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Certifications: Navigating the Alphabet Soup

In the financial job market, when it comes to education and credentials, the more the merrier. So how do you determine which are right for you? At a time when many job postings ask for a master's degree and/or a professional designation, earning both is important "if you want to see your resume go to the top of the pile," says Tom Robinson, head of educational content for the CFA Institute.

In a similar vein, Rosilyn Overton, graduate coordinator for finance degree programs at New Jersey City University, believes, "you really need a CFA and a CFP in order to be a complete" financial advisor to individuals. The Chartered Financial Analyst and Certified Financial Planner credentials "are complementary, but lead to different career paths," Overton says. Along with credentials, she agrees financial professionals need "a master's degree in something."

Which Credential Best Matches Your Personal Goals?

Navigating the alphabet soup of designations requires a clear vision of one's own career path. For example, a CFA holder will spend his or her time analyzing companies or managing portfolios, while a CFP holder will work one-on-one helping individual investor clients. "If you're a person who enjoys working with people and getting them organized and getting them doing the right thing, that is the appeal" of going the financial planner route, remarks Overton.

What's more, job responsibilities often change over the course of a career - even if you're not a "career switcher." Drawing a lesson from his own career, Tom Robinson says that in choosing between a master's and a professional designation, "you should think, where do you want to be in 20 years, and then work backward."

A former investment advisor, public accountant and accounting professor, Tom Robinson today manages people rather than money. He oversees 75 staff members who run the CFA program and continuing education programs for CFA Institute members. So, he says, "If I had the time right now, I'd probably go out and get an Executive MBA. Because those are the skills that I need right now."

Here is a rundown of key features of each program, including typical career paths, compensation, costs, admission and qualification requirements.

MBA Degree

MBA programs center around teaching general management skills, "preparing people who can lead organizations, who can lead and develop teams," says Michael Robinson, associate director for MBA admissions at Columbia Business School. While a majority of 2007 Columbia MBA graduates are employed in financial services, Robinson says the program provides a tool kit that can be used to advance in many different industries.

The 2007 class earned a median base salary of $100,000, according to the school's Web site. Tuition and fees come to about $50,000 per year for two years, during which full-time students also forego any salary. "It is expensive, but it's more than outweighed by the advantages that you get from the program," Columbia's Robinson says. Beyond the educational aspects, a key advantage is access to the school's worldwide network of alumni.

Robinson says Columbia will admit roughly 10 percent of program applicants this year, compared with 15 percent last year. (At Columbia as at other schools, the number of applicants tends to surge during business downturns.)

Certified Financial Planner (CFP)

The CFP certification "is the gold standard when it comes to giving personal financial advice for individuals and businesses," says Overton. It requires passing a single 10-hour exam given over two days, plus three years of experience related to financial planning. The certification's subject matter includes retirement and estate planning, insurance, tax and investment planning. To be eligible to take the exam, most candidates must complete a post-graduate education program registered with the Certified Financial Planner Board of Standards. (This prerequisite is waived for past or present CPA licensees, attorneys, CFA charter holders, and holders of a few other finance-related licenses or degrees.)

Pass rates for the CFP exam, after taking a "registered program," fall within the 55-62 percent range, Overton says. About 40 percent of CFP holders are employed by large companies like brokerages, banks and large insurers, while many others work for boutique financial planning firms, she adds.

A survey by the College for Financial Planning found planners earned a median of $136,000 after one to four years of experience, rising to $263,000 for 10 to 14 years. However, Overton says, "It's not unusual here in the New York City area to have CFP professionals who are making around $500,000 per year."

Chartered Market Technician (CMT)

Market technicians analyze chart patterns to forecast price movements for stocks, bonds, commodities, currencies or any other traded instrument. CMT charter holders must pass a series of three examinations administered by the Market Technicians Association and must have a minimum three years of "acceptable work experience."

Most CMT holders are traders who may work for a broad range of employers, says Philip Roth, chief technical market analyst at Miller Tabak & Co. Some trade for themselves or publish market letters, while others work for hedge funds or institutions, manage technically-driven mutual funds, or act as market-makers on an exchange. "People like me, an in-house technical sell-side analyst, are something of a dying breed," Roth observes.

Successful graduates of the program continue to hire CMT holders for trading roles. Jordan Kotick, head of global technical strategy at Barclays Capital, favors CMT holders, as does Dodge Dorland, chief investment officer at LANDOR Capital Management and past president of both the MTA and of NYSSA, Roth says.

Chartered Financial Analyst (CFA)

The CFA curriculum centers around fundamental analysis of companies and securities, plus techniques for constructing and managing portfolios that meet the needs of various categories of investors. Many CFA holders work for institutional money managers or for private wealth management firms, says CFA Institute's Tom Robinson.

The credential requires passing three exams plus a minimum of four years' investment experience. The institute recommends candidates devote between 250 and 300 hours of study time per exam. In recent years, between 30 and 40 percent of candidates have passed Level I, 40-50 percent passed Level II and 50-70 percent passed Level III.

A survey of members' total compensation for 2006 found equity portfolio managers in the U.S. with less than five years of experience earned a median of $205,000, rising to $499,000 for those with more than 10 years' experience. For buy-side equity research analysts, the corresponding figures were $149,000 and $325,000, with similar numbers for sell-side equity analysts. Fixed-income professionals reported lower compensation.

Networking for CFA holders takes place primarily through local analysts' societies, which are affiliated with the CFA Institute.

The experts spoke at a New York Society of Security Analysts "career chat" on professional designations and degrees.

AUTHORJon Jacobs Insider Comment
  • An
    2 September 2009

    Vanessa: An accountant, even if chartered, isn't qualified to manage investments or advise people on personal financial matters or conduct a statistical study for inputs into a valuation model, etc.... Hence, perhaps the Canadians have it wrong. Cheers!

  • Va
    31 August 2009

    What about a Chartered Accountant (CA). This designation tops all in the Industry in Canada, UK, Australia & Bermuda. The US is lagging as thier CPA is a joke and is not comparable.

  • CA
    20 October 2008

    Where's the CAIA? Risk management, alternative asset valuation and techinical analisys.. Great charter to have now a days.

  • Da
    20 October 2008

    Most people interested in finance already know all these designations. I came to this article to learn more about the lesser known ones and maybe even some of the newer designations that have been coming out recently.

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