CFA vs FRM: Which is better for me?

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Finance certifications such as CFA and FRM are a cost effective way (compared to an MBA) to give your finance career a boost.

We do receive a lot of questions from our readers trying to understand the core differences between CFA vs FRM before making a decision.

Hence, for those still on the fence, or particularly new to these designations: here’s a helpful, straight-to-the-point summary guide comparing CFA vs FRM.

Let’s take a look!


What is the CFA Program?

What Is The CFA Exam

The Chartered Financial Analyst (CFA) Program is a professional, masters degree equivalent credential offered by the CFA Institute. 

It gives you expertise and real-world skills in investment analysis, and has become a gold standard in the finance and investment management industry.

We’ve written a lot about the CFA program, check out these articles to learn more:


What is the FRM Certification?

frm

The Financial Risk Manager (FRM) certification is the leading certification for risk managers offered by Global Association of Risk Professionals (GARP). It is also a masters degree equivalent credential that is recognized globally.

With the FRM certification, you’ll obtain and hone your skillsets in identifying, analyzing, and mitigating risks at a high level, which is highly demanded by top firms and financial organizations globally.

We’ve covered quite a bit about the FRM certification too, check out these articles to learn more:


CFA vs FRM difficulty

cfa difficulty comparison financial designation

Here’s one awesome chart to rule them all – the difficulty comparisons of various finance certifications 🙂

As you can see, completing CFA Level 3 or FRM are both Master degree equivalent programs, using a benchmark provided by UK NARIC (now renamed UK ENIC, thanks Brexit).

In short, both CFA and FRM are equally difficult in this sense, comparable to a Master’s degree course.


CFA vs FRM: Summary of key differences

cfa vs frm

Here’s a quick summary comparing both designations:

CFAFRM
Study Areas10 Topics: Ethics, Quantitative Methods, Economics, Financial Reporting & Analysis, Corporate Finance, Equities, Fixed Income, Derivatives, Alternative, Portfolio Management.
​​​
​10 Topics: Foundations of Risk Management, Quantitative Analysis, Financial Markets & Products, Valuation and Risk Models, Market Risk, Credit Risk, Operational Risk, Liquidity & Treasury Risk, Risk Management in Investment Management, Current Issues.
Exam Levels / Parts3 levels (fastest route is in 15-18 months)2 Parts (you can sit for both parts in one exam day)
Exam FrequencyFrom 2021, CFA exams will transition to computer-based testing for all levels with increased frequency:

Level 1: 4x a year (Feb, May, Aug and Nov).

Level 2: Twice a year (May and Aug in 2021, and 2022 onwards Feb and Aug).

Level 3: Twice a year (May and November).
Part 1: 3x a year (May, Jul, Nov​)
Part 2: twice a year (May, Nov)​
Exam FormatLevel 1: Multiple choice questions

Level 2: Item set questions (multiple choice)

Level 3: Item set and essay questions 
Transitioning to computer-based exams from 2021 for all Parts:

Part 1 & 2: Multiple choice questions​
Pass RatesThe range of CFA pass rates since 2010:
– Level 1: 36%-43%
– Level 2: 39%-47%
– Level 3: 46%-56%
The range of FRM pass rates since 2010:​
– Part 1: 39%-53%
– Part 2: 50%-62%
Fees and CostsOne-off Enrollment Fee: $450

Registration fee (per level): $700-1,000
One-off Enrollment Fee: $400

Registration Fee (per Part): $550-750
Study Hours NeededAt least 300 hours per level200-250 hours per part
Post Exam RequirementsTo become a CFA charterholder:

– Pass all the 3 levels of CFA exams;
– 4,000 hours of qualified work experience;
– Submit reference letters for 2-3 professional references;
– Become a regular member of CFA Institute;
– adhere to CFA ethics and professional conduct.
To become FRM-certified:

– Pass both FRM papers;
– a minimum of 2 years professional full-time work experience in the area of financial risk management or another related field;
– maintain membership.​
Career Opportunities​Investment analysis, portfolio management, securities research, pension, insurance, corporate financeFinancial risk management​, treasury

CFA and FRM: Are there any topic overlaps?

