Andrew Klimishyn | December 14, 2017 at 14:35
Home > Blog > CPA vs CFA: which career is better?

There are so many designations in accounting including CA, CMA, ACCA, CIA, MBA and many more. In this article, we are going to discuss two of them that stands out from the rest. They are, perhaps, the most prestigious ones. I should mention in advance that obtaining a CPA or CFA license is not an obligatory condition for those who work in the field of finance but it is helpful to build a successful career.  Here, we will talk about CFA and CPA salary, responsibilities, requirements to education, working experience, nuances related to passing CPA and CFA examinations. They cannot be directly compared. The CPA and CRA designations have more differences than similarities but let’s make an attempt anyway. I hope that this information will help to find out which career is better exactly for you and why.

Deciphering CFA and CPA abbreviations

Though CFA and CPA abbreviations sound almost the same and differ only by one letter, these designations are quite different. What is the most important that CFAs and CPAs work in different sectors of accounting, namely, investment banking and accounting respectively. Nevertheless, to become a CFA applicant still has to be acquainted with accounting while a CPA is not necessarily obligated to dive deeply into investment banking. The difference between responsibilities of a CPA (auditor) and a CFA (analyst) are worth attention. Let’s begin with deciphering these abbreviations which seem to be so confusing. A Certified Public Accountant (CPA) or an auditor is one who has passed a Uniform Certified Public Accountant Exam. It is administered by AICPA (American Institute of Certified Public Accountants). One who completed the requirements of the program established by another institution - CFA Institute - is called a Chartered Financial Analyst (CFA) or an analyst.

How to make a choice which job to choose?

It may be difficult to decide which career path is better. Both CPA and CFA are very respectable careers but they are related to different sub-sectors. The first one is related to accounting while the second one is dealing with finance, mostly investment management. If CPA refers to public, tax and finance accountants. The most common paths for CFAs include investment management and banking, corporate finance, risk management and other. These jobs are quite different but they both require being acknowledged with accounting to a great extent. If comparing accounting and investments sub-sectors for being easy and interesting, one could say that it depends upon the perspective of view. Both CPA and CFA designations are quite unique but when looking more closely, accounting seems to be more boring and in reality, it has nothing to do with easiness. It is stressful to work as an auditor. A job of Chartered Financial Analyst is no less easy. However, the job of an analyst implies communicating with people on an everyday basis more than a job of an auditor. The thing is that if you do not have right connections, it will be difficult to justify efforts put in when trying to get a CFA designation.

Salary

The main indicator that defines which career is better is a salary. For the given jobs it is comparatively high when talking about the field of accounting. Studies of the U.S. Bureau of Labor Statistics show that the services of an auditor cost about $60 thous. while an analyst earns in average up to $80 thous. per year. According to CFA Institute’s own figures, charterholders and auditors have the lowest unemployment rate, 8%, and 4% respectively. On the forum of these institutions websites, you can ask any questions about a salary and work opportunities for a particular career.  These numbers are so low because representatives of these careers are usually hard-working people and they can’t stand to live without work for a long time. Also, if you feel passionate about your profession, you work a lot and earn a lot.   

Responsibilities of a CPA and a CFA

Comparison of CPAs and CFAs can be decreased to a minimum. Despite the fact that they both work with money and finance, their roles are very different. The public accountants are focused on what assets a client possesses and are all his transactions clear. The CPA is also allowed to consult businesses but he should be properly educated in this area in addition to the major specialty. They use their skills to identify has there taken place any fraud in the company’s performance. The CPA has a right to sign audit reports after they are checked. This job, for sure, opens doors for you in the world of business as accountancy is called "the language of business". The CPAs are working with companies, individuals, non-profit organizations. The job of the analyst is to help his client to increase future profit by investing money.  CFAs has to look wider at market conditions, to be able to assess businesses potential to develop in the existing conditions as well as to determine what are possible ways to invest client’s money. They also advise stocks of what company it is worth to buy. They even conduct on behalf of the client investment transactions. The CFA’s clients are usually hedge funds, non-profit organizations, private equity firms and other.

To conclude, within the job responsibilities of the CFA there are included such services as:

  • banking investment;
  • financial management;
  • financial planning by analyzing business goals;
  • assessing existing and forecasting possible market conditions and risks;
  • determining clients needs;
  • making recommendations on investment.

Services provided by a CPA are the following:

  • checking financial reports for evidence of fraud;
  • preparing tax returns;
  • advising on the ways to increase the profit and decrease loss.

Education

CPA vs CFA education

To become a CPA you would need to graduate from the Finance and Accounting Department. Also, you must earn either a bachelor’s or master's degree, pass a Uniform CPA exam and gain 1-2 year experience in accountancy. The CFAs have the same requirements but when passing a CFA exam they are allowed to complete a test before graduation.   

