It’s a question we hear all the time. To help you weigh your options, we’ve asked Christian Cooper, CFA, FRM, to provide a few thoughts on the value and validity of both credentials.
If you’re contemplating whether taking the CFA exam or the FRM exam would be better for your career, I want to plant a seed for you to consider. I would encourage you to think of these two credentials side-by-side rather than toe-to-toe. We’re comparing different colored apples, not oranges versus apples.
FRM’s Growing Brand Equity
The CFA exam is largely qualitative and equity focused. On the Level 3 exams, you are interacting with a client and portfolio construction, far different from the basic discount cash flow analysis performed during Level 1. The broad focus of the CFA is likely to continue as finance evolves and it has clearly worked as the global standard for finance.
But we don’t think of the CFA as just for “analysts” and the FRM isn’t only for “risk managers”. The FRM designation’s brand value has not yet superseded its acronym like the CFA has, but it is on track to do so for a couple reasons:
- The FRM designation has enjoyed explosive growth in recent years and looks much like the CFA did a little more than a decade ago. Take year-over-year growth for the FRM, slide it back in time, and you can’t tell the difference between the CFA and the FRM.
- The industry has picked a clear winner in the “more than CFA” space and that winner is GARP (Global Association of Risk Professionals). By design, GARP has created the FRM program to fill the gaps not covered by the CFA. You really don’t need to know about credit copulas and marginal probability densities when working in the equity side of finance. It’s a very different world in Fixed Income and Credit.
Thinking 5 to 10 Years From Now …
As more and more industry participants hold both the CFA and FRM in the coming decade, the FRM will see its brand value also exceed just the acronym that focuses on “risk management”. In short, the FRM is certain to become a requirement to differentiate yourself from the pack, so earning both credentials today is the best decision for your best long-term career prospects.
The question future candidates will face is not “which will I take?” but rather, “which do I take first?” For some candidates, both the CFA and FRM designations can be earned in relatively short order.