After my post on how to become a CFP, I received the same question from several readers through emails or comments. They all wanted to know the difference between a CFP and a CFA. Since both titles look alike and they are both related to the finance industry, I agree with them that it could be confusing. Even though there is only one letter different, fields of study differ completely from each other. So here’s a quick summary of what you can do and what you will learn doing those financial titles.
CFP: Certified Financial Planner
In order to get the CFP title, you must complete a bachelor degree along with a certificate in financial planning. The certificate can be included to add to your bachelor degree. Then, you have to register for the final exam. The mark obtained at your final exam will determine if you have your title or not.
Once you are a Certified Financial Planner, you must keep your knowledge up-to-date by following several training sessions each year. Those sessions cover topics such as financial planning, investment, compliancy, etc.
Most people with a CFP title will do become Financial Planner or Independent Financial Advisor. Therefore, you can work for a bank, an investment firm or an insurance company. While you can get a job in other type of companies, the above mentioned will be the bigger employer for CFP.
The Financial planner will answer his clients’ needs in term of investment, retirement planning, tax optimization, estate planning, insurance, personal finance and protection. It is important to mention that when we are talking about investment, we are talking about asset allocation according to your risk tolerance and not stock picking.
Depending of you employer, you might or might not cover all the 7 fields of financial planning. In all cases, this implies a lot of client contact and discussion. If you like meeting people, this is a good job for you.
CFA; Chartered Financial Analyst
While both beasts are Financial Something, the CFA is way different than the CFP. In order to get your CFA, you must successfully write 3 exams that are usually organized across several countries in June (the same date since it is the same exam).
Tests are concentrated on the investment part only and are way more technical than the CFP exam. We are looking at a deeper analytical aspect of the stock market and we do not consider the clients’ needs.
Most jobs requiring a CFA title will obviously include an analytical part where you have to work with spread sheet, graphs and other data. The most common jobs are trader or financial analyst (concentrating on a specific investment category or industry).
The level of math required is way higher while you will most likely meet fewer clients in one-to-one meeting with a job requiring a CFA. I am tempted to think that the CFA is much tougher to get since its 3 exams cover more topics.
While the purpose of the CFP is to become a generalist, the CFA goal is to create specialist. Both require specific ability in different fields and they are not necessarily the same.
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