Getting straight to the point, a savvy finance employee can skip both the CFA and the MBA. This is not the norm but if you can skip both you save yourself 3+ years of studying and ~$10,000 for the CFA or 2 years and an opportunity cost of around $300-500K (2 years at $60,000 a year, post tax money which would be closer to $90,000 in terms of salary, and the foregone annual salary of ~$125,000 a year). Unlike your undergraduate degree in college, both of these items are not necessary to break into the business for the long-term. With this said there are certainly benefits to both an MBA and the CFA which differ depending on your background.
The CFA: There are two solid reasons to take the CFA approach 1) you have industry background or are from a non-target and need to get in, 2) your bank essentially requires it to move up the ladder.
- Industry/Non-Target (Younger Candidates): There are three concerns when interviewing this candidate, can they handle the hours, do they understand financial statements and do they possess social skills. Generally speaking, the CFA level 1 exam answers one of these questions for the interviewer which dramatically increases your chances of getting an interview. The catch, if you take all three levels with zero finance experience you are sending red flags that say I cannot network over the course of 3 years, this makes your resume much more suspect and the behavioral portion far more important. Overall, if you simply get through level 1 more interviews will come your way and you’ve improved your chances
- Moving Up: This is self explanatory, many banks have Analysts that require their Associates to get CFA’s to move up to the Vice President level and beyond. Fortunately, most banks don’t require this and I would actually recommend this route but not all banks are created equal. If you want to give the head research analyst confidence that you’re committed to finance with the CFA designation, you’ll likely reap the rewards over time or get fired because your designation doesn’t mean anything if you’re not generating profits for the firm. If I were choosing a new bank I would look into the biographies of the Analysts, if many don’t have the CFA try to get into the firm to save time and focus on learning the sector
The MBA: From a pure cost perspective, the CFA is far and away the correct choice but as previously mentioned, it’s only if you’re younger or already have a job that requires the designation to be promoted. The plus side is that the MBA can erase multiple questions, save you time from studying all day and on weekends and will benefit the vast majority of candidates, hence the higher cost. Candidates in the following buckets can benefit from an MBA:
- Mid-youngish Candidates: If you’re around 25 years old and have no finance experience, throw away the CFA and go to business school fast. It will help you land your job quicker and you won’t be so old when you exit that banks will shy away from you. The unfortunate truth however, is that there are many qualified candidates with finance experience already getting the same MBA as you. Simply put? Work experience trumps everything so get a job on the Street fast, even if its for a small chop shop firm. Experience trumps “prestige” 1000x over today
- Industry: Very similar, but if you’re in your mid twenties and have no interest in studying for the CFA, jump to school and your new pitch in interviews is that you would like to do finance and wanted a career change. Similar to the above bullet, experience trumps all, so if you’re going to eat the cost the smartest pitch is to work in the exact same sector as your industry experience, don’t be trying to get into Consumer banking if you were an ex-industry medical device specialist
- Multiple Layoffs: Assuming you’ve been in finance for about 3-4 years it is very likely that you have been laid off at least once. If that is the case and you were unable to secure a job again on the Street I would advise that you go get an MBA in a new location. While this may sound a bit extreme, if you’ve really burned bridges its much better to start in a different hub (London instead of NYC, California instead of Texas etc.). As soon as you come out, your new pitch is that you believe you needed to develop a better network to succeed, you can also lie if you have no morals and say you needed to change locations for “XYZ” personal reason
- Burn Out: You’ve been in the industry for a few years and you know its going to take a whole lot of effort to move up to the next level and you know you just can’t handle the hours anymore. In this case it is much better to get the MBA instead of loading up even more working 60+ hours a week and studying another 20+ on top of that. Set up a positive leaving environment by talking to your supervisor and getting positive references and get into that MBA program. To be honest though, if you “burn out” in today’s environment, you’re effectively cooking your future earnings for a long time unless you have a long track record of success.
The CFA and MBA: Some people may ask “Should I get both?” the answer is simply no. Life is much too short to spend your time getting both when you only need one to move up the ladder without questions asked anymore. If for some reason you absolutely love studying finance then by all means get the CFA, but in that case I am guessing you may want to be a finance professor. Normally I would have at least a single reason to get both such as a laid off CFA employee, but if we do the math he likely has 3+ years experience and already passes the general interview screen.
Conclusion: While noting is ever perfectly set in stone, the above should serve as a great guideline to how you should operate your Wall Street career. Try to avoid both. The simple answer to avoiding both is to work for a reputable firm under a high ranking employee and have him/her do your cheerleading for you. You’ll thank me when you see all the MBA resumes coming in and you’re the one throwing them in or out of the interview pile.
