Compass on financial papers indicating a decision - cfa vs. caia - Schweser

Posted By: Kaplan Schweser
Published: August 11, 2020

If you are exploring a career in finance related to advising clients on investment strategy, you’ve probably heard about the CFA® charter and the FINRA Series 7 license. So, how do you know which one to earn? In this article comparing the CFA charter to the FINRA Series 7 license, we give you everything you need to decide.

What do CFA® Charter and FINRA Series 7 mean?

The Chartered Financial Analyst® (CFA) charter is the professional credential offered internationally by CFA Institute to investment and financial professionals. The program covers a broad range of topics relating to investment and portfolio management, financial analysis, stocks, bonds, and derivatives, and provides a generalist knowledge of other areas of finance. Industry professionals worldwide recognize the CFA charter as the “gold standard” of all financial analyst designations.

Also known as the General Securities Registered Representative license, the Series 7 license is administered by the Financial Industry Regulatory Authority (FINRA), a regulatory body that regulates member brokerage firms and exchange markets. If you hold this license, you can sell corporate stocks and bonds, municipal bonds, mutual funds, variable annuities, options, direct participation program partnerships, collateralized mortgage obligations, and more.

It is possible to hold both credentials. Many CFA charterholders who take staff positions in the research departments of brokerages will go on to earn their Series 7 licenses. For Series 7 license holders who become investment advisor representatives or set up registered investment advisor firms, holding the CFA charter is beneficial to their business and clients.

CFA Charter vs. Series 7: Similarities

Both are finance industry credentials, and both are earned by passing a set of exams. The CFA exam has three levels. The Series 7 exam is a corequisite of another exam called the Securities Industry Essentials (SIE), and you must pass both exams to earn your license. The Series 7 exam is sometimes referred to as a “top off” exam because the SIE is a corequisite of several FINRA exams, and earning the Series 7 license requires specific knowledge on top of security industry basics.

CFA Charter vs. Series 7: Differences

Earning the CFA charter requires knowledge and expertise in a broad range of financial analysis topics, such as portfolio management, economics, reporting, quantitative analysis, and more. Its three levels of exams are intense, and each requires an average of at least 300 hours of study to pass. However, because it is a charter, it is not a requirement. You can be employed as a financial analyst, for example, without a CFA charter.

The Series 7 is a license, comparable to those you have to earn to sell real estate or insurance. Anyone who is a stockbroker must hold the Series 7 license. While also intense, this exam is generally believed to be significantly less difficult than the CFA. Its focus is also much narrower; it tests you on your knowledge of the concepts and functions of a registered representative.

CFA Charter vs. Series 7: Requirements

To become a CFA charterholder, you need to:

  • Have a bachelor’s degree (or equivalent) or be in the final year of your bachelor’s degree program. If you have 4,000 hours of relevant work experience or a combination of professional work and university experience that totals 4,000 hours, you are also eligible for the CFA Program.
  • Take and pass Level I, Level II, and Level III of the CFA exam.
  • Become a member of CFA Institute (which costs $275 and includes agreeing to abide by its code of ethics).
  • Provide CFA Institute with proof that you’ve been working full-time for 4,000 hours in a role that either involves investment decision-making or with a product that contributes to that process. This can include any work experience you had before before passing the exam, as well as after.

To earn the Series 7 license, you need to:

  • Take and pass the SIE exam. There are no degree or work requirements for taking this exam, although most candidates are either earning a college degree in a finance-related field or already have one.
  • Secure a sponsorship with a FINRA-member firm. You need to work for them for 4 months; after that, they can file a special application called a Form U4 that registers you for the exam.
  • Take and pass the FINRA Series 7 license exam. Like the SIE, there are no degree or work requirements, but most candidates have a college degree in a finance-related field.

Considering the CFA charter? Download this free Before You Decide to Sit for the CFA Exam eBook.

CFA Charter vs. FINRA Series 7: Exam Topics, Formats, Fees, and Pass Rates

In a discussion about CFA versus Series 7, people are most likely to be concerned about the exams. Here’s what you need to know.

The topics of the CFA exam are:

  • Ethical and Professional Standards
  • Quantitative Methods
  • Economics
  • Financial Reporting and Analysis
  • Corporate Finance
  • Equity Valuation
  • Alternative Investments
  • Fixed Income
  • Derivatives
  • Portfolio Management

The Level I exam is offered four times a year. Levels II and III are twice a year. To learn the exact dates, read this article. The format of the first two levels is multiple-choice. Level III has a written portion called constructed response and a multiple-choice portion. When you register for the Level I CFA® exam, you will pay a one-time enrollment fee of $450.

Because the CFA® exam has three levels, you will pay separate registration fees for each level. As of May 2019, the fees for each level are $700 for early, $1,000 for standard, and $1,450 for late registration. There is also a one-time enrollment fee you have to pay before you can take Level I. The pass rates for the June 2019 CFA® exams are as follows:

  • Level I: 41%
  • Level II: 44%
  • Level III: 56%

One thing that the CFA exam has in common with the Series 7 exam is that beginning in 2021, all levels will all be administered by computer at a Prometric testing center. Prometric also administers the Series 7 exam.

The topics of the Series 7 exam are:

  • Investment Risk
  • Taxation
  • Equity and Debt Instruments
  • Packaged Securities
  • Options
  • Retirement Plans
  • Interactions with Clients

Series 7 exams are administered throughout the year. After your sponsor submits the Form U4 application, FINRA opens up a 120-day window, and you can take the exam on the days it is offered within that window. The pass rate for the exam as of March 31, 2019 was 71%.

CFA Exam vs. FINRA Series 7 Exam: Preparation

Another similarity between the two credentials is that the exams are nearly impossible to pass if all the candidate does is last-minute cramming. So, whether it’s the CFA exam or the FINRA Series 7 exam, you should start studying early.

To prepare for the CFA exam, CFA Institute advises a minimum of 300 hours of study for each level. You should focus on the Learning Outcome Statements (LOS) from CFA Institute because they detail exactly what you are expected to do on exam day. CFA exam preparation classes can really help, as will immersing yourself in practice questions. In addition, you should plan to take as many mock exams as you can to get used to the whole exam process.

To prepare for the FINRA Series 7 exam, plan to spend 80–100 hours studying if you have a finance background and about 150 if you don’t. The questions are detailed and related to the day-to-day activities, responsibilities, and job functions of representatives. Therefore, you should expect it to be challenging. Series 7 exam preparation classes are recommended as part of the preparation process, along with making a study plan, focusing on learning concepts, using practice questions, and taking practice exams.

CFA Charter vs. FINRA Series 7: How to Choose

Deciding which designation to pursue really depends on what you want to do in your career. With a CFA charter, you have a number of career opportunities, such as portfolio manager, research analyst, consultant, risk manager, corporate financial analyst, financial adviser, and the C-suite. If you want a career selling stocks in a brokerage, investment firm, or bank, then not only is the FINRA Series 7 right for you, but it is required.

Of course, you don’t have to choose at all. Having both designations opens more doors in your career, especially if stocks and other securities investment products are your passion. No matter which path you choose, there is a wealth of information out there that can help you earn the credential or credentials you need. You can get started here and here.

Before You Decide to Sit for the CFA Exam

Free eBook: Before You Decide to Sit for the CFA® Program Exam

CFA Fundamentals eBook

Free eBook: CFA® Program Fundamentals, 2nd Edition