the difference between CFA and FRM?

That is a very common question that many students have. I believe that the MBA, CFA and FRM degrees need to be seen as compliments rather than competing with each other. CFA teaches you the inside of finance, MBA finance teaches you to link the financial aspect with the overall perspective of business management. FRM is a designation dedicated to risk management. It gives the candidate a very good perspective on the credit, operational and market risk aspects of a company. Many students today (including myself as a student) have taken all 3 designations. I believe the 3 degrees have increased my knowledge and improved my employability. I advise students to do neither for the courses. CFA and FRM are not stand-alone designations and are supposed to complement an MBA degree or work experience.

How should a student decide between pursuing a CFA or an FRM?

Firstly, students have a misconception that CFA takes 3 years while FRM takes only 2 exams. Therefore, they should not base their judgment on the duration of the course. The CFA curriculum is much more comprehensive than the FRM. In one CFA level it can be argued that you learn more than two FRM levels combined.

Coming to the choice between CFA and FRM, if someone wants a more holistic designation in finance, then they should go for CFA. CFA certification does not restrict mastery to any niche in finance and for students who are not sure about their preference in finance they should opt for CFA. CFA will teach you risk management, corporate finance, risk management and portfolio management, so the scope is wider. If a candidate is sure that he wants to go into risk management, that is, any profile in a bank or credit rating agency. Profiles can range from credit risk, relationship management, treasury or any profile related to risk management, then FRM should be chosen as it is more direct and relevant to the risk management niche in finance.

If equity research, investment banking, or portfolio management is your preferred field, then CFA is the designation to pursue.

Does having passed level 1 or level 2 in CFA have any relevance?

Mentioning that you are a Level 1 to Level 3 CFA exam candidate definitely carries a lot of weight. Having passed level 2 is equivalent to having an FRM qualification. Clearing a CFA level also has value, so students should not be dissuaded from mentioning the same in their CV. Even if the candidate chooses not to complete the CFA course, they can still mention level 1 or 2 in their CV. Non-finance students can usually use the CFA qualification to keep up with finance students during their MBA course. The perception problem that most engineers have about lack of financial knowledge can also be altered after taking a CFA course.

Besides the CFA, what else can a student do to improve their resume?

I have experience working at a senior level in a fund management company. I did my MBA, FRM, CFA and CIA (an alternative investment certification) which helped me gain a lot of knowledge. During my MBA I have also done a large number of NCFM modules which overlap with the CFA curriculum and are therefore not necessary for all candidates to be able to follow. Instead of running after random certifications, I would advise students to focus on the basics. If you have done your MBA from a top tier institute, that is good enough. Also doing live financial projects adds a lot of practical knowledge and helps to establish industry contacts which can be useful during internship. Other than the financial certifications mentioned above, I don’t think any other course adds significant value to a student’s resume. Also the CFA society networking events are quite useful. They open up good networking opportunities.

What questions should MBA students who have successfully passed CFA or are currently undertaking CFA expect in interviews?

The stock is very big in the Indian market and given that many back-end and front-end equity research firms hire senior management schools, so they mined with their valuation concepts, the relative P/E multiple, the DCF rating. Understanding corporate finance concepts such as cost of capital and WAC should be well reviewed. NPV, IRR are questions every candidate should expect in interviews. Focus on the basics and then move on to advanced terms. Most of the students will be fresher in the financial field, so the interviewers expect clarity on the basic concepts that a student should be well versed with. Value a company on your own using the P/E or DCF model and join it. Do the simple things well.

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