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FRM is Becoming an Alternative to CFA, MBA (eFinancialCareers)

A recent article from eFinancialCareers …

Sarah Butcher, 5 July 2011

If you’re not a recent graduate and you want to show your mettle to financial services employers, you’ve traditionally had two main choices: the CFA or the MBA. Or if you’re in London, you’ve had three: the CFA, the MBA, or the Masters in Finance from London Business School.

However, both an MBA and the LBS Masters in Finance are expensive. And some say the CFA Charter has less door-opening potential than it used to now that so many people have achieved it.

Maybe now is therefore the time to consider an alternative. Maybe now is the time to consider the FRM, the Financial Risk Manager’s Qualification.


The FRM is a US-based, but global, qualification run by the Global Association of Risk Professionals (GARP).

Consisting of two parts, it is open to anyone with at least two years’ ‘professional full-time work experience’ in financial services risk management, trading, portfolio management, faculty academia, industry research, economics, auditing, risk consulting, and/or risk technology.

It will cost you around $650 and require around 400 hours in study time.

The syllabus covers everything from risk measurement and management (predictably) to quantitative analysis techniques, valuation models and financial markets and products.


The FRM isn’t new. It’s been around since 1997, but grew monumentally in 2008 following the financial crisis. Last year, 23,324 people took the two exams worldwide - vs. 140,000 in June alone for the CFA.

There are 26,000 existing FRM holders worldwide (vs. 87,000 CFA Charterholders).

Alastair Graham, managing director of Europe the Middle East and Africa for GARP, argues that the FRM exam is poised for growth in London in the same way that the CFA was a decade ago: “In the past, the only qualification you could take as alternative to an MBA was the CFA. Now people are increasingly looking at the FRM,” he says.

Needless to say, the FRM is mostly suited to risk managers. However, Graham says it’s also taken by salespeople and traders.

There are no figures for how much people with the qualification earn, but Graham says he’s confident it can, “significantly enhance someone’s earning power.”

Like the CFA, the FRM is not easy: the pass rate for both exams last year was around 54%, thereby conferring kudos on candidates who pass successfully.

Aside from the fact that the employment market in London is less saturated with FRMs than with CFAs, you may also wish to take the FRM with an eye to the likely resilience of risk jobs. As we said last week, US banks are being instructed by the SEC not to dump risk staff in forthcoming redundancies.

“The FRM is a global qualification,” says Sheldon Paul at risk recruitment firm Cameron Kennedy. “When I see it, it tells me that a candidate has a little more focus. I’ve got some clients that really do insist upon it.”


On the other hand, the FRM is no magic career bullet and you would be foolish to think it is.

The fact that only 26,000 people have the qualification worldwide (and that many of them are currently in the US) means the network of alumni who’ll be rushing to hire you is small.

“Our main problem is still awareness,” says Graham. “When you talk to recruiters and HR people in banks, many of them aren’t aware of the FRM. A lot of people still take the CFA by default, but that’s changing,” he adds.

Priya Mariannie, senior consultant in risk at recruitment firm PSD Group, says clients sometimes mention the FRM but that none specify it as a must-have. “It’s a plus and will attract interest, but clients don’t request it – unlike the CFA,” she says.

Equally, if you do the FRM with a view to getting into a front office position, you may find yourself pigeonholed in risk. Given the current state of front office hiring, this may be no bad thing, however.

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I am CFA L3 retaker and I am interested in FRM program too, while I have reviewed the outlines of the 2 FRM exams and I found that about 50% of the curriculum overlaps that of CFA curriculum.

Aside from some fundamental topics (Statistics or Quantitative methods, Fixed Incomes, Derivatives, Basic Concepts of Risk Management, VaR, Portfolio Construct, Portfolio Risk & Rreturn, Portfolio Performance Evaluation), it is true that many risk management concepts are covered in CFA curriculum, including those important topics (e.g., risk managements of exchange rate/equity/fixed income/commodities using forwards, futures, options and swaps are covered more in-depth in CFA curriculum).

I really woder why GARP did not struture the FRM exams in such a way that CFA charterholders and those passed all CFA 3 exams can be exempted from FRM Part 1 exam !

