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CFA® vs FRM®

Chartered Financial Analyst® vs. Financial Risk Manager®

By: ItsCONCEPTS

Overview

One question I have come across again and again during my career in the education industry is which professional finance course students should take, Chartered Financial Analyst® or Financial Risk Manager®. Quite often, students don’t know what these programs entail and what career opportunities open up after clearing these courses. This article will help candidates in understanding this area of discussion. We hope this becomes the cornerstone for Finance Professionals who are seeking clarity before investing their time and energy.

What you can expect from this article:

  • Description of Courses
  • How many people take these courses?
  • What career paths open after clearing these exams?
  • How much do these exams cost?
  • Who can register for these exams?
  • How much preparation time does it take to complete these exams?
  • What study material is available?
  • Where can you go for preparation?
  • Summary
  • Discussion Forum
  • About ItsCONCEPTS

Course description

The Chartered Financial Analyst® program is a consummative course in Finance. Started in 1963, it has seen 5 decades of expert finishing, bringing it to its present shape. Many firms have made it mandatory to achieve the CFA® charter or at least clear some levels of the CFA® program for a career in Investment Management. In its present form, the CFA® Institute divides its coursework into 3 levels; covering four broad subject categories. ‘Ethical and Professional Standards’ is a consistent constituent in all three exams, however, ‘Investment Tools’ has a wider presence in Level 2 and ‘Asset Classes’ and ‘Portfolio Management’ in Level 3.

Subject Categories in the CFA® Program:

  1. Ethical and Professional Standards
  2. Investment Tools
  3. Asset Classes
  4. Portfolio Management and Wealth Management

According to the CFA® Institute, the following are the percentages of various subjects across the 3 exam levels. The spread of this exam is very vast and it touches nearly all fields of Finance.

Topic Area Level I Level II Level III
Ethical and Professional Standards 15 10 10
Quantitative Methods 12 5-10 0
Economics 10 5-10 0
Financial Reporting and Analysis 20 15-25 0
Corporate Finance 8 5-15 0
Investment Tools 50 30-60 0
Equity Investments 10 20-30 5-15
Fixed Income Investments 12 5-15 10-20
Derivatives 5 5-15 5-15
Alternative Investments 3 5-15 5-15
Asset Valuation 30 35-75 35-45
Portfolio Management and Wealth Planning 5 5-15 45-55

Table 1 – CFA® Course curriculum – Source www.cfainstitute.org

Financial Risk Manager, FRM®, is a course offered by the Global Association of Risk Professionals (GARP), which is a not-for-profit organization and claims to be the “Only Globally recognized membership association for Risk Managers” (please visit this link for more information on their website).

Founded in 1996, GARP has 24,548 FRM holders (data taken from website – www.garp.org/garp/about-us.aspx – on 06 Feb 2011). FRM® distinguishes itself by focusing the curriculum on the niche field of Risk Management. The following are the constituent subjects in the FRM® exams (as of Feb 2011, source official GARP website):

http://www.garp.org/frm/overview/overview/learn-about-the-frm.aspx)

  • Foundations of risk management
  • Quantitative analysis
  • Financial markets and products
  • Valuation and risk models
  • Market risk measurement and management
  • Credit risk measurement and management
  • Operational and integrated risk management
  • Risk management in investment management
  • Current issues in financial markets

How many people take these courses?

According to the CFA® website, there are +90,000 charter holders as of Feb 2011. According to one estimate, India had +12,000 students registered for the CFA® exams in 2010 and India ranked 4th, just behind the USA, Canada and China in the number of students who were enrolled for the exams. From 1963, when the exam was first administered, the success rate for these exams has dropped continuously. On average, not more than 50% of students who appear for the exams clear them.

What career paths open after clearing these exams?

According to the CFA® Institute, its charterholders are engaged in following job profiles:

  • Portfolio Manager: 22%
  • Research Analyst: 15%
  • Chief Executive: 7%
  • Consultant: 5%
  • Relationship Manager, Sales + Marketing: 5%
  • Risk Manager: 4%
  • Financial Advisor: 4%
  • Corporate Financial Analyst: 4%
  • Investment Banking Analyst: 4%

No such data is available for Financial Risk Manager FRM®; however, people with this education are often very highly sought in the following careers:

  • Chief Risk Officer
  • Senior Risk Analyst
  • Head of Operational Risk
  • Investment Risk Management

How much do these exams cost?