What about similarities between CFA and FRM?

cfa vs frm topic overlap infographic

A significant part of the FRM exam is covered by the CFA syllabus, with most of the overlap between these designations found in the FRM Part 1 exam.

We estimate that about 55% of FRM Part 1 is covered by the CFA program (all 3 levels), whereas that figure drops to about 15% for FRM Part 2.

This is an interesting insight for those who are keen on obtaining both CFA and FRM certifications (in the shortest possible time) for their career.

The FRM curriculum covers a variety of risk management topics and provides guidance on how to view these concepts in an integrated fashion.

The FRM exam is tested in two parts:

  • the Part 1 exam focuses on the fundamental tools and techniques used to assess risk; whereas
  • the Part 2 exam focuses on the application of those tools in practice and further examines the major subcategories of risk management (e.g. market, credit, and operational risk).

On the other hand, CFA exam is tested in 3 levels:

  • Level 1 exam doesn’t assume any prior finance knowledge, and focuses on introducing various terms and concepts of the 10 topics.
  • Level 2 exam builds on the foundation of Level 1, with a stronger focus on analyzing and applying the concepts learned.
  • Level 3 exam is heavily focused on applying what you’ve learned holistically in portfolio management and wealth planning topics.

Let’s take a closer look at each FRM topic area and point out the main areas of overlap with the CFA curriculum.

Roughly 55% of FRM Part 1 is covered by CFA program

FRM Part 1 TopicsCFA Level 1
Overlap
CFA Level 2
Overlap
CFA Level 3 Overlap
Foundations of Risk Management (FRM)Portfolio risk & returnCorporate governance, portfolio conceptsRisk management, Evaluating portfolio performance
Quantitative Analysis (QA)Probability & Statistics, Common probability distributions, sampling & estimations, hypothesis testingCorrelation & regression, multiple regression, time series analysis
​Financial Markets & Products (FMP)Market org and structure, Fixed income, Asset-backed securities, Derivative markets, Forwards, futures, options & swapsFX rates, Commodity investing, Term structure & interest rates, Forwards, futures, options & swapsRisk management of forwards, futures, options & swaps
Valuation & Risk Models (VRM)Fixed income valuation, duration and convexity, option valuationArbitrage-free valuation, bonds with embedded options, option markets & contractsRisk management, risk management of option strategies
Estimated % of FRM Part 1 covered by CFA Program25%20%10%

About 15% of FRM Part 2 is covered by CFA program

FRM Part 2 TopicsCFA Level 1 OverlapCFA Level 2
Overlap
CFA Level 3 Overlap
Market Risk Measurement & Management (MR)Term structure & interest ratesRisk management
Credit Risk Measurement & Management (CR) ​Fundamentals of credit analysisCredit analysis models, Asset-back securities: CDOs, Credit default swapsRisk management
Operation Risk & Resiliency (ORR)Risk management
​Liquidity and Treasury Risk Measurement and Management (LTR)Risk management
​Risk Management and Investment Management (IM)Portfolio risk & return, Alt investments: hedge fundsRisk management, Evaluating portfolio performance
Current Issues in Financial Markets (CI)
Estimated % of FRM Part 2 covered by CFA Program5%5%5%

CFA vs FRM: Which is right for you?

CFA vs FRM: Which is better for me? 1

In short, FRM is highly specialized and has a stronger focus on risk management, whereas the CFA designation covers a broader scope of financial analysis and investment topics. 

While the CFA designation opens up job prospects in the field of Research Analysis, Investment Banking and Portfolio Management, FRM on the other hand will open up opportunities in Banks, Treasury & Risk Management.

From a career building perspective, both FRM and CFA stand on equal footing as both are globally recognized designations with ample employment opportunities in their respective areas of expertise. Plenty of finance professionals obtain both qualifications to better perform in their roles and career.

​It really depends on your preferred career route:

  • if you’re into risk management, FRM is the clear choice.
  • If you’re less sure but keen on a career in finance, perhaps CFA is a better choice for a broader finance base.

Hope this helps you decide which certifications you would like to go for (or both)! If you have more questions, just comment below and I’ll try to help 🙂

Meanwhile, you may find these related articles of interest:

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