Introduction

Finance roles often require people to earn certifications to demonstrate their expertise. Two certifications you can receive are the Financial Risk Manager (FRM) and Chartered Financial Analyst (CFA) certifications, with each used for different career paths. Learning more about these certifications can help you determine which one is suitable for your career goals and interests. In this article, we discuss the meaning of FRM vs CFA, explore their differences, and review how to determine which is right for you.

FRM-An Overview

Financial Risk Manager (FRM) is a professional designation awarded by the Global Association of Risk Professionals (GARP). GARP certification is a globally recognised credential for risk management in financial organisations, such as banks, insurance companies, accounting institutions, consulting firms, corporations, credit agencies, and regulatory agencies. FRM designation proves the exceptional risk management capability. To know more about FRM click here.

CFA-An Overview

Chartered Financial Analyst (CFA) is a professional certification awarded by the CFA Institute to applicants who pass the standardised test while meeting educational, professional, and ethical prerequisites. The CFA designation proves your outstanding ability to make Investment Analysis, Portfolio Management & Interpreting Financial statements.

Key Differences 

1. Eligibility Criteria

In the context of CFA, earning the designation has some criteria that need to be met to earn the CFA charter. In regard to CFA, the following pointers give a better idea. 

1. Earned a bachelor’s degree or currently enrolled in the final year of the bachelor’s degree program.
2. Completed at least 4,000 hours of professional work experience. 

3. CFA Program exams are only offered in English. Exams require English proficiency for reading comprehension and formulating answers to complex financial scenarios. 

And In the context of FRM, the eligibility criteria are different which is as follows, 

1. Pass both Level 1 & Level 2
2. Have at least two years of relevant professional financial risk management experience. 

2. Content   

The CFA program is much broader in comparison to FRM and in contrast, FRM is much niche and specialised with better depth coverage to risk management.

In the context of CFA, there are 3 levels spread across the following topics,

1. Portfolio management.
2. Investment Management. 
3. Fixed Income. 
4. Economics & Financial Reporting. 
5. Wealth Management. 
6. Ethical & Professional Standard.

In the context of FRM, there are 2 levels spread across the following topic, 

1. Quantitative Analysis. 
2. Valuation & Risk Models. 
3. Financial Markets. 
4. Liquidity Risk. 
5. Credit Risk. 
6. Market Risk. 
7. Operational risk. 

3. Career Opportunities – FRM vs CFA

CFA certification provides more possible career paths compared to FRM certification. Generally, CFAs can have more opportunities across the financial domains because of the range and diversity of finance-related topics learned during training and in the certifying exam. The most common designations for CFA are Portfolio Analyst, Investment Analyst, etc.

In contrast, FRMs specialise in risk management, making them more suited for risk managerial & analysis roles.  

Choosing between FRM and CFA- Parameters to consider 

There are various factors that you need to access before finalising with which one of these should you proceed. We will be listing and discussing the following parameters involved in the decision-making. 

1. Future Career Goals – FRM vs CFA

When choosing between these two top designations the filter criteria must be on the basis of which of the domains or respective areas you would like to make your career, If you are interested in Investment, Portfolio, or Fund Management there is none of the designations better than CFA, But if you want to make a career in risk management and see risk as your future then there is none of the designation better than FRM. 

2. Time commitments 

CFA is much broader and spread across 3 levels that require much more time i.e. On average it takes 3-4 years to clear all levels of CFA, and post clearing all the levels of CFA you also need to submit work experience and academic proof for 4000 hours to become the charter. 

FRM is not quite broad but it’s quite deep, as the program deals only with risk management and is spread across 2 levels which require 1-1.5 years to clear and post clearance both levels you need to submit 2 years of risk-related work experience.  

      One important thing in this regard is also that upon clearing all levels for both the designations, relevant work experience needs to be submitted therefore it would be best when theory and practice go simultaneously, and time factor is not disturbed.

3.Cost analysis FRM vs CFA [Clear in the first attempt] 

When you register for CFA level-1 exam, you will pay a one-time enrolment fee of $350 USD. That gets you into the CFA Program. Then you will pay an additional registration fee to sit for the exam at each of the three levels. 

Currently, the fees for each exam level of the CFA from CFA Institute are:

Early registration fee: $900 USD

Standard registration fee: $1,200 USD.

So, depending on when you register, you can pay anywhere from $2,700 to $3,650 USD total to take all three levels, assuming that you pass each CFA exam the first time. Add the $350 USD enrolment fee, and the total CFA exam fees range from $3,050 to $3,950 USD, excluding CFA prep. 

In the case of FRM, GARP has implemented the below fee structure for the FRM Exam:

One-time enrolment fee of $400​

Registration fee of $600 (early registration), and $800 (standard registration) 

Total cost for Level 1 ranges from $1000-$1200

Part 2 exam fee of $ 600-$800 depending on your date of registration.

The FRM program costs a student approximately $1600 to $2,000. 

In context to this FRM is more cost-friendly yet both the certifications are gold standard in their respective domains. 

4. Current work profile or Prior Experience

One of the crucial factors while deciding between the two certifications is the current work profile of the aspirant. If the aspirant is a working professional, it gets much easier to make a choice.

Anyone working either in Portfolio Management, Investment Analysis, or Financial Accounting should go for CFA without a doubt if they plan not to move into a specialized risk domain in the future. 

In contrast, if anyone is already working in any of the risk domains and wants to stay in the future the FRM is the best way to develop the skills and move forward in the specific domain. Also, if anyone working in a Conventional Finance role wants to switch to the Risk domain, FRM provides the leverage. 

One important thing in this regard is also that upon clearing all levels for both the exam, relevant work experience needs to be submitted therefore it would be best when theory and practice go simultaneously, and time factor is not disturbed.

Conclusion

In the context of the debate or confusion regarding the choice between these two designations, the inherent differences should be considered, along with parameters such as professional outlook, time required for completion, budget, and professional experience.