“Two roads diverged in a wood, and I took the one less travelled by, and that has made all the difference.” – Robert Frost
The beauty of this quote is that it holds a different meaning for everybody because of how subjective it is, to some it could be Actuary while to some, CFA. Both the paths are too similar and confusing for a student to tread.
Now let’s begin to unfold these paths!
An Actuary is the backbone of financial security. They quantify financial risks and identify solutions to safeguard against potential losses. (What does an actuary do?).
The main requisite that a student must possess before taking up an actuarial exam is their love for and understanding of mathematics. Almost all of the actuarial exams deal with numbers, hence it is important for a student to understand the arithmetic and solve problems quickly and accurately.
One must also have an inclination towards statistics, economics, business and computer science. Analytical skills will be gravely tested.
A Chartered Financial Analyst is an investment and financial professional.
The main requisite that a student must possess before taking up a CFA exam is knowledge of finance or a strong inclination towards finance. It will require a student to explore Portfolio Management, Financial Reporting and Analysis, Equities and Derivates – to name a few domains. In the initial stages, to clear Level I, one must have the ability to store and recollect vast information on 10 independent topics. Level II and Level III will test the understanding
While one must be ready to devote about 5-6 years of their lives to Actuarial studies, the other will take approximately 2-3 years to clear all 3 levels of CFA exams. It largely depends on the effort and time that one has put to prepare for the exams.
One thing that limits actuaries from clearing it sooner is the cap that is set on the number of exams that can be given in one semester.
Additionally, one needs to be from a good financial background to opt for CFA because it may prove to be a monetary burden if not faired well.
Both these sets of exams will require students to give up their social life to devote themselves fully to studying as it will take an approximate of 300 hours to cover the study material of one subject/level. Also, be inquisitive, disciplined and driven on a daily basis to be able to master the art of self-learning.
Although their paths may seem very different, they lead to a few common destinations.
As an actuary, it is vital for a student to take up an internship after they pass 2-3 exams as it will give them a clear understanding of the application of their knowledge. It will also allow them to explore various sectors and discover their own interest and specialization.
Gradually, with the completion of 4-5 exams, a sufficient work experience alongside a graduate degree (Which degree to pursue along with Actuarial Science?), they can start working as full-time professionals. One will find it quite challenging to begin working as a full-time employee without enough work experience.
As a CFA though, work experience isn’t given as much weight. Clearing all 3 CFA levels is the gate pass to all of the KPOs and financial services industry. Having work experience can prove to be advantageous but not a game-changer.
The curriculums clearly show that CFA deals with finance and investment qualitatively where Actuary deals with it quantitatively, hence both can enter into Finance and Investment.
Actuaries and CFAs will find themselves choosing one destination from various options plated for them.
For Actuaries, these are Life Insurance, Health Insurance, Pensions, Property and Casualty Insurance, Consultancies (Types of actuaries). Shifting the focus from traditional areas to non-conventional ones: industries affected by major risks that need to be duly assessed. Casino and gaming is one such industry that is gaining momentum amongst Actuaries.
For CFAs, the topmost employers are Investment Banks and Consultancies and some traditional areas to work include Portfolio Management, Research Analyst, Investment Banking, Mergers & Acquisitions and Equities.
Make a decision wisely, on the basis of your own capabilities and interests as you will be devoting quite a lot of time and effort to these professional exams. A quick advice – do not be hesitant to change your path mid-way, it’s always better to explore further and find your own calling.