CFA? Why not FRM?
If you’re keen on a career in risk management, consider the Financial Risk Manager (FRM) program by by the Global Association of Risk Professionals (GARP): a two-part, self study set of examinations with global recognition.
This updated guide is packed with the latest information that will aid your decision making on FRM certification.
Overview of the FRM Certification
Since the inception of FRM program in 1997, more than 50,000 certified FRMs have successfully obtained the designation. They are employed internationally at nearly every major bank, asset management firms, hedge funds, consulting firms, and regulators.
There is fast-growing demand for the FRM certification – registrations for the FRM exams have grown by an average of 13% per year since 2009, registering a growth of 20% in 2017-2018 alone.
What Is The FRM Exam? A Quick Overview
The FRM exam is a two-part examination consisting of a 4 hour multiple choice exam each.
There are some recent changes due the COVID-19 pandemic:
- May20 exams were postponed globally and replaced by a one-off exam slot in October 2020.
- GARP announced that FRM exams will transition to computer-based testing (CBT) in 2021, so the last paper-based exams would be Nov20 Part 1 and May21 Part 2.
- From 2021, there would be 3 exam windows for Part 1 (May, July and November); and 2 exam windows for Part 2 (May and November/December). Candidates can still take both Parts on the same day, but you will need to pass Part 1 before Part 2 is scored.
The exams are conducted exclusively in English, in person at 100+ exam sites around the world. You can find out your nearest FRM exam center here.
In terms of pass criteria, there are no negative markings for incorrect answers. The passing score is determined by the FRM Committee each year.
The exam results are sent to candidates via email approximately 6 weeks after the conduct of exam, and result is a simple pass or fail. However, you will be provided with quartile results so that you can see how you scored on specific areas relative to other candidates.
FRM Pass Rates Since 2010
The latest FRM exam results (Nov 2019) recorded pass rates for Part 1 and Part 2 at 46% and 59% respectively.
Since 2010, the historical pass rates for Part 1 ranges from 39%-53%, with a 10-year average of 46%. On the other hand, Part 2’s pass rates ranges from 50%-62%, with a higher 10-year average of 56%.
FRM Exam Topics & Weightings
FRM Part 1 Topics
The FRM Part 1 curriculum covers the tools used to assess financial risk. The topics and percentages are as below:
|FRM Part 1 Topic Areas||Topic Weight|
|Foundations of Risk Management (FRM)||20%|
|Quantitative Analysis (QA)||20%|
|Financial Markets & Products (FMP)||30%|
|Valuation & Risk Models (VRM)||30%|
FRM Part 2 Topics
The FRM Exam Part 2 highlights on the application of the tools studied in Part 1 with a deeper understanding of risk types and risk management. Topics and percentages are in the table below:
|FRM Part 2 Topic Areas||Topic Weight|
|Market Risk Measurement & Management (MR)||20%|
|Credit Risk Measurement & Management (CR) ||20%|
|Operation Risk & Resiliency (ORR)||20%|
|Liquidity and Treasury Risk Measurement and Management (LTR)||15%|
|Risk Management and Investment Management (IM)||15%|
|Current Issues in Financial Markets (CI)||10%|
FRM Exam Fees
There is a recent increase in FRM exam fees due to the transition to computer-based exams. Here are the latest FRM exam fees:
|Fees in USD ($)||FRM Part 1||FRM Part 2|
There is a one-off enrollment fee of $400 that applies to first time FRM candidates. So if you’re retaking Part 1 exams, the exam fee varies between $550-$750 only depending on your registration date.
In contrast, if you’re new to FRM, you’ll need to add a one-off enrollment fee of $400 on top of that.
From 2021, the fees for Part 2 FRM candidates are the same as Part 1 (excluding the one-off enrollment fee), ranging from $550-$750 depending on registration date.
