Our dear esteemed reader, you’re welcome to an exciting read on the differences between CFP vs CFA vs CPA designations.
After reading this article to the end, you’ll become an authority when discussing these certifications; their requirements, salary expectations, costs, and more!
Specifically, we will discuss:
Let’s hit the nail on the head as we unfold the details!
CFP vs CPA vs CFA: The General Requirements for Certification
The Certified Financial Planner (CFP), Certified Public Accountant (CPA), and Chartered Financial Analyst (CFA) are the three most popular certifications in the financial industry.
The designations have different focuses, professional paths, and organizing bodies.
The Certified Financial Planner Board of Standards (CFP Board) is in charge of the CFP designation, the American Institute of Certified Public Accountants (AICPA) oversees the CPA.
At the same time, the CFA Institute awards the CFA certificate.
We’ll briefly discuss the study requirements, coursework, and career paths for the designations.
Job Descriptions for CFP vs CFA vs CPA
A certified public accountant is involved in public accounting, preparations of tax returns, and auditing.
They also give financial advice to clients, trace financial inaccuracies, and draft financial documents.
Many CPAs specialize in taxation, personal financial planning, and forensic accounting.
Public accountants work with individuals and accounting firms.
You also need a CPA license to conduct independent auditing, otherwise called public accounting.
On the other hand, the CFA credential carries a huge honor in the global business environment.
Due to the relevant and broad nature of the CFA program, many finance professionals have equated it with a master’s degree in the industry.
The program has some minors in financial accounting, portfolio management, statistical analysis, and economics.
CFA charterholders trade assets such as commodities, currencies, and derivatives.
Chartered financial analysts are also into financial reporting, portfolio management, valuation, financial analysis, and equity investments.
While you’re not bound by the law to be a CFA before you can conduct financial analysis, having this certification is an excellent way to distinguish yourself from competitors.
CFAs also serve as research analysts, investment advisors, and financial consultants to individual clients and corporate organizations.
Financial analysts usually work in financial outfits such as hedge funds, pension, banks, and mutual funds organizations.
However, certified financial planners are involved in retirement planning, estate planning, risk management, insurance planning, wealth management, personal finance, and tax planning.
Financial planners work closely with individual clients to attain their financial goals.
The essential difference between CFA and CFP professionals is that while the former focuses on investment analysis, the latter deals with personal financial planning.
Meanwhile, the primary difference between CPA and CFA is that the CPA is preparing tax documents, while the CFA is based on investment banking or analysis.
One needs years of professional experience to serve adequately in these offices.
We’ve always emphasized the need for practical expertise than mere showing off of certifications without a matching understanding of skills.
CFP vs CFA vs CPA Requirements
Requirements for the CPA differ by state.
However, most states require CPA designation hopefuls to have a minimum of a bachelor’s degree, comprising 120 semester hours.
CPA applicants must pass the certification exam, have required work experience, and meet other education requirements before being awarded the credential.
On the other hand, the CFA Institute is known for its unrelenting taste for excellence.
Candidates must possess at least a bachelor’s degree with three years of experience in finance before sitting the CFA exam.
Only committed candidates stand a chance of passing the examination.
The CFP Board also requires applicants to be first-degree holders with a minimum of three years of experience in financial planning.
CFP vs CFA vs CPA Salary
The national hourly wage of financial planners is $40, while their annual median salary is $83,123.
The 25th percentiles make about $62,000 annually, while the 75th percentiles make more than $94,000.
The top 10% of earners make more than $125,000 per annum.
Years of experience, expertise, and geographical location also affect planners’ earning potentials.
Conversely, the average base salary of CFAs is $97,000 per annum.
Your specialization also determines how much you earn.
For instance, CFAs serving as portfolio managers earn an average of $105,257 annually, while chief investment officers earn an annual median salary of $176,480.
The CFA CFP salary scale comparison shows that financial analysts stand a slight chance of earning more than financial planners.
However, we must also take experience and expertise into cognizance while judging the CFA vs CFP salary.
The base salary for CPAs is $81,619 per annum.
The top three highest-paying locations for public accountants are New York, Houston, and Los Angeles, with an annual salary average of $102,302, $87,112, and $84,566, respectively.
With the national average in view, you can see that the CPA vs CFP salary debate is needless; they have the same salary range.
From this discussion, you can see that it doesn’t matter whether you choose to earn a CPA or CFP or CFA; you must work hard to be among the top earners.
In some cases, you may also need to change your location.
However, money shouldn’t be the only driving factor.
CFP vs CPA vs CFA Exam Patterns and Requirements
The CFP exam is a two-three hour exam with a 40 minutes break.
In other words, the exam lasts for six hours, but candidates take a 40-minute break after the first three hours.
The examination contains 170 multiple-choice questions on risk management, retirement, taxes, estate, and investment planning.
The CFP Board demands candidates complete coursework on the appropriate financial planning specialization before taking the designation exam.
The required courses that CFP candidates can complete within nine months are:
- Income taxation,
- Investment management,
- Fundamentals of estate planning,
- Processes & environment of financial planning,
- Planning for retirement needs, and
- Insurance.
However, the Board emphasizes the experience requirements than others.
The CPA exam takes a different pattern from the CFP.
It’s a 16-hour test with four sections.
The sections include auditing & attestation, regulation, business environments & concepts, and financial reporting & accounting.
Many prep courses online can help your preparations for this high-bar examination.
A candidate must pass the four exams within 18 months of passing the first one to earn the CFA certificate.
