What is a Chartered Financial Analyst?
Chartered Financial Analyst (CFA) is a prestigious certification by the CFA Institute, which is recognised globally. To achieve this certification, you must pass three stages of exams covering subjects like economics, ethics, accounting, investment, financial analysis, security analysis, etc. This has to be done in addition to holding a bachelor’s degree and at least 4 years of work experience.
The certification’s global recognition provides job opportunities and higher earning potential, with over 160000 CFAS working in 164 different countries. CFA is best for candidates who want to pursue their careers in the investment industry, covering topics like wealth management, credit finance, equity research, investment banking, corporate finance, etc.
What is Financial Modelling?
Financial modelling, a skill in Financial analysis, which comes with an objective to combine accounting, finance, and business metrics to create a forecast for a company’s future performance.
It helps to create a summary of the company’s income and expenses in the form of a spreadsheet. It is basically an approach used by almost every business, investor, and individual to make apt financial decisions.
Relation between CFA and Financial Modelling
Now that we have understood what CFA and financial modelling are, we need to understand the correlation between the two. These courses can be a dynamic duo in the financial market to analyse complex data.
• Risk management
This management is a skill covered in both CFA and financial modelling courses by understanding risk analysis and using tools such as budgeting, planning backup strategies, cash flow analysis, & speculation of pitfalls. Financial modelling courses also use capital structure instruments like debentures to quantify risk analysis.
• Comprehensive analysis
CFA includes investment, financial analysis, and ethics, whereas financial modelling turns this into detailed models like relative valuation models for the use of companies and investment analysis.
• Communication
While financial modelling translates complex data into clear formats and insights, CFA focuses on effective financial communication.
• Career Advancement
Both CFA and financial modelling courses offer new opportunities for career growth by building new skills and knowledge for the candidate. Pursuing a dual course will help the professional to stand out in the crowd. And these courses will build skills such as critical thinking, interpretation, communication & analysis. Learn what career opportunities get unlocked when you pursue financial modelling by clicking here.
• Decision making
The final and most important part of these courses is the ease of making financial decisions. CFA health is taking an informed investment decision where financial modelling quantifies that decision with the possible results.
Advantages of pursuing both CFA and Financial Modelling
Financial modelling creates detailed models for the organisation, whereas CFA focuses on advanced financial topics. Both of these courses can help the candidate to stand out among all the other people in their field. Various advantages of taking these courses can be,
• Career growth and advancement for the professional in their field.
• Ease of analysing big data to understand potential risk and building a financial model for the organisation.
• Providing an in-depth understanding of the business’s day-to-day operations.
• Understanding the objectives of businesses with an accurate financial forecast.
• Contribution to developing finding strategies to support the business objectives.
Difference between CFA and Financial Modelling
Well, both of these courses offered numerous benefits when done together; there are a few differences that made both of these courses stand out alone as well. Some of which are,
- The CFA program is a theoretical course that covers financial concepts in depth, including topics such as ethics, economics, investment and risk analysis. On the other hand, financial modelling is a practical skill-centric course, which involves working in Excel to build the financial model, valuation model and projections.
- While financial modelling courses can be completed in a few weeks or months through training programs, CFA is a full-time course that requires three levels of exams, taking 2 to 4 years for completion and earning a degree.
- Both of these courses offer various career opportunities and job roles. CFA offers career opportunities in investment banking, hedge funds, mutual funds, corporate finance, risk analysis, and asset management firms etc. Whereas financial modelling offers career opportunities in private equity, venture capital, financial consulting, corporate finance, financial planning and analysis, strategy roles, and investment banking.
Choosing the Right Path
Both CFA and financial modelling courses offer a wide range of career opportunities. Choosing the right path between the two will depend on your choice of career in the finance industry.
If you are looking for careers in portfolio management, investment, mutual fund, or asset management, you can opt for the CFA course. But if you are looking for career opportunities which can include corporate finance, investment banking, mergers and acquisitions, you can opt for Financial Modelling.
However, you can begin with financial modelling to gain practical experience and later opt for the CFA to strengthen your value. This combination will help you catch the eye of the employer.
Conclusion
The finance industry requires practical knowledge and skills such as critical thinking, analytical skills, communication, management, etc., and values your expertise. To gain such skills and knowledge, you can opt for courses like CFA and financial modelling.
While financial modelling will offer your practical knowledge about the finance market, the CFA will help you with the certification and a more secure job. Choose the right course based on your interests and career aspirations.