As a professor of Finance, now in my fourth decade of teaching, I’ve had the pleasure of speaking with hundreds of young people transitioning from the University to the job market. During these conversations three hesitations often arise. The first can be represented by students worried that their coursework failed to coalesce into a solid foundation of the practice of finance, and the resulting lack of confidence in job interviews. The second by students brimming with confidence but discouraged by the sinking feeling that they fail to stand out in the crowd. The third with the nagging question “should I now consider an MBA?”
With respect to the third question, there have been recent changes in the market for the MBA degree that are worth considering. The MBA degree, at its height of relevancy twenty-five years ago, is today in decline. Applications are dropping, tuition is up, more and more programs are shutting down, and most importantly, the very notion of the value of a generalist degree in business is being questioned, giving way to replacements offering a concentrated curricula and sharper focus. Recently, a Dean from a top business school said “Ten years ago the M.B.A. was the only option you had, but the market has shifted, and business schools, like any company, have to shift with it to meet the demand of our customers.” An example of this phenomenon can be found at the Isenberg School of Management, where I teach, that will soon launch the first ever Masters Degree in Alternative Investments. And so as a response to the “should I now consider” question, my advice would be to grab a seat offered in any top 25 global MBA program, but beyond those in the elite status, it would be wise to consider other options.
As the landscape of University degree programs has shifted, so have the choices available for finance students looking to build their human capital. And here the news is good. Those eyeing to enhance but also streamline their learning would be smart to consider professional designations that are designed to provide what millennials want most – relevant knowledge presented in a way that’s easy to access, has short duration, is relatively inexpensive, and at the end builds-out your resume. Professional designations are usually in the format of long distance education following a specific outline broken into learning objectives. And because your learning is confined to what’s considered to be state-of-the-art in the chosen area, the successful completion of the outline signals a qualification to perform in a job. Typically, the program will require that you prove your knowledge by passing one or a series of exams. The bottom line — those with a University degree in finance often find that the knowledge gained through successfully completing the designation brings a sense of aliveness to their learning and offer insights that help forge future career paths.
What designation(s) are best for you to pursue? Try this: google “top professional finance designations” and see what comes up. For example, according to the Corporate Finance Institute, the leading six designations, in alphabetical order, are the Chartered Financial Analyst (CFA) designation, the Certified Public Accountant (CPA)designation (comparable to the Chartered Accountant of India designation), the Chartered Alternative Investment Analyst (CAIA) designation, the Certified Financial Planner (CFP) designation, the Financial Risk Manager (FRM) certification, and the Financial Modeling & Valuation Analyst (FMVA) certification. What follows is a brief summary of these six designations:
CFA: The Chartered Financial Analyst designation confers the CFA Charter to candidates who pass three levels of exams and meet work experience requirements. The curriculum is built from the CFA Institute Body of Knowledge covering areas of traditional finance such as financial analysis, equity and fixed income security analysis, economics, portfolio theory and analysis and professional standards and ethics. The examinations can be completed in as few as 18 months with the typical candidate taking four years at an average total cost of about $3,000. The CFA designation has achieved explosive popularity in India with a record of just short of 22,000 candidates having registered for exams in June of 2018.
ICAI: The Chartered Accountant of India designation is a degree conferred to qualified accountants in India. The ICAI curriculum covers subjects such as quantitative aptitude, economics, law and all areas of accounting. It takes a minimum of four years to complete the three levels of exams (entrance, intermediate, and final), although many candidates spend longer amounts of time, with an average total cost of about $600. The ICAI is the most popular designation in India and has membership of about 250,000, about evenly split between practicing and non-practicing CAs.
CFP: The Certified Financial Planning designation is awarded to individuals holding a bachelor’s degree from an accredited university and who completes coursework in financial planning. The curriculum is broad, covering areas such as insurance, investments, tax, estate and retirement planning. The CFP designation requires all candidates to pass one exam that costs about $1,000, while also requiring a three year work experience requirement in India. There are less than 100,000 CFPs globally, with estimates for India difficult to estimate.
FRM: The Financial Risk Management designation is issued by the Global Association of Risk Professionals (GARP) to candidates successful in passing a two-part exam and who meet a work experience requirement in risk management. The program follows the major strategic disciplines of risk management including quantitative analysis, models, and risk management in areas such as market,credit, operational, and measurement risk. At a cost of about $1,500, there are about 30,000 certified FRMs globally.
FMVA: The Financial Modeling and Valuation Analyst designation program provides applications of accounting, financial management, valuation, and modelling skills. Students must successfully complete courses and demonstrate mastery of the topics through completion of the course materials, quizzes, and assessments. The cost of the designation is about $750.
CAIA: The CAIA Association is globally recognized as the credential for professionals managing, analyzing, distributing and regulating alternative investments, defined through different asset classes given by hedge fund trading strategies, private equity investment opportunities including venture capital and distressed debt, real assets such as real estate, infrastructure, intellectual property, and commodities, and structured products that span the full range of derivative products. With respect to general characteristics, these asset classes typically occupy the north-east corner of the risk premium curve, appealing to high net worth investors seeking both return enhancement and diversification. CAIA Charter holders must pass two levels of exams and cost about $2,500, and successful exam candidates that hold a bachelor’s degree must also have one year of relevant work experience. The CAIA designation is relatively new – the Association began in 2003 — and in a relatively short amount of time has awarded over 10,000 Charter holders globally. Given the continued growth in Indian capital markets, and the rapid introduction of alternative investment products introduced in the Indian landscape of investments, the relevance of the CAIA designation in India is moving quickly ahead.
By Prof Nelson Lacy, Director of examinations, Chartered Alternative Investment Analyst Association (CAIA Association)