Finance is such a lucrative career field that the discipline lands spots on the list of the top degrees for the highest-paying business careers at both the bachelor’s and master’s levels. To achieve your full earning potential in these careers, though, you need more than a degree. You need professional certification. Fortunately, finance professionals have a lot of certification options. As of 2020, the Financial Management Association International recognizes 18 different professional certifications in the field of finance. Some of the types of finance exams you may take to advance your career include the popular CFP and CPA exams, the Financial Risk Management Exam and accounting-side exams like the CMA and CPA.
The CFP and CFA Exams
Probably the best-known certifications in the field of finance are Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA). The main difference between these two designations is the type of career to which they are most relevant. The CFP credential is best suited for personal financial advisors, or finance professionals who help individuals manage money for growth and plan for their financial future, the United States Bureau of Labor Statistics (BLS) reported. The CFA credential is more relevant if you analyze financial investments for a business like a bank or insurance company, although financial analysts can provide advice to individuals, the BLS reported. The CFP designation is somewhat more popular than the CFA credential, with 181,000 CFPs and 167,000 CFAs in practice worldwide.
Administered by Certified Financial Planner Board of Standards, the CFP credentialing exam is a lengthy two-part test that covers the principles of financial planning as well as topics that range from retirement planning, tax planning and estate planning to insurance and risk management. Over the course of two three-hour test sections completed in a single day, test-takers answer 170 multiple-choice questions.
The CFA Institute is the organization behind the Chartered Financial Analyst credential. Becoming a CFA is an ordeal, requiring candidates to complete three levels of exams and taking, on average, four years to achieve. The Level I CFA exam, Knowledge and Comprehension, focuses on investment tools professional standards and consists of 240 multiple-choice questions. Only 43 percent of test-takers pass this exam. The Level II exam, Application and Analysis, encompasses 12 multiple-choice questions based off of 20 to 30 vignettes that emphasize the application of your knowledge to the situations real analysts face involving asset valuation. The pass rate for this exam is 45 percent. The Level III exam is titled Synthesis and Evaluation. Through an unspecified number of questions again drawn from 20 to 30 vignettes, test-takers show their skills in portfolio management. The pass rate is somewhat higher for this exam, at 56 percent.
There are also numerous credentials focused on investments, such as the Chartered Investment Counselor (CIC), Certified Investment Management Analyst (CIMA), Certified International Investment Analyst (CIIA) and Certified Fund Specialist (CFS).
Financial Risk Management Certification Exam
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Coming out ahead in the field of finance means knowing how to manage risk. The Financial Risk Manager (FRM) designation conferred by the Global Association of Risk Professionals (GARP) attests to your skills in analyzing and mitigating risk. Before you can earn this credential, you must complete two pencil-and-paper exams.
Part I of the FRM Exam is the longer part, consisting of 100 multiple-choice questions that cover topics such as fundamental concepts in risk management, valuation and risk models, financial markets and products and tools of quantitative analysis. Candidates must complete the test within four hours, and the pass rate is usually between 40 and 50 percent. Although test-takers also have four hours to complete Part II, this exam has only 80 questions, again in multiple-choice format. Part II focuses on applying quantitative analysis, valuation and risk modeling and other tools to issues that include credit, integrated risk management and operational risk management. Usually, between 50 and 60 percent of test-takers pass this exam.
You may choose to take both exams on the same day, with Part I offered in the morning and Part II in the afternoon. However, you must earn a passing score on part I before part II will be graded. Otherwise, you will receive no grade on Part II and will need to retake it.
There’s a good deal of overlap between accounting – the field that emphasizes reporting of financial data – and finance, and some finance professionals choose to pursue a certification relevant to accounting. The Certified Management Accountant (CMA) credential from the Institute of Management Accountants emphasizes skills in compiling financial data for a company’s internal use, helping guide the planning and strategies of business leaders. Another credential with a two-part exam, the CMA designation is only awarded to test-takers who prove their proficiency first at financial planning, performance and analytics and then at strategic financial management.
You might not think of a Certified Public Accountant (CPA), whose focus is on financial reporting for public purposes such as taxation, having much to do with a finance career. However, the American Institute of CPAs offers a separate Personal Financial Specialist (PFS) designation for candidates who are proficient in both public accounting and financial planning. To get this credential, you must pass the CPA exam, complete additional financial planning education and either earn a passing score on one comprehensive PFS exam or complete five certificate programs offered by the American Institute of CPAs. The exam requirement for the PFS certification is waived if you are already certified as a CFP or a Chartered Financial Consultant (ChFC). Meeting either of these requirements means that you already passed an exam in financial planning as well as your CPA exam.
Just as an accounting credential may prepare finance professionals for different roles, so can specialized credentials like Certified Government Financial Manager (CGFM), Certified Healthcare Financial Professional (CHFP) and Energy Risk Professional (ERP).