Can't decide about a PG in finance? Here's help

Aditya Ahluwalia of Finstructor debunks the FAQs on the two popular post graduate finance certifications. He differentiates them by their career scope, skills required and more.

Chartered Financial Analyst (CFA) and Financial Risk Management (FRM) are two of the leading financial certifications in India.

Many MBA students pursue these financial certifications to enhance their financial knowledge.

Here Aditya Ahluwalia, an expert CFA coach tries to present answers to the CFA or FRM quandary and also explores the career options students can consider after pursuing CFA and FRM.

What is the advantage that an MBA student with a CFA degree will have over an MBA specialising in finance?

I have personally done both the degrees. I did my masters in business administration (MBA) from FMS Delhi. The MBA finance degree in my opinion covers about 20 percent of what gets covered in the entire CFA curriculum (in terms of financial knowledge).

An MBA degree is more holistic to management as it will also cover non finance subjects like HRM, systems, marketing and general management. CFA is a certification dedicated to the field of finance. In my opinion no examination is as exhaustive and comprehensive in finance as CFA is.

Aditya Ahluwalia has cleared all levels of the CFA and FRM exams with top sectional performance across levels. A computer engineering graduate from Punjab Engineering College, Chandigarh, he completed his MBA from the Faculty of Management Studies (FMS), University of Delhi. Aditya currently works in the Indian equity markets as a part of the portfolio management team of one of the largest domestic fund houses.

What are the profiles that a MBA in Finance with a CFA degree will be offered?

CFA is a comprehensive exam in finance. So whether it be investment banking or portfolio management or equity research or strategy consulting in the financial domain or corporate finance in a manufacturing company, CFA concepts are going to be directly applicable to your job.

For anyone who is interested in a career in the financial domain the CFA designation gives an edge and imparts value to your knowledge and resume.

A CFA qualification today is more of a requirement than an advantage for a career in investment banking of private equity.

Doing a CFA today is not a guarantee of finding a job in investment banking or private equity, it is depends on your financial understanding and communication skills.

What is the difference between CFA and FRM?

That is a very common question that many students have. I believe that degrees of MBA, CFA and FRM have to be looked at compliments rather than as competing with each other.

CFA teaches you the inside-out of finance, MBA finance teaches you how to link the financial aspect with the overall business management perspective.

FRM is a designation which is dedicated to risk management. It gives the candidate a very good perspective about credit, operational and market risk aspect of a business.

A lot of students today (including me as a student) have taken all 3 designations. I believe all 3 degrees added to my knowledge and enhanced my employability. I would advise students not do an either or for the courses.

CFA and FRM are not standalone designations and are supposed to be complimented with either a MBA degree or work experience.

How should a student decide between opting for a CFA or a FRM?

Firstly, students have a misconception that CFA takes 3 years while FRM just takes 2 exams. So they should not base their judgment on the duration of the course.

CFA curriculum is much more exhaustive than FRM. In one level of CFA it can be argued that you learn more than two levels of FRM combined.

Coming to choosing between CFA and FRM, if someone wants a more holistic designation in finance then he or she should opt for CFA. The CFA certification does not restrict the domain to any niche in finance and for students who are not sure of their preference in finance should opt for CFA.

CFA will teach you risk management, corporate finance, risk management and portfolio management hence the scope is broader. If a candidate is sure that he wants to pursue risk management i.e. any profile in a bank or credit rating agency.

The profiles can range from credit risk, relationship management, treasury or any profile related to risk management then one should opt for FRM as it is more direct and relevant to the niche of risk management in finance.

If equity research, investment banking, portfolio management is your preferred field then CFA is the designation to pursue.

Does having cleared Level 1 or Level 2 in CFA have any relevance?

Definitely, mentioning that you are a level 1 to level 3 candidate of the CFA exam holds a lot of weightage. Having cleared level 2 would be equivalent to having a FRM degree.

Clearing one level of CFA also has value hence students should not be deterred from mentioning the same in their resume. Even if the candidate decides not to finish the CFA course he or she can still mention level 1 or level 2 in their resume.

Students from a non-finance background typically can use the CFA degree to come at par with students from a finance background during their MBA course. The perception issue that majority engineers have about lack of financial knowledge can also be altered after pursuing a CFA course.

Apart from CFA degree other things a student can do enhance his resume?

I have experience in working at a senior level at a fund management company. I did my MBA, FRM, CFA and CIA (an alternative investment certification) which has helped me gain a lot of knowledge.

During my MBA degree I also did a large number of NCFM modules which overlap with CFA curriculum and hence is not necessary for every candidate to pursue. Instead of running after random certifications, I would advise students to concentrate on basics.

If you have done your MBA from a top tier institute that is good enough. Also doing live financial projects adds a lot of practical knowledge and helps in establishing industrial contacts which can be useful during placements.

Apart from the above mentioned financial certifications, I do not believe any other course will add significant value to a student's resume. Also the CFA society networking events are quite useful. They open up good networking opportunities.

What questions should MBA students who have successfully cleared CFA or are pursuing CFA expect in interviews?

Equities is very big in the Indian market and given that many back-end and front-end equity research firms hire from top management schools hence being thorough with your valuation concepts, relative P/E multiple, DCF valuation.

Understand corporate finance concepts like cost of capital and WAC should be revised well. NPV, IRR are questions which every candidate must expect in the interviews.

Concentrate on basics and then go to advanced terms. Majority of the students will be freshers in financial domain hence interviewers expect clarity of basic concepts which a student must be well-versed with.

Value a company on your own using P/E or DCF model and be deep with it. Do the simple things well.