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MBA or CFA: Which Is Better for Financial Advisors?

US News & World Report -  Money logo US News & World Report - Money 1/14/2021 Coryanne Hicks
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The financial industry abounds with designations and certifications.

Two of the most strenuous and highly regarded designations in the financial industry are the chartered financial analyst, or CFA, and master of business administration, or MBA. Both require an extensive commitment of time and money but provide considerably different rewards.

For financial advisors, is an MBA or a CFA a better professional credential? Experts say: It depends.

"Professionals need to think outside of their role today into what will help them stand out in the future," says Ryan George, chief marketing officer at Docupace, which helps digitize operations in the financial advice and investment industry. While he doesn't recommend getting designations and advanced degrees as the first step in your career – better to start by finding a mentor and learning about their experience – "initials after your name just might get that recruiter or prospective client to take a second look at you when flipping through options."

The right initials can help differentiate yourself and attract clients in an extremely competitive landscape, says Julie Genjac, Seattle-based managing director of Applied Insights at Hartford Funds. Advanced degrees and professional designations can provide an additional layer of credibility. The challenge is determining which initials will best serve you in your career as a financial advisor.

Here are the differences between a CFA and MBA to help you choose which to pursue.

What Is the CFA?

The CFA is an internationally recognized designation held by professionals in 134 countries, according to the CFA Institute. To earn your CFA, you must have at least four years of professional investment experience, complete the CFA Institute's CFA Program and pass three sequential six-hour exams that are among the hardest in the industry.

The CFA Program teaches investment and portfolio management fundamentals, including asset valuation and wealth planning. Obtaining the designation qualifies you to work in senior and executive positions in areas such as investment, asset or risk management. Many CFA candidates first work as research analysts, investment analysts and quantitative analysts, according to the CFA Institute.

"The CFA is very mathematical, analytical and scientific," says CFA Aaron A. Leaman, principal and chief financial officer and chief investment officer at Signature Financial Planning in Pittsburgh. "You really get into the math and science of investing, including trading mechanics and calculations."

What Is an MBA?

An MBA, on the other hand, is more holistic and focuses on various aspects of business, he says.

"The MBA is a much broader designation in that you can take finance and investment courses as well as leadership, time management (and) communications," says Elliott Servais, vice president at EP Wealth Advisors in Orange County, California, who has an MBA and certified financial planner designation. It's better suited to advisors who want to focus on holistic planning or take on a managerial role.

He's also found the MBA to be useful if you plan to change careers. His MBA helped him transition from the corporate insurance industry to the investment side.

CFA Versus MBA: Time Commitment

Both the CFA and MBA are multiyear commitments. "Any advanced degree or designation takes time away from the business, clients, family (and) hobbies," Genjac says. She urges financial professionals to ask themselves whether they're pursuing the degree or designation for the right reasons and if it is truly the right time in their life to undertake it.

The CFA requires a minimum of three years to complete because the three exams are only offered once per year and must be taken sequentially. You can also expect to spend more than 300 hours preparing for each exam.

MBAs require two years of full-time study to complete. Some accelerated programs can be completed faster. Part-time programs are designed for working professionals who want to get their MBA while keeping their day job. The time commitment for a part-time MBA varies but is usually three years, Servais says.

"Perhaps the biggest difference is that with an MBA, you're engaged in a class-like environment surrounded by peers throughout the process," Leaman says. "In the CFA Program, they mail you the books, and you're on your own to study and register for the test at a later date."

You could theoretically complete the CFA Program in your pajamas from your couch if you wanted to, he says. "You'll be spending a lot of time in those pajamas, though, which may or may not be a perk."

CFA Versus MBA: Cost to Obtain

The only required cost to get your CFA is the exam fees, which range from $700 to $1,000, depending on how early you register, plus a one-time CFA Institute enrollment fee of $450.

The cost of an MBA varies depending on the type of school you attend and can range from $15,000 to more than $75,000, Servais says. The cost of a full-time executive MBA at many of the top-ranked programs in the 2021 U.S. News Best Business Schools rankings is between $100,000 to $200,000.

"Many companies offer reimbursement or assistance in getting credentials and advanced degrees," George says, adding that these are among "the most underutilized benefits in corporate America."

CFA Versus MBA: Salary Comparison

To decide whether a CFA or MBA is worth the time and money, you should consider how much you stand to gain. The median salary for financial advisors in 2019 was almost $88,000, according to U.S. News data. The highest paid quartile earned more than $150,000.

By comparison, the average reported total compensation for CFA charterholders in 2019 was $316,000, according to the CFA Institute. The average base salary, not including bonuses, was $178,000.

MBA salaries are harder to determine because the university factors into the overall compensation. U.S. News data shows the overall compensation for MBA graduates from the business schools with the highest reported salary and bonuses averaged around $170,000, compared to approximately $53,000 for the business schools with lowest ranking salary and bonus.

Should You Get a CFA or MBA?

When choosing between a CFA and MBA, Servais tells advisors to work backward: Determine your end goal, then ask whether the CFA or MBA will help you get there.

The decision often comes down to your value proposition when working with clients, Genjac says. "What additional knowledge or credibility do you need in order to bring solutions to your clients that enhance their experience?"

If you want to provide better portfolio construction, the CFA can be a great fit, she says. If you're looking to deliver a more comprehensive suite of solutions, an MBA may be more appropriate.

Put another way: "If you're planning to run your own firm, consider an MBA," Leaman says. "But if you're planning to run your own fund, the CFA would be a better choice."

If choosing between an MBA or CFA, George says, "Financial advisors should get their MBA five times over."

He explains that stock picking, in-depth security analysis and portfolio design have become commoditized in many ways.

Advisors can outsource portfolio construction via turnkey asset management programs that offer model portfolios created by CFAs, but "what advisors can't, and shouldn't, outsource is the management of their advice business: marketing, culture, customer experience and more," he says. "Those skills will be critical for them today, tomorrow and well into the future."

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