In the wide world of finance, two credentials stand out: the Chartered Financial Analyst (CFA) and the Certified Public Accountant (CPA). Both of these designations are highly respected and can open doors to career advancement, but they cater to very different areas within the financial sector. Earning either one demands significant study and hard work.
As the financial world grows ever more complex, the demand for skilled financial professionals continues to rise. So, how do you decide which path is right for you?
This article offers a detailed comparison of the CFA vs CPA designations, helping you make an informed decision about your career. The best choice depends on your individual goals, strengths, and what you enjoy doing.
What’s the difference between a CFA and a CPA?
The CFA and CPA are both respected credentials in the world of finance, but they focus on different areas of expertise.
Focus and Scope
The CFA charter emphasizes investment analysis and portfolio management. CFAs spend their time analyzing financial data and stock prices in an attempt to predict future performance. They analyze reports, make financial recommendations, and provide wealth management services to companies and individuals.
To do their jobs well, CFAs need to be skilled in discounting cash flows, financial modeling, and investment analysis.
CPAs, on the other hand, emphasize accounting, auditing, and taxation. They focus on creating accurate financial reports, handling tax preparation, and working to minimize taxes for their clients. In some ways, CPAs compile the financial data that CFAs analyze.
CPAs focus on audits, reviews, assurance engagements, and tax forms.
Key Responsibilities
CFAs spend their time on financial modeling, making investment recommendations, and setting portfolio strategy. To do that well, they need to be skilled in financial modeling, discounted cash flow analysis (DCF), and compound annual growth rate (CAGR) calculations.
CPAs focus on financial reporting, tax compliance, auditing, and assurance. They need a solid grasp of Generally Accepted Accounting Principles (GAAP), financial ratios, and profitability measures.
A closer look at the CFA designation
The Chartered Financial Analyst (CFA) designation is a globally recognized professional credential for investment management and finance professionals. It’s known for its rigor and comprehensive curriculum.
Curriculum and exam structure
The CFA Program has three levels of exams, each requiring serious study and preparation. It takes test takers an average of four to five years to complete all three levels.
The exams focus on:
- Ethical and professional standards
- Quantitative methods
- Economics
- Financial reporting and analysis
- Corporate finance
- Equity investments
- Fixed income
- Derivatives
- Alternative investments
- Portfolio management
Requirements for the charter
To earn the CFA charter, candidates need a bachelor’s degree (or equivalent) and four years of qualified work experience in investment decision-making. The CFA Institute requires a minimum of 4,000 hours of work experience.
Career paths for CFAs
Earning a CFA charter can prepare you for a variety of roles in the finance world. These include:
- Portfolio manager
- Investment analyst
- Financial analyst
- Risk manager
- Consultant
- Day trader
- Wealth planner
- C-level executive
A closer look at the CPA designation
A CPA, or Certified Public Accountant, is licensed by their state’s Board of Accountancy. CPAs have met rigorous standards for education, examination, and experience, and are authorized to provide accounting services to the public.
Curriculum and exam structure
The Uniform CPA Examination is a notoriously difficult four-part exam administered by the AICPA (American Institute of Certified Public Accountants). You’ll have 18 months to pass all four sections, which cover:
- Auditing and Attestation (AUD)
- Financial Accounting and Reporting (FAR)
- Regulation (REG)
- Business Environment and Concepts (BEC)
Requirements for licensure
To become a CPA, you’ll generally need:
- A bachelor’s degree
- 150 semester hours of college credit
- A passing score on the Uniform CPA Examination
- Two years of professional accounting experience (though this varies by state)
Career paths for CPAs
A CPA license can open doors to a wide array of career opportunities in accounting, including roles in:
- Public accounting (auditing, tax preparation)
- Corporate accounting
- Government accounting
- Forensic accounting
- Nonprofit accounting
- Academia
CFA vs. CPA: Exam Difficulty and Pass Rates
Both the CFA and CPA exams are notoriously difficult, but they test for different skill sets. Here’s a look at the relative difficulty of each.
CFA Exam Difficulty
The CFA exam has historically low pass rates, particularly for Level I. In fact, CFA pass rates have been dropping since 2020. For the November 2021 exam, the pass rates were: Level I: 27%, Level II: 46%, Level III: 43%.
The CFA exam is often more expensive to sit for, but the study materials are potentially more cost-efficient than those for the CPA exam.
