MBA vs CFA. Curious about the comparison? You’re not alone.
This decades-old question happens to be the most common one that I get from my clients.
Many are overwhelmed by the MBA tuition from top-tier business schools. Others are daunted by the sheer volume of the CFA curriculum and low passing rates of the CFA exam.
There are advantages and disadvantages to each, and both require a large investment of time (and especially money when it comes to an MBA). Let me start by breaking things down.
MBA vs CFA – First Things First
It’s no secret that MBAs get paid well. BUT…so do CFAs (more detail below).
If you only have your undergraduate degree and find yourself at a fork in the road, it’s realistic to expect that you will unequivocally have a higher income (assuming you can find, and hold, a job) with either. Hence, a major reason for the debate around getting an MBA vs CFA.
The MBA
According to Payscale.com, the highest paid MBA graduates by mid-career come from Harvard and make $201,000 per year, on average. In another study done by Business Insider, Stanford MBAs wear the crown at $184,600.
Of course, not everyone can get into these schools and/or expect the same lucrative mid-career pay as graduates from top schools.
Nonetheless, the surveys above seem to be close enough for us to ballpark an expected income at top-tier schools. That brings me to my next point. When it comes to MBAs, brand matters!
The difference between the mid-career pay of the highest paid school (Harvard) and 50th highest paid school (tied between OSU and U Pitt) according to that same Payscale.com survey is almost $70,000 a year!
After 14 years that’s almost a $1 million earnings differential!
MBA Drudgery
Getting into Harvard or Stanford would be nice, but jumping through the hoops needed to get through the process for most respectable MBAs is also time consuming in itself. Here are a few of the hoops:
- Studying for, and taking, the GMAT.
- Filling out business school applications.
- Prepping, and succeeding at entrance interviews for business schools.
- BIG HOOP ==> Coming up with an excess of $100,000 for tuition while foregoing a salary (for students taking the full-time route).
The above is by no means an exhaustive list. For context, it’s recommended that students get started on the application process as early as January when looking to send out applications that coming fall.
The CFA
Now, when it comes to the CFA designation, the “hoops” are fewer and farther between. In my experience the MBA vs CFA question is a no-brainer. From a pure education standpoint the CFA offers almost the same education (if not more).
And, in terms of administration, signing up for the CFA exam simply requires filling out a form online and making a small payment (under $1,000 per level, as of 2016, if you register early). You will then have your textbooks shipped to you, or receive an electronic copy.
You can also get started earlier in life, as opposed to the typical multi-year requisite work experience needed before applying for an MBA.
This will save you valuable career time. You can start taking the exams while getting your undergraduate degree. Thus, avoiding having to balance studying while you work (it’s awful, I promise). An issue that can be a problem with the CFA however, is that a failed CFA exam results in having to wait a year before you can take the exam again (for Level 2 and Level 3).
In terms of brand, while it may not be an Ivy League degree, the CFA designation has worldwide recognition. The CFA is viewed as a prestigious designation globally. Having the CFA designation whether it be in Hong Kong, Buenos Aires, or New York holds the same sway.
CFA by the Numbers
The cost of the CFA designation is unequivocally much more attractive than that of the MBA. If you register as late as possible for every exam (costs go up with later registration), you can still enroll at all levels for a cumulative price of less than what it would cost you to give up coffee from Starbucks everyday for 5 years.
The same sacrifice for an MBA would need to be carried out for over 100 years.
Let’s Talk Pay
Lastly, this topic is hardest to pin down with a gross generalization. That said, you can find plenty of studies done by CFA societies across the globe that provide a glimpse into pay expectations. Pay is a major motivation in the MBA vs CFA debate.
Rather than regurgitate their findings, I’ll generally summarize them but I discuss a few example here.
First and importantly, experience is one of the largest contributors for higher pay for those with the CFA designation. CFA Charterholders with between 5 and 10 years of work experience typically make well over $100,000 per year, with the high-end of the range being closer to $200,000.
Another theme found in the local surveys is that non-CFA Charterholders with undergraduate degrees make significantly less than CFA Charterholders. Some regions, such as Minneapolis, reported lower pay by as much as 50%. Similarly, those with graduate degrees that are non-CFA Charterholders also seem to make significantly less (the range varies with some studies showing between 33% and 50% less) than CFA Charterholders with graduate degrees.
Final Thoughts
The dynamics of this choice are obviously much more complex than the cherry-picked arguments for and against the MBA vs CFA dilemma that we have made above. For what it’s worth, we put our support behind getting the CFA designation first.
The cost/benefit for taking the CFA exam is quite compelling with minimal commitment (except lots of studying!), and/or administrative headaches. If you don’t think you have enough time, consider a CFA tutor.
In my view, the CFA designation is a clearer path to signaling your worth to a potential employer early on in your career as a hard working, intelligent, and disciplined individual. That said, your capability to become an astute investor, it far from guarantees. But, neither does a $150,000 education and an MBA.