MBA + CFA = Better Money Managers?

MBA + CFA = Better Money Managers? Passing the Chartered Financial Analyst exam doesn’t ensure it Jul 9, 2012, 7:00 am EDT | By Will Ashworth, InvestorPlace Contributorhttp://www.investorplace.com/2012/07/mba-cfa-better-money-managers/

Businessweek recently ran an article discussing the upswing in MBA students who are also interested in taking the Chartered Financial Analyst (CFA) exam. Approximately 32% of finance students are also taking the CFA exam, a 28% increase in the number of students doing so. The CFA is seen as a ticket to a better-paying job, and it’s why half the people taking the first-year CFA exam are 25 or younger.

My question: Does it make for better money managers? The answer: Probably not. The problem with all this education, especially at such a young age, is it produces investment managers more concerned about making money for themselves than their clients. According to the CFA Institute, there are more than 95,000 charterholders in 135 countries around the globe. In Ontario, where I live, you either must have completed the CFA and have at least one year of relevant investment management experience in the 36 months prior to registering as an advising representative for a portfolio manager or have received the Canadian Investment Manager designation with at least four years of relevant work experience. That’s why there are more than 7,500 CFA charterholders in Toronto alone, the highest per capita in the world. You simply can’t get an investment management job without at least some CFA exam experience under your belt. The CFA Institute, like many of our business schools, has created an implied need through marketing and public relations that financial institutions and government regulators have bought hook, line and sinker. Who doesn’t know a doctor or lawyer who went to medical or law school simply because it paid well? Perhaps it’s a cynical viewpoint, but when young people see the income potential of an investment management career, passion for investing becomes immaterial. Is this really who you want managing your money? Business schools in recent years have been trying to defend their $80,000 educations. In January, Businessweek reported that the unemployment rate for MBAs graduating in 2011 was 14%, nine percentage points higher than regular college graduates. Taken a step further, venture capitalist billionaire Peter Thiel, who had a lot to do with Facebook‘s (NASDAQ:FB) success, established a program in 2011 where 24 college students were given $100,000 to drop out of a university and focus their energy on creating things of real value for society. The establishment was aghast at the thought of someone promoting educational insurrection. However, as Thiel rightly implies, the mere fact that college graduates aren’t getting hired these days and student loans total $1 trillion make the value of a regular degree questionable. This is where the CFA Institute comes in. Having convinced employers that the CFA is an absolute must for anyone in a finance position, especially those who wish to manage money, it has reached out to business schools to broaden its domain. The biz schools see the writing on the wall: Ignore the CFA and lose more students. Therefore, in conjunction with the CFA, universities across the world are incorporating the CFA material into their business school curriculum. You still have to pass the exams, but at least you get classroom training to better prepare for the annual June ritual. It all sounds good in theory. In reality, it’s simply confusing the purpose of education. I’d like to think those who choose to go to business school do so because they want to learn how businesses function. I’d also like to believe that those enrolling in the CFA do so because they are passionate about investing. The truth is many enroll because it’s their meal ticket. That might not be so bad if we were talking about massage therapy, but unfortunately we’re talking about people’s retirements. And education does not equal passion. University of Toronto professor Gus De Franco and University of Texas at Dallas professor Yibin Zhou conducted a study in 2009 that compared the performance of sell-side equity analysts with the CFA designation to those without. The professors concluded that the analysts with CFAs issued more timely forecasts than those without. However, they also concluded that on most occasions, the statistical difference from an economic standpoint — the only one that counts — was negligible. What does all this mean? Many of the best investors, entrepreneurs, and CEOs would have been successful regardless of their education. Warren Buffett was investing long before he met Ben Graham, and while Graham certainly mentored the head of Berkshire Hathaway (NYSE:BRK.B), I’m sure if the former professor were alive today, he’d take very little credit for Buffett’s success. Buffett is good at investing because he loves it to his core. Society can continue to force educational standards on its citizens, but there’s little evidence to suggest that any of this improves job performance. And that’s especially true about the CFA. If it weren’t, we would see much better results from actively managed investments. And we don’t. ________________________________

Good post. The sad truth of finance is that there are plenty of people that really don’t give a damn about the industry, but choose it because of high salary potential.

Lawyers need grad school and the bar exam. Doctors need med school and residency. Finance professionals can jump in with an undergrad, start at $75k and be at 6-figures in a few years. It’s like a 3 lane highway, with one lane looking a lot faster. But soon as everyone starts crowding into that fast lane, it’s going to jam. The problem is exacerbated with the global economies tanking and the fact that finance is heavily cyclical. Nevertheless, the CFA charter could be the “law degree” or “MD” for the finance world.

People can debate all day long about the value added or “negligible value added” of the CFA, but the somber truth is: because so many people have bought into it, you almost have to or risk getting left behind. WIth 100k charterholders & 200k candidates trying to get it, the CFA ranks climb at 9k people per year. There will be 150k charterholders in just a few years more. All while the finance industry and availble jobs keeps shrinking and global economies getting uglier by the day.

It’s the crowding out effect. Soon, there will be so many qualified people with similar experience per job opening that hiring managers will looking for ways to trim the candidate pool down, and it won’t be long before the CFA status becomes a cut.

Now of course, if you have the stellar p&l figures to show you’re a rain maker, you’ll get a job regardless of the CFA or MBA. But for the younger generation of finance professionals who haven’t had that chance in the proving grounds, the options are limited.