CPA Exam Difficulty
The CPA exam generally has higher pass rates compared to the CFA exam, but it still requires significant preparation. CPA pass rates range from 53% to 68%, depending on the specific test.
Factors Influencing Difficulty
Ultimately, the exam you find more difficult will depend on your aptitude for the subject matter, your study habits, and your prior experience. The CFA exam focuses on complex financial concepts, while the CPA exam is more about detailed accounting rules and regulations.
Salary Expectations: CFA vs. CPA
Salary is an important factor to consider when deciding which path to pursue. While both the CFA and CPA designations can lead to lucrative careers, there are some key differences in earning potential.
CFA Salary Ranges
The CFA charter is generally associated with higher earning potential, particularly in investment management roles. Here’s a look at what you might expect to earn as a CFA charterholder:
- CFA salaries can range anywhere from $51,000 to over $274,000 per year, with the average being around $102,000.
- Passing the CFA exam can correlate with a 15% average earnings increase for finance professionals.
- Early career CFAs can expect to earn around $106,200.
- The average salary for CFAs is about $125,300.
- CFAs with over 15 years of experience can command salaries of $192,200 or more.
CPA Salary Ranges
CPAs also earn competitive salaries, especially in public accounting and corporate finance. Here’s a breakdown of CPA salary expectations:
- CPA salaries range from $50,000 to over $240,000, with an average of $94,000.
- Early career CPAs can expect to earn around $84,100.
- The average CPA salary is about $98,800.
- Experienced CPAs (over 15 years) can earn $169,700 or more.
Factors Influencing Salary
It’s important to remember that these are just averages. Your actual salary will depend on a number of factors, including your experience, location, industry, and specific role. For both CFAs and CPAs, experience plays a significant role in determining earning potential.
CFA or CPA: How to make the right choice
Deciding between the CFA and CPA can be difficult. Here are some things to think about as you weigh your options:
Consider your interests and strengths
Are you more interested in accounting or investment analysis? Do you love financial modeling, or are you more drawn to auditing? Deciding between the CFA and CPA really comes down to your individual career goals and strengths, as well as your personal tolerance for risk.
Evaluate your career goals
Do you aspire to manage investment portfolios, or do you see yourself leading a corporate finance team? Do you want to work in public accounting or investment banking?
Assess your risk tolerance
CFA roles can be more volatile than CPA roles, which tend to be more stable and predictable. Another thing to consider is that the CFA is a global credential, while the CPA is a state-level license.
Frequently Asked Questions
Who gets paid more: CFA or CPA?
Generally, CFAs tend to have higher earning potential over the long term. However, this isn’t always the case, and salary depends on the specific role, experience, and location. CFAs often pursue roles in investment management, which can be very lucrative, while CPAs may work in accounting and auditing, which tend to have a more defined salary range.
Is a CFA better than a CPA?
Neither certification is inherently “better.” It depends on your career goals. If you want to focus on investment management and portfolio analysis, the CFA is likely the better choice. If you’re interested in accounting, auditing, and tax, then the CPA is the more relevant credential.
Is the CFA still prestigious?
Yes, the CFA designation remains highly prestigious in the finance industry. It’s globally recognized and respected by employers, demonstrating a deep understanding of investment principles and ethical standards. Earning the CFA charter requires significant dedication and commitment, further enhancing its value.
Do CFPs or CPAs make more money?
It’s difficult to give a definitive answer as salaries vary based on experience, location, and specific job responsibilities. However, in general, CFPs (Certified Financial Planners) and CPAs tend to have comparable earning potential. CFPs often work directly with clients, which can lead to higher income opportunities, while CPAs may have more structured compensation in accounting roles.
Summary
The CFA charter and the CPA license are both respected credentials in the world of finance, but they represent very different career paths. CFAs specialize in investment analysis and portfolio management, while CPAs focus on accounting, auditing, and taxation.
Choosing between them depends on your interests, strengths, and career goals. Are you fascinated by the stock market and enjoy analyzing investments? Or are you drawn to the precision and detail of accounting and auditing?
Before deciding which path is right for you, do your homework. Research the specific requirements and responsibilities of each designation. Talk to people who hold the CFA charter or the CPA license and learn about their experiences. Carefully consider your career goals and your professional strengths.
The more you know, the better equipped you’ll be to make an informed decision about your future.