Fee Structure for CFA® Exams:

CFA® Fee Structure for June 2011 Exam
Enrolled By Enrolled By Enrolled By
22-Sep-10 16-Feb 16-Mar
Program Enrollment 

(one time)

$405 $405 $490
Exam Registration $630 $720 $970
Curriculum eBook version save $40 save $40 save $40
Total $995 $1,085 $1,420Bottom of Form
CFA® Fee Structure for December 2011 Exam
Enrolled By Enrolled By Enrolled By
16-Mar 24-Aug 14-Sep
Program Enrollment 

(one time)

$405 $405 $490
Exam Registration $630 $720 $970
Curriculum eBook version save $40 save $40 save $40
Total $995 $1,085 $1,420Bottom of Form

Source: http://www.cfainstitute.org/cfaprogram/process/fees/Pages/index.aspx

Fee Structure for FRM® Exams:

FRM® Fee Structure for 21 May 2011
Enrolled By Enrolled By Enrolled By
31-Jan 28-Feb 15-Apr
Program Enrollment $300 $300 $300
Exam Registration $350 $475 $650
Total $650 $775 $950
FRM® Fee Structure for 19 Nov 2011
Enrolled By Enrolled By Enrolled By
31-Jul 31-Aug 15-Oct
Program Enrollment $300 $300 $300
Exam Registration $350 $475 $650
Total $650 $775 $950

Who can register for these exams?

Following is the Eligibility criteria for the CFA® Exams as mentioned on their website as of 06 Feb 2011:

  • Have a bachelor’s (or equivalent) degree
    • or be in the final year of your bachelor’s degree program at the time of registration
    • or have four years of qualified, professional work experience
    • or have a combination of work and college experience that totals at least four years (Note: Summer, part-time, and internship positions do not qualify)
    • If you initially enroll/register as a final year undergraduate student with a degree in progress, you may not register for the Level II exam until you have earned your degree, or obtained work experience that meets the program’s entrance requirements. At the time your degree is awarded, you may update your account education information to certify that your degree has been received.
  • Understand the professional conduct requirements (you will be asked to sign the Professional Conduct Statement and Candidate Responsibility Statement)
  • Be prepared to take the exams in English

Following is Eligibility criteria for the FRM® Exams as mentioned on their website as of 06 Feb 2011:

  • A passing score on both Part I and Part II of the FRM Examination
  • A minimum of two years professional full-time work experience in the area of financial risk management or another related field including, but not limited to, trading, portfolio management, faculty academic, industry research, economics, auditing, risk consulting, and/or risk technology.

Source: http://www.garp.org/frm/overview/requirements.aspx#top

How much preparation time does it take to complete these exams?

It varies from person to person, but usually it is seen that completion of the CFA® program takes 2 – 5 years. Every student has to show 4 years of relevant experience in the financial industry before the CFA® charter is awarded. In 2010, 42% of the 111,731 enrolled students cleared the exam (source: http://www.cfainstitute.org/cfaprogram/Documents/1963_current_candidate_exam_results.pdf).

However, if the right guidance and coaching is taken every level can be cleared on the first attempt. Please note Level I exam happens twice a year (June and December) and the Level II and III exams are only offered once a year (June). Thus, candidates can clear the exam in 2.5 year.

Quite a few organizations give reasonably good recognition to candidates who have cleared at least one level of this exam and are enrolled for the next level.

According to official figures for the spring 2010 exams, 52.5% candidates passed the FRM® Level 1 exam and 54% students passed the FRM® Level 2 exam (source: http://www.garp.org/frm/overview/frm-facts/frm-statistics-and-charts.aspx). In its present form, the exam is divided into 2 parts and both parts can be attempted twice every year (May and November). So in a fast track mode, this exam can be cleared in 1 year.

