CFA® Exam

There are many credentials and degrees a financial professional may hold. However, there is no other than Chartered Financial Analyst® or CFA® that earns respect or is so rigorously focused on developing investment skills and knowledge. The magazine ‘The Economist’ referred to the CFA® charter as the “gold standard,” writing that:

qualification is roughly equivalent to a specialized postgraduate finance degree, including a mixture of economics, ethics, law, and accountancy… Whereas tens of thousands of finance degrees are available worldwide, ranging from the excellent to the worthless, there is only one CFA®, managed and examined by an American association of financial professionals, the CFA® Institute.

My journey towards earning my CFA® charter has been pretty exciting, enriching as well as challenging. There were many ups and downs – I passed the CFA® Level 1 and the CFA® Level 2 at once. However, CFA® Level 3 was a tough nut to crack. Nevertheless, it took me three attempts to pass CFA® Level 3. The CFA® charter has been incredibly beneficial for my Equity Research Analyst career. Most recently, I received the fantastic news that my younger brother Neeraj Vaidya (who works with the CEO of a global firm and lives in Dubai) has also passed the CFA® Level 3 examination. He is now looking forward to applying for the CFA® charter. I am sure he has a great career ahead.

Appearing for CFA® Level 1 exam? – Do have a look at these excellent 70+ hours of CFA® Level 1 Training Tutorials

Also, do not miss CFA - Important Dates and Schedules.

If some of you are confused between CFA® vs. FRM, here is a quick infographic that may help you a bit – CFA® vs. FRM

I have trained and mentored hundreds of students for the CFA® exam and hope to spread awareness of this most valuable CFA® program through my blog. This article focuses on the nuts and bolts of the CFA® examination –

The Chartered Financial Analyst (CFA®) Program, administered by the CFA® Institute, offers a graduate-level curriculum and examination program to expand your working knowledge and practical skills related to investment decision-making.

Given the time, money, and effort, is the CFA® designation worth pursuing? Below are the main reasons why you should date CFA® –

• CFA® is the most recognized global designation for finance professionals across the globe.
• Not only employers but also clients consider CFA® Charterholders as experts in Finance.
• Career advancement due to the CFA® designation is no brainer. This program is instrumental in investment banking, portfolio management,investment research, security analysis, etc.
• A recent survey by the CFA® Institute noted that the CFA® Charterholders are primarily working as portfolio managers (22%), research analysts (14%), and chief executives (7%)

source - CFA® Institute

Additionally, in July 2016, the CFA® Institute surveyed the CFA® candidates and found the below reasons as their primary motivation to take this exam –

• 37% are taking this exam because of Career Advancement opportunities that open up
• Another 20% do this to attain a higher level of knowledge
• 10% believe that it improves the chances of obtaining a job.

The below table showcases essential areas of the CFA® Examination.

Critical Highlights about CFA® Exam format

CFA® Level 1 exam

• This exam primarily focuses on developing basic concepts in Finance.
• