CFA vs CFP

These are two popular designations in the world of finance. Both are in high demand, offer great earning potential, and can advance your career exponentially. However, which investment-related designation is best for you? It all depends on what you want to do with this credential.

What Is a CFA?

The Chartered Financial Analyst (CFA) credential is a professional certification offered by the CFA Institute. 

The CFA requires candidates to pass three levels of exams and demonstrate cumulative knowledge regarding financial analysis, general management, accounting, ethics, and economics.

The designation was created in 1963 and has been used widely by finance professionals since then. To this day, it remains one of the most respected professional credentials in the business. 

It is widely recognized globally and stands out among competitors because of its high level of difficulty. Enrolling for this credential is expensive but well worth it once you consider what kind of career advancements are possible with CFA designation.

What Is a CFP?

The Certified Financial Planner (CFP) credential is also offered by the CFP Board. The organization began in 1952 and has been working to establish itself as the premier financial planning certification among other designations out there today.

It requires applicants to pass comprehensive exams and demonstrate knowledge of ethics, taxation, retirement and estate planning, and risk management.

The CFP designation is seen as similar to the CFA credential in terms of prestige and difficulty level. With this credential, you can expect salary advancements of up to 50% or more. 

Because it is accepted by FINRA (Financial Industry Regulatory Authority), the CFP designation opens doors for its holders when compared to other designations that are not accepted for this purpose.

How Are They the Same With Each Other?

CFA and CFP are both respected designations in the world of finance. They both put a high value on education, preparation, standards of excellence, and ethics. 

As two highly competitive professional certifications, they differ significantly in terms of specialization but are alike when it comes to general concepts that can be applied across different contexts.

How Are They Different From One Another?

There are several key differences between the CFA and CFP designations.

Program Requirements

First, there are significant variations in program requirements when you compare them with each other. The CFA curriculum is broken down into three levels. Candidates must pass exams in each of the following:

Level 1: General Principles and Investment Foundations (3 hours)

Level 2: Quantitative Methods (4 hours)

Level 3: Security Markets and Products (6 hours) 

CFP curriculum does not follow this structure; it is more project-based. Candidates must complete three projects, each varying in terms of complexity and fee amount (roughly $3000 total).

Scope of Practice

Second, there are differences in the scope of practice for each designation. CFA holders can work in financial analysis, portfolio management, risk management, sales and trading, operations research, business development, or general management. 

CFP holders can work in financial planning, stock analysis, portfolio management, investment advice, retirement plan consultation, risk management, tax advice for businesses and individuals, insurance advice/planning, or estate planning.

Amount of Study

Third, the differences are related to the amount of study you need to put into earning each designation. CFP requires more hours of study than CFA. 

On average, it is estimated that you will need to spend 300 hours studying for the CFP designation as opposed to 240 hours for the CFA. It depends on your area of specialization but it can be said that CFP has more depth relative to its breadth when compared with CFA.

Exams 

CFA exams are self-study and require the use of a professional exam prep provider. On average, candidates spend six to 12 months studying before they take each exam. 

CFP exams are more structured in terms of structure and time frame. CFP requires preparatory materials from FINRA, which gives you access to sample exams and study materials through the CFP board. 

Exam fees for CFA exams vary by level but most applicants pay around $2000 per exam. CFP exam fees are more standardized at about $800 per exam. 

Who Can Become Certified in Each Discipline?

Although many people are qualified for either designation, they are not suitable for everyone. 

CFA Qualifications

For a CFA certificate, a person must have a bachelor’s degree or higher and pass three levels of rigorous exams in areas such as ethics, finance, statistics, economics, mathematics, and portfolio management. Prior experience in investment banking is highly recommended before applying for this credential.

Unlike CPA licensure for accountants, CFA designation is highly recognized among employers regardless of the industry because it shows that you have a high level of commitment and knowledge. 

It also shows that you are not just any run-of-the-mill finance professional – you devote significant time and effort to become more than qualified.