What study material is available?

The CFA® Institute provides its notes free when you register for the course. You can save USD 40 if you opt for the eBook version of the notes.

FRM® Handbook by Philippe Jorion, prescribed by GARP, is available at USD 359 + shipping charges. (Source: http://www.garp.org/frm/test-preparation/test-preparation/study-materials.aspx)

Outside the official handbooks, which are good but lengthy, other popular options exist such Schweser, Stalla & 7City notes. Please refer to www.schweser.com, www.stalla.com & www.7city.com for more information. A Few preparation institutes and online sites also provide their notes i.e. www.itsconcepts.com & www.analystnotes.com.

Where can you go for preparation?

Though these exams are considered to be distance learning modules, quite a few students want to be on the fast track and take advantage of coaching institutes to increase their success rate, reduce the cost of clearing the exam, or take a crash course before the exam in cases where they’re not able to focus on the preparation earlier because of work or personal obligations.

ItsCONCEPTS is a pioneer in this field. Based out of Mumbai, the financial hub of India, we are very conveniently located in Dadar – central location to most of Mumbai.

Summary

Very clearly, these courses don’t overlap and they sit quite comfortably commanding an unsurmountable respect from Industry bodies and candidates within their circle of presence. Where the CFA® program is a course, which covers all aspects of Professional Finance Education; FRM® is a focused course in the niche segment of Financial Risk Management. Both courses open up quality career opportunities in Financial Markets. Candidates should understand their interest and commitment (years) before deciding which course to take.

About ItsCONCEPTS

Its CONCEPTS is a coaching institute that provides training for all levels of the CFA®, FRM® and CPA® exams. As the name suggests, Its CONCEPTS strives to “build strong foundations” by developing understanding at a conceptual level. “It’s all in the CONCEPTS” is the belief here as the deeper one’s foundation is, the greater the heights one can hope to achieve.

Its CONCEPTS was started by Nisha Sharma Mahajan who is MBA (Finance) and has completed all levels of FRM® and CPA®. She is a CFA® Level 3 candidate. She has 3 years of work experience with one of the top Investment Banks and one of the big 4 auditing firms. Her work profile comprised of working on Leveraged Finance, Financial Sponsors, Mergers & Acquisitions Special Purpose Entities and Federal Taxation among other things. She has more than 2 years of teaching experience on the professional front. She is the main faculty at Its CONCEPTS and is now full time involved in coaching.

Key benefits of joining us:

  1. Focus on basics and fundamentals
  2. Interactive classes to develop conceptual clarity
  3. Highest number of Hrs per course that any institute provides
  4. Experienced faculty who have worked in Investment Banking
  5. Online Test modules
  6. Class notes
  7. Special attention to non-commerce students
  8. Flexibility to choose from Daily and Weekend batches
  9. Free revision sessions
  10. Presence in centralized location (Dadar West) & Proximity to Railway Station
  11. Well developed infrastructure – A/C Classroom – Located in silent location
  12. Group discount for students joining in batches of 3 or more
  13. Most competitive fee structure
  14. Facility to pay in installments

For more information visit our website www.itsconcepts.com or write to us at info@itsconcepts.com.

Categories: CFA®, FRM®
  1. Savai jain
    October 3, 2012 at 1:29 am

    can u plz tell me that, who have passed 12th education can enroll for FRM exams….??

    • AJ
      June 8, 2016 at 12:34 am

      Yes. As long as I know, there are no limitation on enrollment regarding to the applcant’s degree of education.

  2. January 9, 2014 at 7:25 am

    Orbit Institutes leader among educational institutions in the field of accounting and finance by building on its traditions of innovation. We build your career courses after graduation as a Certified Public Acountants, Training for CMA, CFA, CPA Cource.

  3. Manik Imrose
    June 30, 2014 at 11:42 pm

    I am working in a bank in Bangladesh at corporate banking division. I am very confused which course(CFA/ FRM) will be suitable for me. I have limited knowledge in finance as I am from science background but I completed my post graduation in Bank Management. Would you please help me to take decision? I will be greatful to you for your kind suggestion.

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