At the end, the CFA charter is valuable and well-known, and far cheaper than an MBA. The real value of an MBA these days is the strength of its on-campus recruiting, which is essentially an exclusive job fair. In today’s world, anything below a top 10 MBA is probably a waste of time and money.

I am 23 yrs old, and I in the process of getting my MBA with a concentration in Finance with Kaplan. While I’m in the process of acquiring my online MBA I will also be in the process of gaining some relevant job experience to be a charter holder. When I acquire my MBA I will then focus on the CFA certification.

I hear what you guys are saying and I don’t want to become that greeding financial professional that doesn’t care about people investments but my own. But at the end of the day I know that I need to be financially stable myself in order to not only provide for me and my future family but others around me.

What advice would you give an up and coming financial professional to avoid the pitfalls of greed and focus on my own desires of helping others with their future?

This article is skewed because the fact of the matter is that we all work ot earn a living. If I wanted to do something altruistic, I would join the peace corp or the “Save the Manatees”. I think most people do the CFA or an MBA because they are goal driven and want an edge on the competition for job opportunities. Ultimately, the people that are only concerned with helping themselves and not their clients will fail because this business is about serving your clients honestly.

My advice to you LLDavidson would be to stop the online MBA immediately and just focus on your career and do the CFA or maybe do a traditional MBA. If the CFA is too difficult or time consuming consider doing the CFP.

Honestly, i am not trying to be a dick, but the finance industry is full of arrogant dickheads and would not give a resume a second look if they saw an online MBA from a for-profit school like Kaplan or UoP. Honestly, this is just honest advise and not trying to be a jerk.

Don’t get an MBA before 26, and if you do, go to Harvard’s 2+2, do NOT get an online MBA. And Kaplan is doing MBAs now? Princeton Review better up their game!

Can an Online MBA Help You Get Ahead?

Despite the research supporting online education, recruiters and hiring managers still see an online MBA as a second-class credential. In its Corporate Recruiters Survey, the Graduate Management Admission Council (GMAC), the nonprofit organization that administers the GMAT, reported that only 9 percent of companies surveyed actively recruit candidates from online MBA programs, as opposed to the 77 percent that pursue full-time MBA grads.

Gail Dundas, a spokesperson for Intel Corp., captures the prejudice in an e-mail: “We target hiring from top-tier MBA universities, and online degrees do not tend to be in the top tier.”

http://www.cbsnews.com/8301-505125_162-51342353/whats-an-online-mba-worth/

How exactly does an online MBA work?..just distribute lecture notes/videos by email/portal login??..But yeah as everyone else has said… eventhough a traditional MBA may not guarantee anything, the value of an online MBA is quite questionable…especially given that a large proprtion of an MBA’s value comes from networking/groupwork rather than textbook knowledge per se…

Also, I bet most students at reputable MBA programs get jobs through on-campus recruiting. It’s probably worth paying a couple hundred thousand dollars to be thrown in front of that many hungry recruiters, even if it’s a one time thing.

If you want to work for a hedge fund or other “high end” asset manager, an online MBA is basically worthless. If you want to be a financial planner for lower or middle income folks or maybe work for a government pension fund, I can see some value in an online MBA particularly when paired with the charter.

Sorry to be blunt, but an online MBA is worthless. Especially if its from Kaplan? Since when did they start offering MBAs

I would venture to say, from an educational stand point, excluding networking and the like, any MBA is worthless. It is the same stuff as a business undergrad degree. When you take out the networking factor, as in an online MBA, you have a negative NPV investment. Any person doing an online MBA that has studied this concept should automatically be failed.

Since they realized there are loads of people dumb enough to pay for it, and Kaplan realized they can make lots of $$$.

Actually, If two resumes came in and both had the exact same undergrad wth the exact same degree and the exact same GPA but one had an MBA from the University of Phoenix or Kaplan U or any other university like that, I would throw that resume in the trash and call the other candidate for an interview. At least he/she was smart enough not to throw their money away and waste their time on an education from a for profit school.

You know, I bet there are some employers that would choose the guy with the online MBA. Think of the Office Dunder Mifflin type places. Only 30% of US adults have college degrees. There must be some kind of job market that straddles the 30% margin.

The kid wrote he is in the process of gaining relevant work experience so I assume he is already in finance. I do not know why he is wasting his money on a useless degree.

Some education is better than no education.

I honestly think that I would have more respect for someone that went to a state school undergrad and no MBA than someone who had the same undergrad and went on to get an online MBA from a place like UOP or Kaplan…Just me. I feel like that would just be a wart on a resume.

I appreciate everyone’s advice. I joined this forum to get expert knowledge and advice about the financial world. I wouldl take your advice, apply it, and do my own research about Top Tier MBA programs. Thanks again!

That’s a good attitude to have. Most people would have gotten highly offended. Honestly, start pursuing the CFA charter now and bypass all the BS that goes with getting an MBA, especially if you are already working in the industry.

Thanks, I’m not working in the industry yet, I am volnuteering at my church and advising them through their financials; I’m running a small marketing business and handling those financials, and I have an interview this week for an internship with an Investment firm. I am really trying to get my foot in the door in one of this financial institutions but I they want the financial experience and won’t give me shot at gaining the experince with them. That’s why I’m looking at my MBA combined with CFA certfication. My question to you is that can I land a job with a financial instituion with me having a Bachelors of Science in Business Administration. Or would I have to look at getting my CFA first? Also what direction did you take and what is your educational background?