FRM Vs CFA Certifications (Which One Is Right For Me?)

Updated 15 September 2023

Accounting and finance roles often require people to earn certifications to demonstrate their expertise. Two certifications you can receive are the Financial Risk Manager (FRM) and Chartered Financial Analyst (CFA) certifications, with each used for different career paths. Learning more about these certifications can help you determine which one is suitable for your career goals and interests. In this article, we discuss the meaning of FRM vs CFA, explore their differences and review how to determine which is right for you.

Please note that none of the companies, institutions or organisations mentioned in this article are associated with Indeed.

Meaning Of FRM Vs CFA

Here is a definition of the FRM vs CFA certifications to help you learn more:

What is a FRM?

Financial Risk Manager (FRM) is a professional title awarded by the Global Association of Risk Professionals (GARP). GARP certification is a globally recognised credential for risk management in financial organisations, such as banks, insurance companies, accounting institutions, consulting firms, corporations, credit agencies and regulatory agencies. The goal of the Financial Risk Manager certification program is to standardise risk management practices and offer a more effective application of theories in real-world financial situations. These classes can help you learn more about your field and position you as a desirable candidate, showcasing your expertise in accounting and finance.

What Is A CFA?

Chartered Financial Analyst (CFA) is a professional certification awarded by the CFA Institute to applicants who pass the standardised test while meeting educational, professional and ethical prerequisites. These courses help you learn about the financial industry further and may make you a more marketable candidate when you share this credential in a job interview or on a CV or cover letter. This certificate indicates that you understand your industry and can make sound financial decisions on behalf of companies and clients. The certification exam assesses the competence of individuals seeking positions as financial analysts.

Differences Between FRM And CFA Certification

Individuals often compare FRM and CFA certification because both fields involve financial analysis, but there are many significant differences between the two. Those with CFA certification focus primarily on investment, financial analysis, work ethics, professionalism, evaluation of assets and portfolio management. In contrast, those with FRM certification focus mainly on risk management of factors associated with assets and businesses, such as credit risk, volatility, foreign exchange, liquidation, inflation, business and legal reputation, and other factors that may cause financial challenges for businesses or corporations. Here is a list of more differences between these certifications and professions:

Prerequisites

The two professions differ greatly in their prerequisites and the exams required for each. A CFA certification requires educational and professional qualifications such as:

Earned a bachelor's degree or currently enrolled in the final year of the bachelor's degree program
Completed at least 4,000 hours of professional work experience
Have a combination of the educational and professional requirements
Have proficiency in the English language

FRM certification focuses more on professional experience than educational qualifications like the CFA. The overall requirements needed to earn this certification include:

Pass part one of two of the exam
Pass part two of the exam within four years of passing the first
Have at least two years of relevant professional financial risk management experience

Exam structures and topics

Another difference between these two certifications is the exam structures. The certifying exam for CFAs comprises three levels and covers a broad range of topics. The topics can include:

Asset classes
Economics
Ethical and professional standards
Fixed income
Investment tools
Portfolio management skills
Wealth management abilities

The FRM certifying exam comprises two parts. The course and exam focus generally on the application of theories and tools associated with financial risk management. If you pursue this certification, you may learn about some of these topics:

Financial and business risk models
Financial markets and products
Fundamentals of probability
Market risk
Quantitative analysis
Random variables

Related: Understanding The CFA Exam

Career opportunities

CFA certification provides more possible career paths compared to FRM certification. Generally, CFAs can have more opportunities to secure managerial positions because of the range and diversity of finance-related topics learned during training and in the certifying exam. CFA training makes financial professionals qualified to manage financial risks for businesses and companies. This means that if you are seeking more executive roles, this might be the certification that is right for you.

Primarily, FRMs specialise in risk management, making them more suited for risk analysis roles. This makes the FRM certification beneficial if you enjoy researching market trends, collecting and analysing statistics and documentation and creating reports based on your findings.

How To Choose Between The FRM Or CFA Certification?

Here are a few points to consider when choosing between the two certifications:

1. Consider your professional goals

When deciding between CFA and FRM, it is essential to consider your ideal career path. Think about your dream job and the steps it might take for you to achieve it. If you have not decided and might like to have more career options in the investment or financial industry, or want to own your own business in the future, a CFA might be a beneficial choice for you. Here is an explanation of the jobs you may qualify for with each certification:

CFA Jobs

Here are a few jobs that require CFA certification:

Financial advisor
Relationship manager
Corporate financial analyst
Risk manager
chief financial officer (CFO)

If you prefer to be a specialist, then an FRM certification can give you more opportunities to focus on a specific career path. Unlike the CFA, an FRM concentrates more on the application of skills and may benefit those who do not have the educational background and professional experience to meet the requirements for CFA.

FRM Jobs

Here is a list of some jobs that require FRM certification:

Financial risk analyst
Trader
Wealth manager
Investment officer
Auditor
Business risk consultant

2. Compare the requirements, focus and preparation needed for each exam

It is important to consider your current capacity to meet the requirements for each certification. This means it is vital to think about how your lifestyle and finances can support pursuing this education. Here is a comparison of various elements for both courses:

Examination structure

Here is an explanation of the difference in the examination structure of each:

CFA: complete all three levels of the exam to get certified
FRM: complete the two-part exam to get certified

Curriculum focus

When choosing between the two certifications you can consider the curriculum focus. Here is an explanation of each:

CFA: This curriculum focuses on investment management, including ethics, portfolio management, accounting, corporate finance, fixed income and equity investments.
FRM: This course concentrates on risk management, including quantitative analysis, derivatives, value at risk, credit risk, operation risk and Basel Norms.

Number of hours to study

Finally, it is beneficial to know how long each certification requires to complete. This can help you determine how you can fit it into your schedule and if it is a good fit for you at the time. In addition to the courses and studying independently, some people choose to join study groups or pay for test prep courses to increase their understanding of the material and increase their chances of doing well on the test. Here is the general amount of time you may spend reviewing the material to prepare for the exam:

CFA: may require at least 300 hours of studying
FRM: may require at least 150 hours of studying

3. Consider earning both certifications

It is entirely possible to earn both a CFA and an FRM. Though it can take time and effort, getting both certifications may increase your available job opportunities and earning potential. Holding both certifications might make you more qualified for upper management and executive roles. If you are interested in showing dedication and interest in all aspects of finance, you can consider obtaining both.

You may find it easier to complete one at a time with a break in between rather than trying to do them simultaneously. Doing one at a time can help ensure you are understanding the material in each course. Additionally, after earning either certification, make sure you add it to your CV or tell your managers about your new credentials.