The exams have 3 question types—written communication simulations, work-based simulations, and multiple-choice questions.
The CFA exam is in three tiers, and each section lasts for six hours.
You must be well prepared for the exams because their pass rates are often below 55%, and if you fail the second or final tier, you’ll wait for a year for a retake.
The first exam borders on financial principles, the second is on accounting and financial analysis, and the third focuses on decision-making and portfolio management.
A candidate must pass the three exams before being awarded the CFA designation.
CFP vs CFA vs CPA Difficulty Levels
The three professional exams are moderately complex, and it’s easy for an experienced candidate to pass them on the first attempt.
Most of the exams are practical-based; if you have the required years of experience and study the course materials well, you will pass quickly.
The CFP exam pass rate is 62%, but first-timers had a 66% success rate in the 2019 edition.
The pass rates for the CFA exams are 53%.
However, the pass rate keeps depreciating annually.
For instance, the CFA Institute reported a 39% success rate for the Level III exam on its website for September 2021 edition.
The report signals a 3% depreciation from the 42% success rate in the May/June edition.
The head of the CFA, Margaret Franklin, says it’s an “incredible accomplishment” to pass all the CFA exams at a go.
The national average pass rate for the CPA is about 50%.
The figure shows that half of CPA exam participants usually have a re-sit.
According to the 2019 report by the AICPA, candidates had the worst performance in financial accounting & reporting (FAR) with a 48.3% success rate, while they had their best result in regulations with a 56.5% pass rate.
The figures given here do not frighten you but enhance your preparations.
For instance, some financial advisors met the CFP requirements for CPA and went on to earn the two certifications.
The CPA and CFP combination will enable finance professionals to function in numerous roles.
Having the two credentials also means that you’ll receive a CPA and CFP combination salary.
The more financial services you render, the more your earnings!
CPA vs CFA vs CFP: Cost of Examinations
The registration cost for the CFA program depends on when you register for it, but all candidates are to pay a one-time $450 enrolment fee.
The early registration fee for this program is $700, while the late registration fee is $1,000.
Ensure you schedule your exam at the most convenient time for you because exam rescheduling within the same window attracts a $250 fine.
However, the CPA program is costlier than the CFA.
It includes a $130 application fee, $300 registration fee, $833.60 exam fee, and $2,000 for a CPA review course.
Candidates also pay $175 as licensing fee, $169 for a professional ethics exam, and $1,000 annually for continuing professional education credits.
It means that you need $4,700 for the CPA license.
However, these fees vary by state; hence, you should check with the appropriate authorities in your state.
The CPA Board gave a detailed breakdown of the fees to let applicants know what they are paying for.
Many applicants may opt for the former if we limit the CFA versus CPA debate to exam fees.
For the CFP, there are three registration windows, each with its unique cost.
The standard registration fee for the CFP certification exam is $825, but early birds pay only $725.
However, the Board charges late applicants $925.
You can see that the CFA versus CFP exam fees is within the same range.
If you want the CPA CFP combo, you may register for the CFP first due to exam cost, and after being certified, you pursue the CPA certification.
CPA vs CFA vs CFP: The Job Prospects
One of the most important things you must consider before opting for a finance certification program is the job prospect.
Do you stand any chance to make an impact in the field?
What is the job growth rate of the profession?
For instance, the Bureau of Labor Statistics (BLS) has projected 5% job growth for the CFP within 2020 to 2030.
The projection means that the CFP job growth rate would be slower than any typical occupation in the US.
But this doesn’t mean that potential financial planners don’t have a chance of survival.
Despite what looks like a gloomy future, there would be 21,500 annual job openings within the projected period.
The projection should only propel you to work harder rather than feeling discouraged.
If you want to work with individuals, the CFP certification is the best for you.
It’s the ideal certification for financial professionals with an entrepreneurial mindset.
Your sales performance determines your earning potential, not by the national salary scale.
However, there’s a 6% projected job growth for financial analysts within 2020 to 2030.
It means there would be an average of 41,000 annual job openings in this profession.
49% of CFA charterholders serve as in-house financial analysts for corporate finance organizations, 16% work with broker-dealers, while 29% serve in government establishments, colleges, and other non-profit outfits.
Some CFAs make about $300,000 annually.
The figure includes base salary, equities, and bonuses.
However, the CPA is the most promising designation out of the three, with 7% projected yearly growth till 2030.
There would be 96,000 annual job openings from 2020 to 2030.
The projection shows that CPA jobs are in high demand.
Hedge fund accounting has openings for well-paying CPA positions.
You shouldn’t relax on your oars because of these optimistic projections because the high earners in any occupation are experienced and highly versatile.
CPA vs CFA vs CFP: Which to Choose?
Now that you have the basic facts on these three certifications, it shouldn’t be difficult for you to make a choice.
However, if you’re still a bit confused, you may ask these few questions:
What type of work are you willing to do?
Do you want to work as an employee or entrepreneur?
Once you know your passion and what you’re cut out for, it will be easy for you to choose the proper designation to pursue.
Conclusion
It doesn’t matter what designation you choose; these three designations are worth your time, investment, and resources.
They are also the most popular in the industry, thus opening you to numerous financial management opportunities.
However, you must stick to your passion and harness your expertise in the chosen profession.
For instance, if you think you’re better at financial planning than investment analysis, you should pursue the CFP rather than the CFA.
You can see that the exams for the three designations are moderately complex, and you only stand a chance of success if you’re genuinely committed to your chosen career path.
Rest assured that you have all it entails to succeed as a financial advisor in any chosen designation!