This has been discussed thoroughly in the FRM Forum and parts of the CFA Forum. The coverage overlap is signicantly less than 50%! The coverage depth is different for the FRM exams relative to the CFA exams. For example, the quant material in the FRM Level 1 has a greater breadth and goes 5 levels deeper than the CFA exams. The CFA I and II exams only cover simple and multiple regression, which is one chapter on the FRM Exam out of 20 other chapters (e.g. distributions). In addition, the FRM exam not only covers the application of derivatives (e.g. hedging), as does the CFA exam, it also covers extensively the valutation of derivatives, which is not included in the CFA material.

I recommend to anyone to take the FRM program, but you need to come prepared for the same extensive preparation and challenge as found in the CFA level II and III exams. Good luck!

In 2011 FRM Part 1 curriculum, the quant material covers following topics :
Review of Probabilities, Review of Statistics, Linear Regression with One Regressor, Regression with a Single Regressor : Hypothesis Tests and Confidence Intervals, Hypothesis Tests and Confidence Intervals in Multiple Regression, Discrete Probability Distributions, Continuous Distributions
Although there is more or less nuance due to different texts are used, I don’t see much difference.

Valuation of derivatives are also overed extensively in CFA L2 curriculum ! Maybe even more in-depth !

Aloha668 - I already finished the FRM program and will sit for the CFA Level 3 exam in June. As a result, I am sharing you my experience. Just because it says on the syllabus that the material covered is similar for both designations, it doesn’t necessarily mean it is covered in the same way. If you do a quick search on this forum, you will find plenty of comments regarding this discussion. Good luck!

CFAFRM, thank you for your input ! I am not arguing with you but it is good for us to have some discussions here.

I finished my stuying of derivatives by reading those chapters (readings) in Hull’s textbook as I have the textbook on my hand. My view is that except that continuous compounding is used instead of discrete compounding, nothing is very different from those in CFA curriculum. Bluntly speaking, maybe CFA curriculum is more in-depth than FRM curriculum regarding the “Valuation of Derivatives (CFA L2) and the “Risk Management Applications of derivatives (CFA L3)”.

I also have reviewed the quant material in FRM curriculum carefully, it is true that a few distributions are not covered in CFA curriculum, but the key point is that if those distributions are absolutely critical or required in risk management. If not, then the nuance does not make sense.

The fixed income portion in CFA curriculum is more in-depth as well, in my opinion.

I think PRM’s way is much reasonable and I am considering to go with PRM.

Sorry Aloha668, but I have also done both the FRM and CFA and the FRM goes into more depth on all things quantitative than the CFA. CFAFRM is right on this.

That said, the curriculum does change much more in the FRM than the CFA (30% a year or so) - my girlfriend got caught out on this in May when, having been unable to do the level II exam last November, relied on the old materials to study for the May exam to discover a couple of weeks before the exam date that a lot of the stuff had changed. She thus postponed until this week’s exam.

The new material is different from last November and she thinks it goes into a lot less depth on some of the credit modelling than when I sat in in November 2009. This may be a temporary thing or a change of focus given that the focus on credit derivatives that was so intense then has now faded a little. Who knows? All I know is that I found none of the CFA levels as tricky as the FRM.

Millview, than you for your response !

I recognize that some topics in FRM curriculum are not covered in-depth in CFA curriculum and some other topics in FRM curriculum are even not covered in CFA curriculum at all. But I shall recognize that the quantitative methods (statistics), derivatives (basic concepts and risk management applications, fixed income and portfolio concepts (including construction and performance evaluation„,) are covered more in-depth in CFA curriculum.

What I meant was that the FRM exams shall be structured in such a way that its Part 1 curriculum covers all the stuff which are already covered in CFA curriculum and Part 2 curriculum covered those stuff not in CFA curriculum, and CFA charterholder shall be exempted from the Part 1 exam. This is the way of PRM.

Maybe FRM exam questions were more tricky than CFA exams, but I think this has somethings to do with the readings (whether they are well written, organized in a systematic and/or integrated ways, as well as the stuctures of the exam questions tested). Trickiness of the exam questions is another matter and more tricky questions tested does not necessarily mean good dicriminability of the exam.