The CFA Conundrum – Does CFA with MBA in Finance add value?

The CFA Conundrum

So, if you are doing an MBA in Finance from a top B-School, should you really invest in a CFA? I am sure this question has popped up in many a mind in various forms. Let us try to answer this in as simple a way as it can be.

 

Does CFA add value if you are doing MBA Finance?

Yes, and No. Let me explain.

If you pay attention in all your finance classes, and get all your concepts cleared in the major courses (accounting, financial management, security analysis, derivatives, portfolio management, fixed income, risk), then there is very little that a CFA can add to you content wise, from the aspect of what the recruiters need you to know. I know many friends who sailed through B-School with good finance roles/knowledge without ever touching CFA books. Also, remember that most finance jobs need only a sound knowledge of the basics and a good thought process.

What it does add is more knowledge of things such as Private Equity, VC, Pension accounting and so on. Are these areas really useful for placement interviews – not really. It does add to your knowledge though, and if leveraged the right way, might help you get an edge in your interviews. But most interviews never go to these depths, and so the utility from this aspect is limited to zero.

So how is it useful? It is useful from a shortlist perspective as most of us come into B-Schools with zero to very few finance ‘CV Points’. Here, it helps differentiate your CV as it is a far more powerful point compared to NCFM/winning a stock trading game/etc. Particularly in a country where 90% of the students are engineers with no prior grounding/experience of finance.

Level 1/2 cleared candidates do get an advantage in summers and the same holds true for Levels 2/3 in final placements. It is just a way of showing the seriousness of your ‘fin’ interest to the recruiter. It shows you were interested to read 6 additional books and also splurge some serious cash! On the flip side, it also ensures that you have more to revise before your interviews, since when you claim to have cleared a certain level of the CFA program, you better know at least the major portions of that level pretty well. But increasingly, it is becoming a hygiene factor in many schools, and since the exam calls for more of diligence than brilliance, I expect this ratio to shoot up in the coming days – especially in schools which are not renowned for great finance placements.

As far as the impact/usefulness of the CFA is concerned w.r.t. the various finance-domain roles, it is a mixed bag. For roles such as Corporate Finance, Consumer Banking, Corporate Banking and Project Finance, the CFA may not be really relevant.

Compared to these, in the fields of Equity Research and Asset Management, a CFA will be a definite plus (both from a profile and a knowledge perspective).

Relevance to PE is really a subjective call, since often specific domain knowledge might also be sought after.
Investment Banking is again more a client-interaction role, and while the CFA might be a good add from a CV perspective, it may not really matter for day to day work.

Can you manage the CFA workload along with the course load?

I would think so. If you make the decision in time, and plan out your study, it should not be too difficult. Since the first opportunity for Level 1 is six months after you join school, your accounting and finance basics are already in place by then. For Levels 2/3, you can study in your summers. Yes, it might stretch you at times, but (a) it is far easier to get done with these exams when you are studying than while you are working, (b) if you clear them, you do stand to gain some of the benefits highlighted earlier.

How easy or difficult it is to manage is down to the individual. If you are someone who relies more on hard work than sheer brilliance, then you might want to start a little early (around Oct for the Dec Level 1, and around March/April for the June Levels 2/3), and stick to a plan. I say this because revising 6 books for a 3 hour exam (the second exam is essentially a repeat of the first one with different questions) can be quite painful and revision itself can consume a couple of weeks sometimes. If you are more of brilliant child, then you really don’t need much advice!

-Meet Kachhy

The author is an alumnus of XLRI School of Business & Human Resources (Batch of 2011). Currently working as a financial Analyst at Goldman Sachs Asset Management (Investment Management Division), he has interned with Axis Bank. Prior to his MBA, Meet worked for almost three years with J. Ray McDermott ME Dubai (an offshore EPC contractor in the O&G business), after completing his BE (Hons.) from BITS Pilani (Dubai) in 2006. He has cleared all the three levels of the CFA program.

 

If you are preparing for Summer Placements or Final Placements, please have a look at our Career Guide – The InsideIIM Career Guide

 

Summer Placements Prep – Finance Roles

Demystifying Finance Roles

Summer Placements – Prep – Part 2

Summer Placements Prep – Consulting

Comments

16 comments

Ankit

Great article. But I think CFA helps a lot even in Investment banking. I was in the US for training and a lot of people in senior positions were asked if CFA helps and the overall gist was that it does.

Most people join as analysts at the start even in front end investment banking roles and its not client facing for quite sometime. People who have done a CFA/CA definitely have a great head start when analyzing balance sheets of companies for valuation purposes.

But I do agree that corporate banking has not too much to do with a CFA coz thats what I do and no one in my team has even appeared for level 1.

Ankit

@Pankil – Front end jobs are hard to come even if you are a CFA in India/cleared level II CFA unless you have a top tier management degree. Over the years, due to lack of enough number of quality finance jobs competition is fierce. Also, there is an exclusivity mindset which makes people from top tier institutes to only let people from their own institutes get those jobs. Things should change as more and more jobs become available in India.

Karan

I know people who get absorbed in good banks in certain posts after clearing an L2. But for good progress along the way, an MBA is probably important.

Abhinav Tripathi

I`ve cleared CFA level-2 and have worked in a boutique investment bank for 1.5 years. As mentioned in the earlier posts, if you count on CFA alone, you might as well kiss goodbye to your chances of getting into a good i-bank. At best, you can get into another boutique investment bank or a back-end role at a big i-bank.
Moreover, in India, if you want to get into a front-end bulge bracket role, only aim for IIM A/B/C. For the other B-schools, you can only get front-end roles in boutique i-banks/Indian I-banks (Yes, this also includes big names like other IIMs)
I`ve worked in the industry so am giving the general idea of how the industry works.

MKiing

Haha. Funny how you folks just think of how everything can be positioned to an employer. Employer employer employer. Come to the west, and you'll realize the number of fantastic money managers who don't even hold a degree in Business or Finance. You folks will just keep chasing qualifications to end up in a front office role at a BB I bank. Is your life restricted to just that? Think beyond that. And the CFA is great for Investment Management.

Karthick V S

I would like to kknow if this CFA can be done before hand. i mean even before getting into a b-school?? and how long is this certification valid??

Vamsi

i would like to know if by clearing certain level of CFA would add any value in the IIM admission process?

srikar

Very useful article 🙂

Can you please enlighten us about FRM certification too. The opportunities for a person who completed CFA level 1 and 2 vs the one who finished FRM part 1 and 2.

I know that CFA and FRM focuses on different parts. But I am uncertain about the job opportunities ‘in reality’ with the help of these certifications. I work as an IT support in Operations Risk field.

shradha

can we do CFA along with our B-school? or is it necessary to first complete the graduation?

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Riya Dingria

Anyone Please Help Me I Want To Study MBA+Cfa Together And I Want To Settle In Abroad. Whether I Get Any Kind Of Job Opportunities In Abroad After Doing Cfa +mba

Team Insideiim

If you want to settle abroad – there is a higher probability of you being able to do that by doing your MBA/Masters abroad than in India.