Are you thinking about a career in financial planning and wondering what type of certification you should get? You might be considering a CFA vs. CFP.
While both options can help you advance your career, each designation serves different financial needs.
Becoming a chartered financial analyst is a difficult exam to pass but doing so can allow you to work for larger clients.
Meanwhile, a CFP is good for someone who doesn’t have a finance background but it takes a long time to obtain your certification.
In this article, we’ll explore the key differences between CFAs and CFPs, the time and cost required to obtain each, and who these certifications are best suited for.
Chartered Financial Analyst
A CFA – or Chartered Financial Analyst – is a certification for professionals who work in the financial services industry.
CFA charter holders specialize in:
- Wealth management
- Portfolio management
- Trading
- Auditing and accounting
- Financial planning
- Credit analysis
CFAs work with individual clients or large corporations like hedge funds to reach specific financial goals.
For individual clients, CFAs can provide guidance on things like estate planning and purchasing insurance products.
While CFAs can work with individuals, they are best suited for working with larger companies. CFAs use data-driven insights to guide investment decisions.
This includes managing a larger portfolio or performing a risk assessment.
Offered by the CFA Institute, a CFA certification is one of the most difficult designations to obtain in the financial industry.
To earn a CFA you must complete the following:
- Obtain a bachelor’s degree in finance (or a related field)
- Have at least 4 years of professional work experience in a financial role
- Pass three 6-hour exams
- Complete 20 hours of continuing education each year
The exams cover several topics including accounting, money management, and security analysis.
Individuals spend hundreds of hours preparing for the exams which have a low success rate. According to the CFA Institute, the average pass rate for the last 10 years is 43%.
To obtain a CFA, candidates must pay a one-time enrollment fee of $350 which covers enrollment in the CFA Program and Level 1 exams. For the remaining exams, standard registration is $1,250.
Due to the rigor of the exams, candidates can elect to take a supplementary prep course. Kaplan Schweser is one of the most established CFA exam prep programs.
The basic self-study option starts at $329 while the comprehensive program starts at $1,399.
The investment in obtaining a CFA can be worth it. CFA charter holders typically earn a base salary of $126,000 and an overall compensation of $177,000.
This is higher than the $99,890 median salary of general financial analysts.
Certified Financial Planner
A CFP – or Certified Financial Planner – is someone who works with individual clients to achieve financial goals.
CFPs help their clients create plans for things like:
- Taxes
- Buying a home
- Estates
- Retirement
- Insurance
- Saving for college
CFPs can work one-on-one with clients or provide financial planning services within a large firm, like a brokerage.
CFPs are fiduciaries which requires them to put their clients’ interests above their own.
The CFP certification is offered by the Board of Standards, Inc. which sets standards for personal financial planning.
To become a CFP you must:
- Obtain a bachelor’s degree in finance (or related field)
- Complete financial planning courses
- Have 6,000 hours of direct financial planning work experience or 4,000 hours through an apprenticeship
- Pass the CFP Board exam
- Complete 30 hours of continuing education every two years
The board exam and coursework leading up to the exam are rigorous. The curriculum covers a wide range of individual financial planning areas, such as tax accounting, insurance planning, estate planning, and risk analysis.
Standard registration for the exam is $925. Completing CFP coursework is required before you can enroll in the exam.
CFP courses are offered by many universities. A CFP course and any supplemental exam prep classes cost several thousand dollars and can take one or two years to complete.
Getting a CFP is a significant time and financial investment that can pay off in the long run.
According to the CFP Board, CFPs with 10-20 years of experience earn a median salary of $225,000 while CFPs with 20+ years earn a median salary of $325,000.
CFA vs. CFP: Key differences
CFAs and CFPs are similar in that they provide financial advice for their clients. There are some key differences that set each designation apart.
| CFA | CFP |
|---|---|
| Investment planning and risk management, often for large companies or high-net worth individuals. | Long-term financial planning for individual clients or couples. |
| Services: Portfolio management Risk assessment Asset allocation | Services Financial plans for taxes, estates, etc. Saving for large goals like buying a home |
| Requirements: Bachelor’s in finance 4 years work experience in financial role Pass Level I, Level II, and Level III exams | Requirements: Bachelor’s in finance Complete financial planning coursework Have 6,000 hours professional experience or 4,000 hours as an apprentice Pass CFP Board exam |
| Cost: $350 enrollment fee and $1,250 standard registration | Cost: $925 exam standard registration fee and $4,995+ course tuition |
| CFAs earn $126,000-$177,000 per year | CFPs earn $150,000-$325,000 per year |
Which one is right for you?
Determining whether a CFA vs. CFP designation is right for you to come down to your professional goals.
While both certifications are common for financial advisors they help different types of clients.
A CFA will likely work with larger portfolios and leverage different strategies or financial analysis methods to allocate investments and reduce risks.
A CFP may also assist with this but usually for individual clients who are also seeking non-investment-related advice.
Both the CFA and CFP certification processes are difficult and take several years to obtain. The CFA has fewer requirements but tends to have a lower success rate.
The CFP takes a long time to complete but is more accessible for someone who might not have a professional background in finance.
If your goal is to be more of a portfolio manager and work with larger institutions a CFA might be the best option for you.
If you’d prefer to work with individual clients to help them achieve specific financial goals, you might be better off obtaining a CFP.
Is a CFP or CFA better?
Congrats on making it to the end of this guide. You now know some key differences between a CFA vs. CFP.
The biggest thing to take into consideration is the time investment required for both.
CFPs and CFAs support their clients in different ways. Depending on your professional goals, one might be more feasible and realistic to obtain than the other.
There isn’t a one-size-fits-all option for everyone. Evaluate your needs and goals first to determine which type of certification makes sense for you.
FAQs
Is CFA worth it for a financial advisor?
A CFA can be worth it for a financial advisor, especially if you plan to work with a large financial institution like a hedge fund.
Being a CFA charter holder can make you more valuable to the company, helping you advance your career or set yourself apart during a period of downsizing.
Is it harder to become a CFA or CFP?
Becoming a CFA tends to be harder than becoming a CFP. The CFA exam process is more rigorous and has a lower passing rate.
It also requires more quantitative analysis than a CFP.
Do you get paid more as a CFP or CFA?
It depends on the type of clients you work with and your level of experience. The CFA Institute reports the total compensation for CFA chart holders is $177,000.
The CFP Board reports that the median salary for CFPs with 20 years experience is $325,000.
