Dear esteemed reader, you’re welcome to an enlightening session on the differences between CFA and FRM designations.
You’ll learn how the CFA differs from the FRM in educational requirements, exam structures, and salaries in this piece.
Here are our specific areas of focus in the CFA vs FRM article:
Let’s get right into it!
Overview of CFA and FRM Credentials
We must understand the overview of these designations before outlining their differences.
“CFA” means Chartered Financial Analyst.
It’s a designation offered by the CFA Institute since 1963.
The CFA program covers a wide range of topics in the finance industry.
The areas of focus of this program include portfolio management, asset management, derivatives, hedge funds, bonds, financial analysis, and stocks.
Over the decades, the CFA has increased in standard and relevance, and it’s now referred to as the “gold standard” among stakeholders in the industry.
Conversely, “FRM” stands for Financial Risk Manager, a credential issued by the Global Association of Risk Professionals (GARP).
The FRM certification gives you an edge in contemporary ever-dynamic financial markets by sharpening your risk management skills.
The certification distinguishes you in the marketplace and validates your knowledge of risk management concepts.
Earning the FRM means that your understanding of risk management techniques matches global professional standards.
Job Profiles for CFA and FRM Certification Holders
CFA charterholders usually serve as investment analysts, portfolio managers, research analysts, fund managers, wealth managers, strategic analysts, private bankers, auditors, chief executives, relationship managers, and financial consultants.
FRM professionals end up as risk managers, risk analysts, financial risk consultants, directors, and investment bankers.
CFA vs FRM Salary
Many aspirants want to know CFA and FRM salaries before enrolling in the programs.
However, it’s challenging to compare salaries of two unrelated certifications as it will amount to comparing apples with lemons.
Geographical location, specialization, job roles, individual creativity, and seniority affect earning potential.
According to the CFA Institute, the average base salary of a CFA charter holder is $126,000, but their total compensation is $177,000 annually.
Conversely, Payscale.com states that an average FRM certificate holder makes $102,000 per annum.
However, their overall compensation is $128,000 per annum.
Thus, CFA and FRM salaries are highly competitive.
Requirements for CFA and FRM
Now that you know how much these certification holders earn, the next thing is how to earn the certifications.
What are the requirements for the CFA charter?
Every CFA hopeful must pass CFA Levels I-III exams.
Passing the preceding level is a prerequisite for taking the next.
You must also have a bachelor’s degree from an accredited university or be a final-year student.
Students can register for the exam in their penultimate year and take it in their final year.
Candidates with 4,000 hours of work experience are eligible for the CFA course.
Alternatively, you can also partake in the CFA program if you have a cumulative of 4,000 hours in university and work experience.
Then, you pay $275 as a CFA Institute membership registration fee and consent to the Institute’s codes of ethics.
Before certification, you must prove to the CFA Institute that you have 4 years of work experience in investment-related roles or product creation.
You may garner the experience before, during, or after the program.
On the other hand, the FRM requirements aren’t as complicated as those of the CFA.
For instance, you need not have work experience or a bachelor’s degree to sit the FRM exams.
However, you must have 2 years of full-time experience in financial risk management.
Describe the specific roles you played in financial risk management and submit it to the GARP within 5 years of passing the FRM Part II.
If we’re to contextualize this question: “Is FRM harder than the CFA?” you can see that the answer is obvious.
The FRM certification requirements are straightforward and quicker to meet than the CFA.
Hence, from the requirements’ perspective, the CFA is more complicated than the FRM!
FRM vs CFA: Course Syllabus
The FRM curriculum dwells on the following: risk models, investment management, valuation, quantitative analysis, financial markets & products, treasury & liquidity risk management, and credit risk, market risk & operational risk.
On the other hand, CFA topics include ethics & professional standards, quantitative methods, fixed income & derivatives, corporate finance, financial reporting & analysis, equity & alternative investments, and portfolio management.
