DOES CFA HELP IN MBA ADMISSION
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DOES CFA HELP IN MBA ADMISSION
Few professional credential programs today have the prestige or the recognition that the Chartered Financial Analyst (CFA) designation from CFA Institute, Virginia, does. Just about 15 years ago, the CFA was considered more of a Western phenomenon. Yet, today, Asian candidates dominate the candidates who take each level of the exam as well as those who clear it. Till about 2010, the CFA designation was considered relevant only for those who wanted a professional career in investments. Today, though, consultants, corporate finance managers, and even general managers are aspiring for this credential. As a result, many MBA applicants too have begun to wonder on the role o the CFA for MBA admissions. Is the CFA helpful for MBA candidates? Are there CFA exemptions for MBA applicants to top schools? This article hopes to address this and many other questions.
What is CFA?
For the uninitiated, the full-form of CFA is Chartered Financial Analyst. It is a professional accreditation accorded by CFA Institute headquartered in Virginia, USA.
As described by the official website, this is a self-study, graduate level program that equips candidates with advanced knowledge of various finance topics most notably on investment analysis and portfolio management.
In essence, it is something that can spell success or a foot-in-the-door for those seeking a career in the broader field of investment management.
The relevance of the CFA to MBA studies
Over the years, the CFA has acquired a status almost parallel to that of the CA itself. Yet, the CFA is shorter, and requires no officially certified internships (though it does require relevant work experience) than the CA (Chartered Accountancy) programs across the world.
In fact, many candidates who already have the CA certification find that adding the CFA to it is relatively easier. The point remains – is the CFA helpful for MBA studies, and is the CFA helpful for MBA admissions?
Lets address the part around the utility of the CFA to MBA studies first. In many programs around the world, preparation for the CFA curriculum is offered as part of MBA studies.
Even in those programs that do not offer it, possessing the skill-set offered by the MBA can give an MBA student a significant edge in excelling at coursework, at least with respect to courses in Finance, Economics, and Investments. If one carefully scrutinizes the Dean’s Lists of top B-schools around the world, on those lists one would find many CFA charter-holders.
DOES CFA HELP IN MBA ADMISSION
The Chartered Financial Analyst (CFA) designation—a grueling, three-part financial program that hundreds of thousands of people pursue each year—covers many of the subjects included in a “typical” first-year MBA curriculum. A CFA aspirant must study basic economics, accounting, finance, and quantitative analysis, areas that echo aspects of many first-year MBA core curricula. So, could working toward the CFA designation negatively affect an MBA applicant’s candidacy by suggesting that they already have the tools an MBA education would provide and that additional studies would therefore be superfluous? Definitely not!
In fact, pursuing the CFA designation reflects positively on an applicant in that the effort emphasizes their ability to manage a rigorous MBA curriculum and establishes the candidate as a self-starter and a disciplined individual, given that CFA exam preparation is intense and requires several months of sustained and extensive study for each level. Furthermore, from an admissions perspective, admissions officers want to know that they are admitting individuals who are employable; the CFA charter holder has an advantage in the post-MBA recruiting world, because employers can point to the designation as a differentiator among otherwise comparable applicants.
DOES CFA HELP IN MBA ADMISSION
The CFA exam/program can also be a useful marketing tool for candidates to help them during the admissions process. Because the CFA narrowly focuses on financial tools, it does not cover a myriad of other subjects the MBA does address and that are useful to financial professionals, including marketing, operations, international business, human resource management, and entrepreneurship. The CFA is an independent and largely quantitative program and thus cannot provide the elements a business school program offers through discussion, debate, and measuring qualitative information in decision making.
Together, the CFA designation and the MBA degree constitute a powerful one-two punch that can be advantageous in landing that coveted post-MBA position.
Is the CFA helpful for MBA admissions?
The simple answer is – yes, it is. The complete answer is a bit more complicated – read on.