CPA  and CFA Examination

It is quite a challenging task to get a CPA or CFA certification.  For this purpose, applicants are asked to pass the difficult exams. To build a successful career either in finance (investment) or accounting you, of course, are not obliged to go through any tests and the number of applicants annually, to tell the truth, is not extremely high. In 2015, only about 150 thous. candidates from the USA, Europe, Middle East, Africa sat for a CFA exam. The number of those who succeed in the exams in the field of accounting is fairly low as approximately a half of all candidates are able to get a CPA or a CFA credential.The CPA and CFA exams are conducted in a totally different way. To be allowed to pass a CPA exam the applicant has to possess 4-year bachelor’s degree, 150 credit hours of education. The CFA examination is granted by CFA Institute, a global non-profit organization which is based in the USA and has 200 chapters around the world.

The candidates apply through the CFAI. An application process is relatively easy, the candidates are required only a  bachelor’s degree being allowed to take the first step before graduation from university or college. Earning a degree is not even necessary for a person who is going to sit for the CFA exam. As for the exam content and format, these examinations are totally different. The CPA examination consists of 4 parts: Audit and Attestation (AUD), Financial Accounting and Reporting (FAR), Regulation (REG), and Business Environment and Concepts (BEC). The test is computerized consisting of multiple choice questions, task-based simulations, and written communications. The grading is 100% computerized. You can choose to pass either one, two or all parts at the same time sitting for the exam during the first 2 months of each quarter. The testing centers are in the USA, Japan, Brazil and the Middle East.  People who are going to make an attempt to become an auditor are expected to maintain high standards of ethics that are proved by a high grade in the Ethics exam conducted along with a CPA Exam.

As for a CFA test, there are 3 levels of the exam. It is less flexible as you need to complete each part one after another. If you cannot pass the first level, you are not allowed to move to the next one. The test content is focused on financial analysis and portfolio management. Unlike the CFA, CPA exam is intended to test the knowledge of accounting, audit, and taxation. The first level is quite broad. It is focused on economics, corporate finance, capital markets and other. It provides just an overview of everything while the 2d level is much more analytical. It is usually related to accounting. The 3d level encompasses knowledge of assets and portfolio management. Some of the candidates find the 3d level more interesting as accounting is quite boring. The 3d level is usually easier to pass than the 2d. If you are wondering where the CFA designation can get you, the answer is, as might guess, in investment banking. One may not even complete all parts and levels of the CPA or CFA exams as every test you pass is helpful in building a career. If you accomplish only 1 level of the CFA exam, you still can apply for the positions in the banking industry.   

Unlike a CPA examination, this test is conducted in the pencil-and-paper format and is human graded. The exam is administered twice a year for the level 1 and once a year for the level 2 and 3. There are many international testing centers around the world in major cities and metropolitan areas.The time required to obtain these designations is different. To complete the CPA test applicants need on average from 1 to 1,5 year but it depends strictly on the person. It is allowed to pass all 4 parts during even 6 months or even in one go. However, it may be difficult for the duration of a CPA exam lasts 14 hours. One should remember that most state boards require 1 or 2 years of working experience in the field of accounting before getting a license. This experience has to be supervised and verified by the US CPA.

All 3 parts of the CFA exam can be technically completed in 18 months. I total, the test consists of completing three 6-hour parts. However, it takes candidates about 4 years, hence it takes much longer to become a CFA charterholder than to become an auditor. 4 years of working experience is required to get a CFA license.  The supervisor who will be verifying your experience does not need to be a CFA charterholder. This adds a lot of flexibility to the process. About 40 percent of those who take part in this test is known to pass. As you can see, the chances are quite low but it is worth efforts and time to get that designation written in your CV. In case, you failed to pass any of these tests being not prepared well or for any other reason, you may take it one or whatever times you need but, of course, paying the mandatory and additional fees is still an obligatory condition.

Conclusion

CPA vs CFA conclusion

I hope this article was useful. If you are deciding which career to choose, the main question to consider is whether the particular designation is relevant to your career. The CPA has more restrictive education and experience requirements but is easier and faster to pass. The CFA has lower entry barrier but it takes much longer to complete. As the 2d level of the CFA exam is focused to a great extent on the accounting, one may consider getting a CFA license more convenient. However, one has to take into account that the 3d level is focused on banking investment. That's why if you are interested in accounting yet, you should think twice whether to pass totally the CPA exam or stop on passing the 2d level of the CFA exam and have no license at all. The levels you pass are useful whichever career path you choose but if you need a license, you still have to decide in advance which exam to take.

 

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