As you can see, there are overlaps in the curriculums.
The overlapping will ease the study burden of professionals aiming to do CFA and FRM together.
Exam Pattern and Structure for CFA and FRM
The FRM is divided into two—Part I and Part II.
A candidate must take the two sequential exams before certification.
Part 1 contains 100 multiple choice questions and is in computer-based format.
The exam lasts for 4 hours.
Part 2 comprises 80 multiple choice questions and also lasts for 4 hours.
Conversely, CFA hopefuls will take three sequential tests (CFA Levels I to III).
Each level takes 4 hours and 24 minutes to complete, with the choice of breaks in their intervals.
CFA Level 1 contains 180 multiple-choice questions.
Level 2 is vignette-based multiple-choice questions, while Level 3 combines multiple-choice and essay questions.
Most of the questions are practical but tricky.
The CFA charter is the gold standard because it ensures the highest standards in every aspect.
The Certified Public Accountant (CPA) certification is also widely accepted due to its uncompromising standards.
Course Duration
The Chartered Financial Analyst Institute projects 3 years to complete exam levels I to III, but it takes most candidates up to 4 years to pass all the exams.
The CFA exam is strict and organized; if you don’t pass CFA Level 1, you can’t take Level 2, subsequently, Level 3.
On the other hand, the Association of Risk Professionals expects candidates to pass the FRM Part II exam within 4 years after passing Part 1.
However, many candidates complete the FRM program within a year.
Comparison of Exam Fees
Apart from “Is FRM harder than CFA?” another commonly asked question is “How much do the CFA and FRM cost?”
Many people want to have a perspective of the cost implications of these certifications.
But before we reel out the figures, it’s essential to note that the exam fee doesn’t truly reflect the CFA charter and FRM certification value.
They’re worth more than candidates are charged!
A CFA hopeful will pay a one-time enrollment fee of $450 when registering for the CFA Level 1 exam.
Then, every exam level costs between $700 to 1000.
Early birds pay $700, while the standard charge is $1,000.
Thus, if you can pass all the exams on your first attempt, the CFA certification program costs between $2,550 and $3,450.
You’ll save almost $1,000 if you register as an early bird for the three levels.
To enhance your chances, you may also buy CFA reviews.
FRM candidates also pay a one-time enrollment fee of $400.
But the FRM exam fee for Part I is $950 for early birds and $1,150 as a standard registration fee.
The FRM certification fee for returning candidates who pay early is $550, and $750 is the standard payment.
Early birds also pay $550 for the Part II exam, while standard registration is $750.
Thus, the FRM fee ranges from $1,900 and $2,300.
Remember that you don’t need any eligibility criterion to take the exams.
If you’re passionate about managing risks in organizations, you may take advantage of the affordable FRM certification cost to earn the designation.
You’ll learn all about FRM in the course and how to manage risks professionally.
The essence of earning these certifications is to empower you to undertake more technical tasks intellectually.
What are CFA and FRM without the know-how to defend them?
FRM or CFA: Exam Difficulty Levels
Understanding the FRM vs CFA difficulty levels will let you understand the best way to prepare for exams.
CFA and FRM are relatively complex, as are the CPA and CFP.
The pass rates for the FRM exams in recent times are 45% and 63% for Part I and Part II.
The success rate for Part I from 2010 to 2021 was 39%-53%, while it was 50%-62% for Part II.
However, the pass rates for CFA Levels I to III are 27%, 46%, and 39%.
Since 2010, the CFA success rate for Level 1 has been 36%-43%.
The success rate for Level 2 is 39%-47%, while Level 3 stands at 46%-56%.
The data shows that most candidates do not pass the exams on the first try.
Preparing for the CFA and FRM Exams
The unimpressive success rates of the certification exams show that candidates must prepare well before taking the exams so as not to waste their time and resources.
You can’t pass these exams with the fire brigade approach.
Early preparation is the antidote to failure.
