If you are competing for a position in investment banking, a Master of Business Administration (MBA) degree may be marginally preferable over the chartered financial analyst (CFA) designation, but only if the business degree is awarded by a top B-school.
Key Takeaways
- The CFA focuses on the kind of number-crunching skills that are most needed in investment banking.
- The CFA designation requires experience as well as study.
- The MBA is an impressive credential if it's from a top-rated business school.
In any case, CFA certification is a solid credential for many investment jobs. It's well worth considering if you are aiming for an entry-level job in investment banking. In fact, it will probably serve you better than an MBA from any business school other than the top 20. (The schools in the top 20 may vary a little from year to year and source to source, but not by much.)
MBA vs. CFA
If you're just starting out in investment banking, you're probably going for a job as an analyst. This position demands great expertise in number-crunching and financial modeling, skills that are best imparted by the CFA program rather than an MBA.
About the CFA
The CFA is awarded only by the CFA Institute, an organization that was created to educate investment professionals and to maintain ethical standards for the industry.
The CFA has just about the best return on investment of any educational program. The total cost of all three levels of the program amounts to a few thousand dollars. In return, successful candidates who obtain the CFA charter can look forward to a significant boost in earnings over the course of their careers.
The difficulty of the CFA exams is nearly legendary.
Compare that to an MBA from one of the top schools. The average cost is about $130,000 for a two-year program, plus two years off for study unless you take courses at night while continuing to work.
Not that obtaining the CFA charter is a walk in the park. Candidates are required to pass three levels of exams, which take a combined 1,000 hours or so of study. They also must possess 4,000 hours of qualified experience that involves investment decision-making.
The CFA exams are almost legendary for their level of difficulty. According to the CFA Institute, pass rates for Levels I, II, and III hover around 43%, 47%, and 54%, respectively.
The MBA Edge
Completion of an MBA degree can get you direct access to investment banking jobs since the major firms recruit on campuses. It also can get you a good network of contacts.
These benefits are not available with the CFA, which is primarily a self-study program.
So, if you are fortunate enough to get into a top B-school, and you can afford it, the MBA should help you get your foot in the door. But the CFA has become a viable alternative to jumpstart a career in investment banking, not least because of its scarcity value.
As of 2020, total CFA charter-holders worldwide numbered just over 170,000; in contrast, something like 200,000 students graduate from U.S. business schools every year.
FAQs
If you're just starting out in investment banking, you're probably going for a job as an analyst. This position demands great expertise in number-crunching and financial modeling, skills that are best imparted by the CFA program rather than an MBA.
Should investment bankers get a CFA? ›
A bachelor's degree and or a master's degree in a related field is often required to become an investment banker. Investment bankers often start their careers as analysts and do so by earning the CFA charter.
Should investment bankers get an MBA? ›
An MBA is not a requirement to enter the field of investment banking. You can get your MBA at a later date should you decide it's worth pursuing. Getting an MBAdoesn't guarantee you will land a position at a top bank.
Is it better to get a CFA or MBA? ›
An MBA is more costly to acquire than a CFA and typically requires being a full-time student, while someone studying for a CFA can simultaneously hold a full-time job. However, the tradeoff is that after completion, an MBA often gives a bigger boost to your earnings potential than a CFA.
Does Goldman Sachs hire CFA? ›
Investment Banking
Large banks such as Goldman Sachs and Merrill Lynch tend to be good examples of the specific types of companies that hire CFA charterholders.
Do most investment bankers have a CFA? ›
You can do the degree course in finance, accounting, math, banking-related courses, etc. Let us make it clear that you can become an investment banker without getting the CFA Charter. However, with the CFA Charter, you will be able to explore and discover several new opportunities and also get a higher salary.
What is the downside of CFA? ›
Earning the CFA is a prolonged, pricey, and altogether challenging process that may not be right for every financial professional. To become a CFA, a candidate must pass the three-level exam, build up work experience in a related field, provide letters of reference, and apply to join the CFA Institute.
Does Goldman Sachs pay for MBA? ›
The Goldman Sachs MBA Fellowship is available to first-year MBA students who are pursuing a summer associate position with the investment bank. Scholarship recipients receive a $35,000 award, plus a summer associate salary.
What degree do most investment bankers have? ›
An MBA is the typical terminal degree for an investment banker. Some investment bankers do choose to continue their education in other ways. Many pursue additional continuing education courses and certifications in banking or finance to remain competitive in the fast-paced industry landscape.
Which MBA is best for bankers? ›
If one is interested in working for a bank, the MBA Finance and MBA Marketing or PGDM is the highly recommended course.
Who earns more MBA or CFA? CFA vs MBA who earns more, if general both the courses are great. However, if we see the career opportunities and earning potential then MBA pass out will be making more money than the CFA holder.
What is the average age of CFA Level 1 candidates? ›
For Level I exams in 2013, the average age of test takers was 27.2. Five years later, that number fell to 26.6 – a difference of around seven months. (Though this only includes the June exam for 2018; the average age for December test takers ticked slightly higher – between 0.2 and 0.3 years – from 2013 through 2017).
How much does a CFA increase your salary? ›
The CFA charter prepares you for a variety of investment-related jobs, such as portfolio manager, risk manager, and research analyst. Seven percent of CFA charterholders even go on to be chief-level executives. In general, the CFA designation increases salaries by around 15-20%. The CFA Charter is Recognized Worldwide.
How much does a CFA at Goldman Sachs earn in the US? ›
The estimated total pay for a Cfa at Goldman Sachs is $207,351 per year. This number represents the median, which is the midpoint of the ranges from our proprietary Total Pay Estimate model and based on salaries collected from our users. The estimated base pay is $142,977 per year.
Should I put CFA after my name? ›
If you are an active charterholder in good standing:
Include your designation after your name. (For example: “Jane Doe, CFA”) Include your charterholder status in the certifications or education section of your resume as “CFA® charterholder, CFA Institute.” You may also include the date your charter was issued.
What is the salary level for investment banking at Goldman Sachs? ›
Goldman Sachs Investment Banker Salaries
| Level Name | Total | Base |
|---|
| Analyst | $154K | $105K |
| Associate | $239K | $167K |
| Executive Director Vice President | $476K | $261K |
| Managing Director | $ -- | $ -- |
They are masters of insurance planning, risk management, investments, tax planning, estate planning, retirement planning and employee benefits planning. While the CFA is the best designation to pursue in terms of investment knowledge, it certainly does not cover all of the aspects of financial planning.
Is CFA useful for M&A? ›
Certifications like Chartered Financial Analyst (CFA) and Certified Public Account (CPA) can help you advance your M&A career. But, again, they're not required. In the U.S., entry-level investment banking professionals are required to pass exams from the Financial Industry Regulatory Authority (FINRA).
Is CFA worth it for financial analyst? ›
If you're aiming to work in roles such as financial analysts, portfolio managers, or investment bankers, the CFA designation can be a valuable asset. However, if you want to pursue careers in other areas of finance, an alternative certification or qualification may be more relevant.
Is CFA useful for private equity? ›
A lot of limited partner private equity firms will hire undergraduates and then put them through the CFA. It's rare for direct investment firms to do the same. However, we also see a lot of junior investment bankers with CFA level one, as it shows both technical knowledge and evidence of commitment.”