CFP Qualifications

CFP certification requires applicants to be financial planners and pass a series of four comprehensive exams that provide in-depth knowledge on topics such as retirement planning, estate planning, taxation, transition management, investment strategies, risk management, and insurance. 

Applicants must also complete at least 150 hours of study or work experience in the field (which can vary depending on your level of prior experience).

For CFP certification, you are required to have an undergraduate degree or higher. You are not required to have prior work experience but being a financial plan is beneficial in terms of your knowledge and understanding of key concepts.

As for CFP, it is recognized for its specialization and focus on the various aspects of personal finance. It is used as an “umbrella” term to represent financial planners and advisors.

You should obtain a designation only if the requirements suit your needs and you meet all qualifications for it. Otherwise, you will waste time and money pursuing an expensive credential without any gain.

How Much Does It Cost to Obtain CFA or CFP Designation?

The costs of obtaining CFA or CFP designation vary depending on your level of commitment and availability to take exams. 

The cost for CFP certification is $1195 while the cost for CFA charterholders is $1425. Because you need to pass three levels of exams, the total cost for CFA will be much higher than that of the CFP because it requires additional costs for each exam.

The cost of obtaining CFA or CFP designation can be broken down into the following four categories:

Cost_of_Obtaining_CFA_or_CFP_Designation

The average cost of obtaining CFA or CFP designation ranges from $4075 to $6175.

Time Commitment for CFA vs CFP

Time_Commitment_for_CFA_vs_CFP

As the chart above shows, the average cost and time commitment for CFP certification is considerably less than that of obtaining CFA designation (which costs three times more than CFP).

Pros and Cons of Each Certification

CFA

CFA is only related to the financial industry. If you are not working in the field, it makes little sense to obtain this credential.

Also, if you are looking to change your career into investment banking or asset management, the CFA designation will be very useful for that purpose because many employers require their employees to have passed Level I of CFA.

In terms of the pros, CFA is viewed as a family tradition among those who have been in the industry for a long time because it provides general knowledge on finance and investing concepts that can be applied to any asset class. 

It does not specialize in one particular area of personal finance like CFP which makes it good for professionals who like variety. 

CFA is also comprehensive and covers nearly all concepts related to finance and investing, which makes it very useful for individuals who want to work in different areas of the industry because they will have a solid foundation on which they can build their knowledge.

CFP

If you are not working as an investment advisor or financial planner, CFP designation does not make sense because you will need to pay a lot of money and time in order to get it. 

If you are working in the same field, however, CFA will be less useful for you because financial planners usually specialize in one particular area such as insurance or estate planning.

In that case, CFP will be more valuable for you because it provides specialization in one of these areas.

CFP is not as comprehensive as CFA, but it does cover all areas related to personal finance and planning. 

Although the two designations are different entities, they are both highly valuable when taken together because CFP focuses on a particular area while CFA provides a general knowledge of finance and investing that CFP complements. 

For personal finance, the CFA and CFP designations together provide an in-depth insight on all things related to financial planning and investment.

The Bottom Line

Although obtaining both credentials is very costly and time-consuming, they are extremely valuable when taken together because they complement each other. 

Also, keep in mind that CFP is the less costly among the two designations because it is cheaper to take, and it can be taken whenever you are ready, unlike CFA which requires experience first.

No. In order for you to take the CFA/CFP exam, you will be required to have a Bachelor's Degree as a minimum academic requirement. This is because both qualifications are designed for individuals who want to work in the finance sector and hold professional positions.
For both qualifications, you need to be at least 18 years old, but it is best that you pass the exams before you turn 31. This is because there is no upper age limit for CFA, but if you fail the CFP exam four times, your application will automatically be rejected.
The CFA stands for the Chartered Financial Analyst designation and is a professional credential that must be obtained through an examination process. This qualification specifically focuses on investment analysis, portfolio management and wealth planning.
CFP stands for Certified Financial Planner and relates to personal finance and financial planning. It does not use an examination process and instead involves education and experience.
It depends on how fast you study, but expect to take at least one year out of your life to fulfill the academic requirements for both qualifications.
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.