Professionals in finance and accounting often pursue certifications and licenses in order to advance their careers.
Certified Public Accountant (CPA) and Chartered Financial Analyst (CFA®) are debatably the two most prestigious titles in their respective fields. What are the differences, and which one is better?
The primary difference between the two are what each position covers and the career opportunities. CPA is considered to be “black belt in accounting” and prepares you for careers in Accounting and Auditing, whereas, CFA® Program focuses on Investment Management covering broad topics like Corporate Finance, Portfolio Management, Derivatives, Fixed Income, Alternative Investments and prepares you for careers in Investment Banking, Portfolio Management, Financial Research etc.
Rather than asking this question that “which is better?”, you should be asking “which is is better for you”.
What is a CPA?
A CPA is a designation for non-public accountants, tax accountants, and finance professionals who seek a title that proves their number crunching expertise. A CPA also has statutory rights to sign audit report which makes the title special.
According to the AICPA, CPAs roughly earn 10-15% more when they begin working compared to non-credentialed accountants. Also CPAs are more attractive to employers than non-CPAs.
According to the U.S. Bureau of Labor Statistics (BLS), accountant and auditor occupations, which includes CPA’s among other accounting professionals, were projected to grow by 13 percent between 2012 and 2022.
What is a CFA®?
The CFA® title is the gold standard in finance and investment. If you are looking for a career as equity analysts, fund managers, and professionals in asset management or hedge fund houses, this is the best title you can get.
CFAs® focus on investment management.
The top employers of CFAs® include the most respected financial corporations in the world, such as, JPMorgan, Citigroup, Bank of America, and Wells Fargo.
Many of these are investment banks, but the CFA® Program goes beyond that into the knowledge and skills most relevant to the global investment management profession from the standpoint of a practitioner.
CFA® vs CPA: The Application
The eligibility criteria for the CPA title is the highest among all finance related qualifications. You must have at least a 4-year bachelor degree and in most cases, 150 credit hours (equivalent to 5 years of higher education) to sit for the exam.
The CPA license is granted by each of the 55 states or jurisdiction in the United States. Because of the high barrier of entry and complicated application process, it is quite a challenging process.
The CFA® is a designation granted by CFA® Institute, a global non-profit organization. The institute is based in the US, but there are 3 regional offices and 200 local chapters around the world.
You can apply through the institute and application is relatively simple. As long as you have a bachelor degree (not necessarily 4 years), you can sit for the exam. You can even take the exam before graduating
CFA® or CPA: Exam Content and Format
The CPA Exam has 4 exam sections: Financial Accounting & Reporting, Audit & Attestation, Regulation and Business Environment & Concepts.
The exam is 100% computerized consisting of multiple choice questions, task-based simulations (case studies), and written communications. You can choose to take the 4 parts one at a time, 2 at a time, or even 4 at the same time.
You can sit for the exam any time in the CPA exam testing window, which is the first 2 months of each quarter and at any prometric centers throughout the US. There are also testing centers in Japan, Brazil and 4 Middle Eastern countries.
Most state boards require around 1 year of accounting experience before getting the license, and for most states, this experience has to be supervised and verified by an active CPA.
The CFA® exam format is much less flexible. There are 3 levels of exam, and you need to complete them in the proper order to move on to the next. The exam is focused on financial analysis and portfolio management instead of accounting, audit and taxation.
The test is administered twice a year for Level 1, and once a year for Level 2 and 3. There are many international testing centers for CFA® exam in major cities and metropolitan areas.
Although technically you can complete the CFA® exam within 18 months (Level 1 in December, Level 2 in June, Level 3 in June the year after), most candidates take 4 years to complete the exams. It takes much longer to become a CFA® than a CPA.
You are required to have 4 years of relevant experience to get the CFA® designation. Your supervisor, who will be verifying your experience, does not need to be a CFA®.
So, Which is Better: CFA® or CPA?
When deciding whether to go for CFA® or CPA, the first and foremost thing you need to think about is your career. Besides that, the CPA title has more restrictive education and experience requirement, but once you get qualified, the process is much faster. CFA® has a lower entry barrier but it takes much longer time to complete.
The decision between these two is ultimately up to you and your career goals.