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Now that you’ve landed your first finance job out of college, what’s your next move?  

The first two to three years in a job is when you prove yourself.  But how do you get to the next level in your career after surviving and perhaps thriving in those first few years?

Some people get lucky and happen to be in the right place at the right time and land that next promotion or a great opportunity at a competitor.  If the economy and the job market are strong, you are more likely to hear from a few headhunters with options that could sound appealing.

If your phone isn’t ringing, you might want to consider more traditional options.  In finance, after that 2 to 3-year mark, many people start to consider going back to school to get an MBA or pursuing a professional designation, like the CFA charter.

If that sounds like your situation, you might be wondering whether you should pursue an MBA or start studying for the CFA exam.

What Do You Want to Accomplish?

Before you start evaluating options, you need to carefully consider what you want to accomplish.  Are you just looking to move up within your existing company?  Are you looking to change jobs or do you want to change careers entirely?

The answer to that very basic question may give you a strong indication of which direction to go.

What Are the Benefits of the CFA Charter?

Earning the CFA charter means you persevered through three of the most difficult exams imaginable.  The prestige and value of the designation are partially defined by the difficulty of earning it.  Historically, just 1 in 5 candidates passed all three levels of the CFA exam and earned the ability to use the CFA designation after their name.

The difficulty of earning the CFA charter is also reflected in median salary data.  

A 2018 salary survey completed by the CFA Society of Chicago reported the following salary statistics:

  • The median salary of $155,000 for chapter members with a bachelor’s degree.
  • The median salary of $233,000 for chapter members with a graduate degree.

Keep in mind that median salary statistics include chapter members with a range of experience levels.  In comparison, the average MBA salary statistics represented first-year average salary ranges.

What Is the Cost of Earning a CFA Charter?

Registering with the CFA Institute costs $450.  The standard registration fee for the June exam is currently $1,000.  So the combined cost for all three exams would be approx. $3,450.

Most candidates also utilize a CFA review course.  Assuming you selected the most expensive option for all three years, the total cost could range between $6,000 to $7,000 on the high side or closer to $3,000 to $4,000 on the lower side.

Using very rough estimates, the total cost of a full-time MBA program might range from 18 to 20 times the total cost of studying for the CFA program.

Your Cost in Time

While the CFA exam may seem like a great option in terms of the low relative cost, the true cost of your time may be much higher than you realize.

Nearly every CFA candidate studies for the exam while holding a full-time job.  Most candidates need at least 300 hours of preparation for each level of the exam.

This means that you can expect to study for 2 to 3 hours on Monday through Thursday and maybe an additional 4 or 5 hours on Saturday and Sunday.  You will need to keep this schedule for 6 to 7 months if you want to meet that 300-hour threshold.

Now picture maintaining that schedule for two more years.  That’s also the best-case scenario.  Many people fail at least one exam, so you might need to maintain that schedule for four years.  That’s the equivalent of going through 2 separate full-time MBA programs.

What about Job Considerations?

The CFA charter is a very specialized designation.  It only makes sense to consider this option if you plan to work in certain segments of the finance industry such as within investment management.

If you don’t plan to work in those specialized segments, you are more likely to benefit from an MBA.  An MBA will give you a broader knowledge base that can be applied across various industries.  The MBA’s curriculum will be more beneficial for people working in a wider range of industries beyond investment management.

What Are the Benefits of an MBA?

The MBA is a master’s degree in business administration. It is a graduate degree program you can achieve after completing a full-time two-year program.  Many schools also allow you to complete an MBA on a part-time schedule.  Part-time MBA programs can require 3 to 5 years to complete but offer a far more flexible schedule.

In terms of salary, US News and World Report reported overall average salaries for full-time MBA programs in 2018 of $102,495.  

When you consider the top ten programs, the average salary increases to $166,999.

However, that same survey also reported that the average salary for the bottom fourth of the full-time MBA programs, which do not have published rankings, averaged $53,464.  In other words, average salaries for the very top MBA programs were nearly 3x higher than for graduates of the lower-ranked schools.

What Are the Costs of an MBA?

Tuition for a full-time MBA program costs on average $50,000 to $80,000 a year.  When you consider housing and other costs, you could easily spend close to $100,000 per year.

This is when you need to consider your answer to the first question about what you want to accomplish with your MBA program.

If you want to stay with your current employer and are just looking for an extra edge for your next promotion, you might be better off considering a part-time MBA program.  Many employers will cover the cost of a part-time program as long as you commit to staying with your current employer for a set period.

On the other hand, if you want to make a career change or want to move up within a more specialized segment of the finance industry, you may be better off considering a full-time MBA program.

However, as the US News and World Report survey pointed out, you might want to be more selective about the full-time MBA program you consider.  The more highly ranked the program, the more likely you will be to earn a stronger return on your investment.

Requirements for the Top Ranked MBA Programs?

If you plan to apply to one of the top full-time MBA programs, you will need a high score on either the GMAT or the GRE.  For the GMAT, you should aim for at least a 700 score.  The very top programs report GMAT averages that are closer to the 720 to 730 range.

Students that may be considering other graduate school options often choose to take the GRE. You should aim for a 320 combined score on the GRE to be competitive for top-ranked programs, and you can find a GRE study plan here that will help you reach that goal. While many MBA programs will accept either exam, you should make sure to confirm with each school on your list if you are considering taking the GRE.

MBA Considerations

We already discussed the cost.  The direct cost of an MBA is significant, but the opportunity cost should also be considered.  If you stop working for two years, you miss out on two years of salary and you also miss out on two years of work experience.

If you plan to attend a top-ranked MBA program, your biggest challenge may be whether you are accepted into the school of your choice.  The positive side of this equation is that most people only spend 2 to 4 months preparing for the GMAT.  So you will know very quickly whether your scores will be high enough to make you competitive with the other applicants.

In comparison, the CFA exam requires passing three exams with increasing levels of difficulty.  You could pass one or two exam levels, but not pass all three exams.  That would mean you might invest anywhere from 300 to 600 hours studying for an exam and never go on to complete it.

Alternatives to a Full-Time MBA

The most common alternative is a part-time MBA program.  The main advantage of this option is the reduced cost.  Many employers will cover the cost of part-time MBA programs.  

Occasionally, you might even find an employer that will cover the cost of a full-time MBA program.  In either scenario, an employer-subsidized MBA program will require you to remain with your current employer for a minimum amount of time after you complete the program.

Another alternative to the full-time MBA program is a Master’s in Finance.  This type of program is a more specialized option for people in the finance industry.  Given the more focused concentration, this might also appeal to students considering the CFA exam.

Can You Consider Both Options?

Earning the CFA charter and completing a full-time MBA program would not be something to consider lightly.  The amount of time and commitment required would be incredibly significant.

However, as indicated by the Chicago CFA survey, many people do pursue this option.  They are also rewarded by a higher average salary than either option reported individually.

Written By
Lou Haverty is the founder of Financial Analyst Insider which is a resource to help aspiring financial professionals advance their careers.

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