CFA® vs CPA
Which One to choose?
Although both the Charter Financial Analyst (CFA®) and Certified Public Accountant (CPA) designations play significant roles in the financial industry, it can sometimes be challenging to differentiate the tasks they perform. CFA charterholders typically work in roles such as investment analysts, portfolio managers, strategists, consultants, or wealth managers, among others. On the other hand, CPAs are often found in positions such as accountants, auditors, controllers, and chief financial officers, to name a few.
Details | CFA | CPA |
---|---|---|
Requirements | 3 exams and one of the following:
|
4 exams, bachelor's degree, & 150 schooling hours |
Costs | $3,220- $8,250 | $1,000 to $3,000 |
Number of exams | 3 | 4 (changes in 2024) |
Exam Pass Rate | 43-44% | 40-50% |
Content Focus | Portfolio Management, Investments | Financial Reporting, Audit, Tax |
Career Path | Investment Analyst, Portfolio Manager, Strategist, Consultant, Wealth Manager | Accountant, Comptroller, Financial Manager, CFO |
Study Time (hrs) | 300-350 per exam | 300-400 hours for entire exam |
Completion Time (Course Duration) | 3-5 years | 2.5 - 5 years |
Average Salary | $180,000 | $70,000 |
CFA Certification vs CPA Licensure
The Chartered Financial Analyst (CFA) designation is awarded by the CFA Institute (CFAI®) to evaluate the expertise and integrity of financial analysts. These professionals are highly sought after by financial institutions due to their top-tier talent. High-net-worth individuals, as well as institutions like endowments, pension funds, asset managers, and companies in need of internal risk management, rely on CFA charterholders for their proficiency in financial research and investing.
Achieving the CFA charter or CPA distinction requires successfully navigating individual exams. The comprehensive CFA exam is structured across three levels: CFA Level I, CFA Level II, and CFA Level III.
Steps to Obtaining the CFA Charter:
- Pass all three exams in sequence
- Collect evidence of qualifying job experience
- Send in reference letters to back up your application.
- Apply to become a CFA Charterholder.
In contrast, a Certified Public Accountant (CPA) earns their professional designation through a combination of education, experience, and licensing. CPAs specialize in handling complex tax issues for clients, demonstrating their proficiency in managing intricate financial situations. They assist businesses, high-net-worth individuals, and others facing complicated financial challenges.
The CPA license, granted by the United States to State Boards of Accountancy in all 55 jurisdictions, is administered and regulated by the National Association of State Boards of Accountancy (NASBA). Unlike a centralized administrative organization, NASBA oversees CPA licensing. To sit for the exam, candidates must meet state standards set by NASBA. Additionally, the scope of employment responsibilities for CPA professionals may vary based on the state of practice.
Steps to Obtaining a CPA License:
- Check the CPA licensing requirements in your state - Since these state boards will ultimately license you, check with them to ensure you can take the exam in your state or jurisdiction.
- Complete your school requirements for a degree and acquire experience - To obtain your license where you intend to do so, you must meet the academic standards set forth by that state.
- Pass the CPA Exam - Your understanding of accounting standards, the legal obligations of the profession, and much more will be tested in the four components that make up the CPA exam.
- Finish the certification process - While some jurisdictions might mandate an ethics test, others might mandate that registered CPAs take continuing professional education (CPE) annually to keep their licenses.
Requirements
To become a CFA charterholder, you need a bachelor's degree, four years of relevant experience, and must pass all three CFA exam levels. First-time CFA Program enrollees require an international passport, and exam candidates need 4,000 hours of professional experience. Prerequisites include residency, citizenship, and a social security number.
A bachelor's degree with 150 semester units (or 225 quarter units) is essential for CPA licensing. Some states allow exam eligibility with 120 hours, but 150 hours are needed for licensure. A minimum of 24 semester units in accounting is required, along with one to two years of public accounting experience. In addition, you must pass all four parts of the CPA exam.
CFA vs CPA Exam Difficulty
The CFA examinations comprise three levels of increasing difficulty: CFA Level 1, CFA Level 2, and CFA Level 3. Renowned for their rigor, CFA exams boast a challenging nature, evidenced by an average pass rate of 43% as of 2023. The exam content spans financial principles, portfolio management, financial analysis, and accounting.
Note: The CFA Level 3 exam pass rate has historically been higher than the other levels.
Level 1 | Level 2 | Level 3 | |
---|---|---|---|
2014 | 43% | 46% | 54% |
2015 | 43% | 46% | 53% |
2016 | 43% | 46% | 54% |
2017 | 43% | 47% | 54% |
2018 | 44% | 45% | 56% |
2019 | 42% | 44% | 56% |
2020 | 49% | 55% | 56% |
2021 | 31% | 41% | 42% |
2022 | 36.75% | 42.6% | 49% |
2023 | 37.25 | 46.6% | 47.5% |
Average | 40% | 45% | 52% |
The CPA exam is difficult and extensive. Candidates who just graduated from college have an advantage since most accounting principles are taught during the core curriculum. Starting 2024, the CPA exam is restructured with three core sections – Auditing & Attestation (AUD), Financial Accounting & Reporting (FAR) and Taxation & Regulation (REG); and one optional discipline section – Business Analysis and Reporting (BAR), Information Systems and Controls (ISC) and Tax, Compliance and Planning (TCP).