Some MBA programs (such as the Rotman MBA program in Canada and the CUHK MBA program in Hong Kong) love the CFA so much that they will provide a GMAT exemption for candidates who have the CFA! Yes, that means applying to (and getting through, in many cases) these programs without the GMAT/GRE requirement.
Most programs, though, will not offer a test exemption to CFA charter-holders. Rather, they will provide some credit to the person’s application if he/she holds a CFA.
Here is where things start getting a bit complicated. Around 2011-12, relatively fewer people achieved or applied for the CFA, so having the CFA credential was more rare.
Today, that is no longer the situation. Yes, achieving the CFA requires rigor, but there are more people taking the tests, and more passing them as well! Today, the CFA carries most value in B-school admissions if one’s work is aligned to the CFA charter itself.
For example, applicants in IB/PE/VC or even Corporate Finance, and to a lesser extent, Corporate Accounting roles, will get greater credit for the CFA. Some others in allied but non-Finance areas, such as consulting, research, or even financial services advisory, will get some credit as well.
DOES CFA HELP IN MBA ADMISSION
CFA Exam structure, syllabus and logistics
Like out home-grown Chartered Accountant (CA) qualification, CFA too has levels – 3 in this case.
The Level 1 exams are conducted in June and December every year while for the subsequent levels, they are in June. Technically, one can complete the Level 1 in December, followed by the other two levels in consecutive June months making for a total duration of about 18 months. That is no mean task though (read next section).
As a pre-requisite to taking the exam, you either need 4 years of full-time professional experience OR a combination of education and work experience. In terms of education, they require a bachelor’s equivalent or a final-year student. This means that even those without much/any professional experience can take the exam.
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To get an official CFA Charter though, it is required to have 4 years of full-time experience. This qualifies you for a formal membership to the CFA Institute with a caveat that at least 50% of your experience should be in investment decision-making roles (managing your own/family investments does not qualify).
How difficult is the CFA exam?
The CFA program started somewhere in 1990 or so and as per the official website, there are only about 150,000 professionals globally who have the CFA credential. That looks like a fairly elite class to begin with. Let’s look at things a bit more microscopically though.
The pass percentage for level 1, 2 and 3 were 43%, 47% and 54% respectively. Those look pretty sizeable at the face of it. But if one multiplies them all, then the pass rate for all levels combined goes down to a lowly 11%.
To put this into perspective, though maybe not the best of comparison, the acceptance rate at Harvard Business School in 2017 was the same – 11% (and much lower at Stanford at 6%).
As per a 2017 new article, about 189,000 candidates took the test across all 3 levels. Some other sources put the number of candidates taking level 1 at about 90,000 and level 3 at about ~30,000 or so. You can do the math to get an approximate idea of candidates at each level but suffice it to say that the curriculum is tough and requires dedicated effort.
As per the official website, it requires 300 hours of study and about 2000 pages of curriculum for each level – that’s no mean feat by any standards!
Despite the effort, India has the 3rd highest number of test takers after US and China with Mumbai leading the pack from a local spread perspective. There are no figures of CFA charterholders by geography that we got hold of but assuming the previous pass % applies, one can expect a healthy population of CFA charterholders building up in the country.
Does CFA help in your MBA application?
Right, so now we get to the crux of this post. Does having a CFA add to your profile when applying to an MBA programs?
The answer, in more ways than one, is a fairly resounding yes. Over the years, the credibility, popularity and relevance of CFA has been increasing. The course content, at least from a theoretical perspective, mimics what one would learn in Finance courses during an MBA; in some cases, maybe even more advanced.
The vital difference being ‘theoretical’ – MBA programs score in making this a lot more real through case based pedagogy. A CFA charter usually indicates to the adcom that you are proficient with your financial basics, are good with numbers in general and have the potential to do well with the analytically intensive MBA curriculum – CFA curriculum as we already covered is fairly intensive too.
Some schools even go to the extent of waiving off the GMAT requirement the best known example of which is Rotman in Canada. The waiver is more common for masters in finance programs, the most famous amongst these being the one in London Business School where even a Level 1 can get you the waiver.