The Question – CFA and/or FRM?

Many people ask me this question when they see both CFA charter and FRM certificate after my name. The questions typically revolve around whether they should take CFA exams or FRM exams. The whole purpose is to land them a job in the finance industry.

Considerations of CFA vs FRM

Some have monetary considerations while others have career considerations as to what area do they want to focus. But it is all about one thing – who do you want to become and do you want to achieve certain career goals? In fact, before I took both exams, I didn’t have a good idea either. I have tested the waters by myself. Now I’d like to share with you honestly what I have experienced and what I think. Take note that this experience is limited by my skill sets acquired in school, the early part of my career, and my connection. I will talk about these factors later.

How did I start with CFA and FRM?

Before we dig further, let me provide you with a summary of my background. I have been an equity research analyst for more than seven years.  My research reports are read by many famous funds that you probably have heard of. I studied electrical engineering for my bachelor degree and computer science for my master degree. I landed my first job in the back office IT related function at a Singapore based financial institution. After a certain time and period, I more or less knew that back office is not my intended destination.There must be more excitement in the financial service sectors if I were to enjoy my job. So I started thinking about what I should do.

Through googling certification and degree courses, I finally shortlisted FRM and CFA certificates and ruled out further studies (for personal reason). In the first year, I passed CFA level one in June and FRM exam in November (there was only one level for FRM in the past, many years ago). I went for both exams because at that time, without guidance from mentors, I could not tell the difference between working in the middle office as a risk manager and as a research analyst in the front office (ie. investment bank).

After the exam?

There are only instincts told me that the risk management job could be an easy transition for me as I came from a computer science background and would have little problem dealing with data. Long story short, I passed CFA exams and FRM exams all in one shot.

Guess what’s next? I still couldn’t land any meaningful interviews. Why? I will explain in the next few sections.

Technically CFA vs. FRM…

You can find various websites providing technical comparisons so I will just go through them quickly. Basically, these two certificates are targeting different audiences. CFA exams are more broad-based, touching on various aspects of the investment industry whereas FRM exams are more focused on various aspects of the risk management. When I use the word touch, I literally mean that. It is really not in-depth enough to prepare you for an interview for a junior investment analyst.

If you just know theories you have learnt in the CFA exams, I have to be blunt to tell you that you will have close to zero chance to be an investment analyst. So I summarize the difference in the table below. As you can see here.

Table: CFA vs FRM modules

On top of the difference in curriculum, CFA will cost more and take you longer (usually 3 years) to finish, as well as getting your charter (4 years of experience for CFA vs 2 years of experience for FRM).

In order to pass the CFA exams, it is helpful if you have accounting knowledge (so you can understand the financial statement and those adjustments better) or engineering (so you grasp the formulas better). But for you to pass FRM, you really have to be good in numbers. This is because there are numerical tests that use things like the option pricing formula. If you don’t understand how the option pricing works in various scenarios you will have a difficult time with the exam.

Thoughts on Return on Investment

Many students also care about the return on investment for respective certificates and I found that the typical numbers cited for comparison (for example $45,000 and $180,000 p.a. for CFA vs $50,000 to $165,000 for FRM) irrelevant. Why? These reports don’t differentiate between junior hiring and experienced CFA candidates. Here is my take. As many of the job requiring CFAs have lower barriers to entry, such as personal bankers or back office operations, versus jobs that require FRMs typically demand a pretty high level of technical skills. Hence, it is not surprising for me to read that the starting pay of CFA hires could be similar, if not lower than FRM hires.

To be fair, we should also discuss career upside. If you are a CFA graduate who ends up in the fund management industry and proven yourself to be a successful money manager over ten years, you could be managing hundreds of millions of dollars. Who knows, you may even enjoy profit sharing based on fund returns, which could amount to millions of dollars. As for risk management jobs, what can you do after ten years? Even if you are the CRO of the company, it is not likely that you can make millions of dollars a year.

How do I benefit from FRM or CFA?

Are they jokes if you can’t find an investment job after you pass exams?

Here I continue with my own story. After I passed my FRM exams and got all the certificate, I had tried to find a risk management role or even product control in the market but to no avail. What I understand then from my contacts, is that employers were looking for those with either accounting background (for credit risk roles or product control) or math/physics/stat/financial engineering background (for market risk roles). So I was pretty disappointed with the effectiveness of the FRM certificate.

Building your credibility and connection

Next, it was not easy to land even one interview after my CFA exams. But what changed my life was really the encounter of Springboard at the time that I needed the most help. With part-time internship under a fund manager, I managed to build my credibility. Then I was then referred to the team at an institutional broker. It just happened that many analysts there, including the head of research and my boss and equity sales, had the charter. They valued the CFA charter.

So what is my conclusion on the effectiveness of CFA exam? It builds your knowledge in the investment field and to some extent, helps you in landing your job when all else are equal. But whether you can get the job still largely depends on how much value-add you can bring to the table. In my case, I did my part-time internship to prove my value-add before I got hired. This arrangement helped to de-risk my employer from making a “wrong hire”,  as well as provided me with adequate time to adapt to the fast pace of the front office environment.

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This article is contributed by AKY. The author has more than seven years of experience working in institutional research. He currently works as an independent research analyst with a focus on liquidity events and holding company discount arbitrage. His clients include hedge funds, long-only funds as well as sovereign wealth funds. He loves coaching aspiring junior analysts. If you wish to get in touch with the author you can email info AT

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