FRM Exam Dates & Key Registration Deadlines
For 2021’s May and July’s exams, registration will open on 1st Dec 2020. Stay updated with the key exam deadlines below:
|Key Deadlines||May (Part 1 & 2) and |
July (Part 1 only) FRM Exams
|November (Part 1) / |
December (Part 2) FRM Exams
|Registration Opens||1 December 2020||1 May 2021|
|Scheduling Opens||15 December 2020||15 May 2021|
|Early Registration Ends||31 January 2021||31 July 2021|
|Special (RAD)* Requests Due|
Special (ADA)** Requests Due
|28 February 2021||31 August 2021|
Last Day to Defer to next Exam
|31 March 2021||30 September 2021|
|Last day to schedule/reschedule Exam|
Last day to select/change exam sites
|8 April 2021||20 October 2021|
|Exam windows and dates||8-21 May 2021 (FRM Part 1)|
10-23 July 2021 (FRM Part 1)
15 May 2021 (FRM Part 2)
|13-26 Nov 2021 (FRM Part 1)|
4-10 Dec 2021 (FRM Part 2)
* Request for alternative exam date for religious reasons only (RAD)
** Accommodations for Americans with Disabilities Act (ADA)
What Are the FRM Exam Requirements?
In order to be certified as a Financial Risk Manager (FRM) and be able to use the FRM designation after your name, the following conditions must be fulfilled:
- Pass the FRM Exam Part 1;
- Pass the FRM Exam Part 2 within 4 years of passing Part 1; and
- Demonstrate 2 years of professional full-time financial risk management work experience.
FRM work experience requirements:
- To demonstrate relevant work experience, GARP requires a candidate submission of a minimum of 4-5 sentences (at least 300 words) detailing how he/she manages financial risk in their day-to-day work.
- Experience completed for school will not be considered, including internships, part-time jobs, or student teaching.
- The work experience submitted cannot be more than 10 years prior to having passed the Part 2 exam.
There are time limits to getting FRM-certified:
- Once a candidate passes FRM Part 1, he/she must then pass the FRM Part 2 within 4 years.
- Then, the candidate will have 5 years from the date of passing FRM Part 2 exams to obtain work experience verification. If this is not done in time, the candidate will have to re-enroll and pass both Part 1 and Part 2 exams again for certification, not to mention re-paying the required fees to do so.
Benefits of FRM Certification
FRM certificate is one most widely accepted global designation for risk management profession, and getting this certification certainly sets you apart from the rest. Once you achieve this designation, you can expect to:
- Differentiate yourself and further boost your risk management credentials in the financial industry
- Enhance career growth and increase job mobility in the risk management sector
- Become a part of the global elite group of risk management professionals who are FRM-certified
- Be recognized globally as a leader in financial risk management
- Command better remuneration package and job opportunities
FRM vs CFA – Which is Right for You?
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.
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.
Here’s a quick summary comparing both designations:
|Study Areas||10 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 / Parts||3 levels (fastest route is in 15-18 months)||2 Parts (you can sit for both parts in one exam day)|
|Exam Frequency||From 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 Format||Level 1: Multiple choice questionsLevel 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 Rates||The range of CFA pass rates since 2010:Level 1: 36%-43%|
Level 2: 39%-47%
Level 3: 46%-56%
|The range of pass rates since 2010:Part 1: 39%-53%|
Part 2: 50%-62%
|Fees and Costs||One-off Enrollment Fee: $450|
Registration fee (per level): $700-1,000
|One-off Enrollment Fee: $4002021 Registration Fee (per Part): $550-750|
|Study Hours Needed||At least 300 hours per level||200-250 hours per part|
|Post Exam Requirements||To become a CFA charterholder:|
Pass all the 3 levels of CFA exams;
4 years of qualified investment 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;
|Career Opportunities||Investment analysis, portfolio management, securities research, pension, insurance, corporate finance||Financial risk management|
Certified FRMs represent at nearly every major banking institution, government regulator, consulting firm and financial services institution around the world. For someone who looking to build up a career in financial risk management; FRM can be a pretty good bet.
Are you considering FRM, as well as the CFA designation? Leave a comment below!
Meanwhile, you may find these related articles in our Beginner’s Guide series of interest:
- CFA Exams in 2021: A Beginner’s Guide
- CAIA (Chartered Alternative Investment Analyst): A Beginner’s Guide
- CFA Investments Foundation: A Beginner’s Guide
- IMC (Investment Management Certificate): A Beginner’s Guide
- SCR (Sustainability & Climate Risk) Certificate: A Beginner’s Guide
- Certificate in ESG Investing: A Beginner’s Guide