CFA Or FRM, Which Financial Certification Is Better?

All of the finance aspirants, looking to get certified on the international front, there seems to be one debate which is the most common occurrence. This deals with the two pristine financial certifications, the CFA or Chartered Financial Analyst and the FRM or Financial Risk Manager. Both of these certifications are internationally recognised and offer the chance to have a sterling career in the world of finance. This is exactly where a lot of candidates are faced with the big dilemma of, which certification should they go for and which one would be the most profitable for them.

While it is true that both of these certifications, open up a world of enriching possibilities for the candidate; it is also true that both of these are highly competitive, expensive and tough to crack. Thus it becomes very important for an aspirant to choose the most suitable certification, lest it all go to a waste or they reconsider their career choice, down the road after a few years. To someone who is thoroughly aware of both of these certification, would notice a world of difference between them. But someone who is an amateur could end up making the wrong choice. Hence a clear distinction between the two is necessary so as to make it easier to choose.

Here we explore both the certifications in great detail and highlight their differences.

CFA Program: Careers, Qualifications and Eligibility Criteria

The inception of the Chartered Analyst Program took place in 1963. Originally intended for equity analysts working in the field of Investment Banking; today it is compared to the MBA program. It has become one of the go-to certifications, which a professional opts for when looking to target some specific positions in the fields of investment andbanking. The various roles offered under this program range from, Portfolio Managers, Fund Managers, Risk Managers, Financial Advisors, Private Bankers, Consultant, Research Analysts, Accountants, Relationship Managers, Hedge Fund Research and many others. When it comes to the eligibility criteria, a candidate needs to have a bachelor’s degree and around four years of professional work experience.

FRMCertification: Careers, Qualifications and Eligibility Criteria

This certification was originally intended for those candidates, who wanted to pursue the profession of risk managers in financial institutions. Modern times were infused with rapid changes and high competition, which resulted in the need for professionals, who were able to manage risk, money and investment efficiently. Thus as a result of this, the certification came to be recognised as an important designation. The various career prospects and roles here include Chief Risk Officer, Senior Risk Analyst, Head of Operational Risk, and Investment Risk Management. Unlike CFA, here no educational or professional qualifications are required for a candidate to get qualified for the FRM certificate.

Some Major Distinctions

While the CFA program deals with concepts like, financial analysis, ethics, and asset valuation and so on; the FRM certification mainly covers risk, valuation at risk, models of risk, credit risk and so on. Basically topics which revolve around the concept of risk. Some common concepts, where both these certifications overlap include, credit, derivatives, hedge funds, risk/return metrics and so on.

Imarticus Learning is an education institute offering courses for certification in both CFA and FRM. It is recognised by the Global Association for risk management as well as by the CFA institutes and proves to be an instrumental set up for those looking for a career in finance and investment banking.

Best Financial Modeling Courses in India

The field of Investment Banking deals with evaluation of financial standing of a firm, business or a company. This basically involves evaluating the net worth of a company so as to either create capital for the same, get into mergers with other firms or dabble into acquisitions. The very skill required to asses a company’s financial structure, is known as Financial Modeling.

Simply put, financial modeling is a process which draws up the strengths and weaknesses of a company in terms of finance. This process aims at the creation of a mathematical model, which reflects a firm’s financial accomplishments or pitfalls from the time of its inception. Every top notch company has certain assets, some variables as well as some financial value and can be weighed in order to calculate its net worth in the market.

Thus various firms have varied values depending upon their financial standing. A financial model can be any mathematical formula that is used to calculate or estimate the value of a firm under the umbrella of corporate finance. In other words, anything from just a simple calculation to a series of highbrow complex calculation falls under the banner of a financial model. The various types of financial models relied on range from the DCF analysis (discounted cash flow), mergers and acquisitions, enterprise value calculations, estimations, to financial statement modeling and dilution modeling. People working in the Investment Banking industry look at the skill of financial modeling as an asset to have.

There are quite a number of courses on financial modeling, sought out by those who want to make a career in the field of InvestmentBanking. This is one field which covers a vast array of subjects, thus learning becomes a continuous process and learning new modeling techniques is always looked forward to. These courses are offered both in the classroom formats as well as online formats. Although there is a tilt towards opting for online courses, as they provide students with the autonomy to pace themselves through the course.