A candidate requires about 200 to 240 hours to prepare for each FRM exam part.
Subscribe to preparation classes and focus on the big picture.
Familiarize yourself with the main topics and do as many practice exams as possible.
On the other hand, you need at least 300 hours to prepare for each CFA exam level.
Study with the Learning Outcome Statements (LOS) the Institute gives candidates.
The LOS contains the areas “questions’ zones” for the examination.
Purchase CFA reviews and learn thoroughly, practicing past questions along.
CFA hopefuls should also take several mock examinations to familiarize themselves with the exam patterns.
Exam Dates
Part I of the FRM comes up from May 07 to 20 and November 05 to 18, while Part II takes place between May 21 to 27 and November 19 to 25.
The CFA exam also comes up on different dates.
The CFA Level I exam comes up between February 15 to 21, May 17 to 23, and August 23 to 29.
The Institute hasn’t announced the date for the November edition.
Level II has been scheduled for February 22 to 26 and August 30 to September 03.
Another one will come up in November, but the Institute has yet to fix its date.
The CFA Level III is between May 24 to 26 and August 30 to September 06.
The organizing bodies released the exam dates beforehand to give room for thorough preparations.
You can plan and schedule the exam at the most convenient.
Exam rescheduling attracts charges.
CFA or FRM: Points to Consider
We hope that you can now make an informed decision on the career path to take between FRM and CFA.
However, before we drop the curtain on this discourse, let’s emphasize a few points on the two career options to simplify your decision-making process further:
Career Opportunities
The CFA course is ideal for professionals targeting investment banking, financial analysis, and portfolio management opportunities.
However, the FRM program allows you to work in financial institutions and treasury units.
Thus, the job opportunities you’re scouting for will determine the certification earned.
Focused vs Broad Views
The FRM curriculum specializes in risk management concepts alone, but the CFA covers a wide range of concepts in the industry.
If you want to be knowledgeable on risk identification, analysis, and control, the FRM is the best choice for you.
However, explore the CFA course if you want to understand how to manage a portfolio, analyze investments, and have generalist knowledge of finance.
Examination Tips
It’s easier for candidates with a quantitative background to pass the FRM exams because most of the foundation-level topics of the program are calculation-centered.
On the other hand, candidates with an accounting background will do well in the CFA exams because its curriculum is accounting-based.
Do you have an accounting or a mathematics background?
Reflect on the advantage you have to choose the best career path for yourself.
Of course, you can earn the two designations, but you should focus on the one where you have a comparative advantage first.
Success Rates
Don’t worry about success rates while deciding because the two designations’ exams are challenging.
The pass rate ranges from 30%-63%.
You can pass both exams on your first attempt if you follow the study guide we explained earlier.
Don’t be pessimistic about your chances of passing the exams once.
Rate of Competition
Finally, before you enroll in a certification program, find out its competitive advantage and the rate of its receptivity in the industry.
It will amount to a waste of time and resources to earn a poorly perceived credential.
For instance, no provider directly competes with the CFA charter.
Thus, it’s the best choice for anyone targeting a career in investment banking.
However, the professional risk manager (PRM) designation competes directly with the FRM.
If you want a career in risk management, you may be torn between these options.
The FRM is somewhat more popular than the PRM; hence, it should be your preferred choice.
You may also explore the FRM vs CFP debate to see how the two programs differ or complement each other.
Conclusion
The CFA and FRM certifications are two notable professional designations in the finance industry.
Your career path determines the certification program you choose per time.
This article has given you insights on the two certifications and how to choose the appropriate one to bolster your career.
You can earn the two certifications but firstly, concentrate on the one that adds immediate value to your most preferred path.
If you’re risk management-minded, the FRM is the first way to take, but the CFA charter is the best way for you if you’re investment-focused.
Earning the appropriate certifications bolsters your career and makes you a cynosure of all eyes in the industry.