Here are the CPA 2023 Pass Rates:
Section | Q1 | Q2 | Q3 | Cumulative |
---|---|---|---|---|
AUD | 47.01% | 48.24% | 45.64% | 46.92% |
BEC | 56.98% | 59.16% | 54.90% | 56.52% |
FAR | 41.82% | 42.78% | 44.08% | 42.94% |
REG | 58.63% | 59.71% | 59.13% | 59.19% |
Salary and Career Paths - CFA vs CPA
The salaries of CFA charterholders and CPAs may vary substantially depending on individuals' educational background, job experience, the location where they live, the size and industry of their current company, and the professional path that they have chosen.
While several factors contribute to the variance in compensation, the CFA credential generally raises overall salary and benefits, giving charterholders an advantage in the job market. According to the CFA Institute, charterholders may earn higher pay than finance professionals. Charterholders with a bachelor's degree earn a median total compensation of $162,500, while those with a graduate degree earn a median total compensation of $237,357.
According to the Bureau of Labor Statistics (BLS), on average, a CPA's annual pay, without bonuses, is around $119,000 per year. CPAs with less than one year of experience earn an average of $70,000 a year, while those with more than 20 years of experience earn an average of $150,000 annually.
Robert Half International, a financial employment agency, indicated in its compensation recommendations that accounting professionals with a CPA license earn an average of 5 to 15% more than accountants without a CPA credential. The following were the median yearly salaries of accountants and auditors in the top industries in which they worked:
- Finance and insurance - $79,310
- Management of companies and enterprises - $78,540
- Government - $77,290
- Accounting, tax preparation, bookkeeping, and payroll services - $77,080
The decision to become a CPA or a CFA charterholder is an excellent professional decision. These marks not only serve as a significant credential for accountants and analysts seeking to advance their careers but also provide a diverse range of job opportunities. Furthermore, the accreditation demonstrates your confidence and ability to achieve challenging goals to your prospective employer.
CFA Career Path | |
---|---|
Top 5 Roles | MedianSalary |
Equities Portfolio Manager | $316,600 |
Income Portfolio Manager | $253,250 |
Chief Investment Officer | $334,500 |
Chief Financial Officer | $227,500 |
Financial Analyst | $80,930 |
CPA Career Path | |
---|---|
Top 5 Roles | Median Salary |
Accountant and auditor | $100,000 |
Financial controller | $110,000 |
Information Technology Accountants | $102,910 |
Corporate Controller | $112,000 |
Teacher in Accounting | $127,000 |
Please note that the salary figures provided are subject to fluctuations based on market dynamics and other variables.
*Source: https://careeremployer.com/financial-analyst,
https://www.bls.gov/ooh/business-and-financial/home.htm
Pros and Cons of CFA Charter & CPA License
- Big Investment Firms: Acquiring employment with some of the well-known names in finance will be easier with the CFA credential.
- Finance Knowledge: Examining the curriculum will help you build a solid financial knowledge foundation and abilities to help you achieve your long-term professional goals in the financial sector.
- Salary: Typically, CFA charterholders receive higher pay for the same position than those who do not have the CFA charter. A CFA charter holder’s salary can range from $52,000 to $154,000 annually.
- Connections: There are over 190,000 charterholders in 160+ countries. The benefit of worldwide recognition is that a charterholder can be more easily transferred across the markets.
- Expertise Credential: The CFA credential is the gold standard of finance and carries enormous weight in the business and financial worlds. Anyone who recruits portfolio managers, pension fund managers, hedge fund managers, or Fund of Funds (FOF) professionals is familiar with the CFA Institute and its charterholders.
- Program Duration: It will take four years to complete the test and collect at least 4,000 hours of work experience within 36 months.
- Difficulty level: The CFA exam is tough to pass because of its comprehensive and lengthy content. Per the CFAI’s historical data, the average pass rate was only 43% spanning ten years.
- Expense: The cost of the three CFA exams, assuming three straight passes, is between $ 3,220 and $8,050, excluding travel and lodging.
- Cumbersome: Even if you pass all three levels, you must also account for the other CFA requirements before receiving your charter.
- No preferred job: As with any certification, the CFA charter doesn’t ensure you get every job you apply for.
- Career Advancement: In public accounting, obtaining CPA licensure is especially important to advancing your career. If you want to advance to a management role or become a partner.
- More Options: Technology, artificial intelligence, cybersecurity, healthcare, energy, sports and entertainment, government, and other fields offer immense CPA potential. CPAs are needed in every business!
- Job Stability: While accountants are ubiquitous and in high demand, trained CPAs are hard to find (especially in industries where higher specialization is required). This increases job stability and negotiating power during a job search.
- Job Fulfillment: Job satisfaction is an extensive career plus for CPAs. They can choose from a range of career choices and have a beneficial impact on the lives of people, businesses, and non-profit efforts.
- Increased Salary and Benefits: Junior-level CPAs with one to three years of experience can expect to earn between $52,000 and $87,000 annually. Average wages range from $66,000 to $110,000 after four to six years of expertise.
- Expense: Securing licensure ranges from $1,780 to $4,950 (including applicable taxes). The fee for early registration is $825, the regular registration charge is $925, and the late registration fee is $1,025.
- Program Duration: The CPA process can take up to 7 years. This includes four years to complete a bachelor’s degree, one year for additional credit requirements, and one to two years of relevant job experience.
- Exam Difficulty: The CPA exam is considered challenging because of the complexity of topics covered in the four sections of the exam. In 2023, the cumulative pass rate for all four CPA exam sections ranged between 45-63%.
- Continuous learning: Your state board requires continuing professional education for you to keep your CPA title (CPE). These courses will help you keep your skills up-to-date and keep doing professional work.
- Long working hours: It is common for accountants to put in more than 70 hours of labor in a single week during the tax season. AICPA reports that approximately 90 percent of CPAs work more than 50 hours a week, and a quarter of them work more than 70 hours a week during the busy season.