Breaking Into Wall Street Premium Package

This course includes Excel and financial modeling fundamentals courses in addition to sections of DCF analysis, financial statement modeling, mergers and acquisitions. This course is crafted by senior investment bankers and managing dir

ectors of investment banking firms. This course although does not have an official usage, but can be treated as a refresher to all the comparable, which come under financial modeling.

Financial Modeling & Valuation Certification- Imarticus Learning

This course has comprehensive coverage of concepts of both Financial Modeling and Valuation and it comprises of concepts of core corporate finance like, modeling and forecasting, Equity, Enterprise, Three Financial Statements, Valuation in project Finance and others. The course focuses on real life business scenarios and takes up a methodology based approach coupled with its unique feature of mentor ship. Every student is assigned a mentor, a dedicated senior level industry professional, who guides the student through the course. At the end, students also receive the FMVC certification, which is industry endorsed and the optional CISI Corporate Finance Technical Foundations certification. Career assistance and a 24/7 access to the online portal, sets this course a class apart from the others.

This is one of the reasons why a lot of graduates from the background of Finance opt for this course, so as to level up in their Investment Banking Careers.  

Disruptive Innovations in Financial Services

Disruptive innovation in Financial Services is having the greatest impact where the delivery is happening through business models which are platform based, light on capital & data & analytics intensive .This is making the industry very innovation focused and competitive as it gears up to provide its customers with upgraded, digitally intensive solutions across business lines such as banking, payments, cards, investment management and many more.

A few central themes emerge in this area and are summarized as follows:

Infrastructural Streamlining

Advanced emerging platforms and decentralized technologies have changed the way information is aggregated & analyzed, improving connectivity and accessibility while reducing the cost & time for accessing information and providing financial solutions across geographies.

Automation

Firms are increasingly relying on and leveraging advanced algorithms and computing power to automate manual activities ,allowing them to offer cheaper, swifter & scalable products and services to clients.

Role of Intermediaries

Latest innovations are changing or eliminating the role of traditional institutions as intermediaries, and offering lower prices and / or higher returns to customers

The Strategic Role of Data

Financial institutions are accessing new data sets like social data, customer online behavior & likes , which is redefining ways in which they are  understanding customers and markets. It helps them to customize and offer bespoke offerings as per client requirement versus generic cookie cutter solutions.

Niche, Customized Products

With extensive availability of customer related data a lot of the financial institutions ,especially the new entrants are creating highly targeted products and services with deep & complex specializations, hence increasing competition and creating pressure for the traditional end-to-end financial services model to unbundle

Customer Empowerment

In this flat world with high end technology & emerging innovations, customers now have access to previously restricted assets and services, more visibility into products and their features and benefits and hence a heightened ability to make intelligent,need based choices making them “prosumers”

What To Expect On The CFA Level I Exam

Becoming a chartered financial analyst requires the passing of three grueling exams covering an array of topics. To ace the exams, it helps to have a study plan and stick closely to a study schedule.

The Level I exam is a six-hour test. It’s broken into two, three-hour sessions, each with 120 multiple-choice questions, for a total of 240.

The Level I exam focuses on basic knowledge and comprehension of the tools and concepts used in investment valuation and portfolio management. There are 10 topics grouped into four areas: ethical and professional standards, investment tools, asset classes, and portfolio management and wealth planning.

The ethical and professional standards portion contains 15% of the test, or 36 of its questions. The CFA Institute takes this section very seriously. It frequently uses the score on this section to determine whether a candidate passes the exam if her scores on the other three sections are borderline.

Investment tools account for half of the test’s questions, and topics include corporate finance, economics, financial reporting and analysis, and quantitative methods. Reporting and analysis questions are the most abundant, and familiarity with statistical and economic concepts is helpful.

Asset classes are 30% of the test, and topics include alternative investments, derivatives, equity investments and fixed income.

Portfolio management and wealth planning make up the final 5%. This topic is covered extensively on the Level II and III exams, which focus on applying a candidate’s knowledge to portfolio management.

Source: investopedia.com