When looking for a financial advisor, you’ll encounter various designations and licenses, all of which can be confusing to differentiate. Two common fiduciary credentials are the CMA and CFA, each with distinct qualifications and expertise. Learning the differences between the two can help you choose the right advisor for your financial needs. A knowledgeable financial advisor can assist in developing a tailored plan to align with your goals.
What Is the CMA Designation?
The certified management accountant (CMA) designation is for advisors who specialize in accounting. It illustrates that the professional has expertise in financial accounting and strategic management. This designation is primarily for accountants who work outside of CPA firms, so it can provide a solid foundation for understanding the financial needs of clients. Most applications complete within one year because it is not as intensive as the requirements for becoming a CPA (certified public accountant).
What Is the CFA Designation?
The chartered financial analyst (CFA) designation provides a strong foundation in real-world portfolio management and advanced investment analysis. These professionals often make investment decisions as research analysts or portfolio managers for investment firms, family offices or high-net-worth clients. Candidates study accounting, economics, money management and other relevant topics as they prepare for their exams. Certification requires passing three notoriously challenging exams. And most students fail the first one.
CMA vs. CFA: Similarities
The CMA and CFA are both prestigious professional designations that require the rigorous study of various financial topics to qualify for exams. Central bodies govern and administer these exams. They also adhere to a code of professional ethics and demand that their members do the same. Members must meet continuing education requirements covering changes in laws and regulations to maintain their membership.
CMA vs. CFA: Differences
While there are many similarities when comparing the CMA vs. CFA, there are differences, as well. These are the main differences that you should know:
- Accrediting entity. Different governing bodies administer the exams for each designation. The Institute of Management Accountants offers the CMA, while the CFA Institute governs CFA certification.
- Testing requirements. Testing requirements for the CMA and CFA are also different. The CMA has a two-part exam covering 12 competencies, while the three CFA exams cover advanced knowledge of investment tools, asset valuation, portfolio management and wealth planning.
- Focus of the designation. The CFA designation focuses on investment analysis, while the CMA designation signifies expertise in financial accounting and business strategy.
Which One Is Best for My Portfolio?
When comparing the CMA and CFA designations, both are highly respected and require extensive knowledge of key financial topics. However, for the average investor seeking a financial advisor, the CFA designation is generally the more suitable choice.
The CMA designation focuses on accounting, financial strategy and business operations, making it particularly valuable for small business owners and corporations. CMAs specialize in areas such as financial reporting, cost management and risk management — critical components of business success, but not typically relevant to individual investment decisions. As a result, CMAs often pursue roles such as corporate treasurers or controllers.
On the other hand, CFAs are trained in asset valuation, portfolio management and wealth planning — areas directly related to investment strategy. While many CFA professionals work for large investment firms, their expertise is generally more aligned with the needs of individual investors compared to CMA professionals.
Bottom Line
Professionals in the investment world often hold certifications and designations that the average investor is not familiar with. They study long hours to pass exams to qualify for these prestigious certifications. While all of these professionals hold valuable knowledge, some certifications are a better fit for working with investors. When comparing the CMA vs. CFA designations, a CFA’s focus on investments, company valuation and wealth planning may be the better choice for a retail investor over a CMA’s credentials in corporate accounting and business strategy.
Investing Tips for the Future
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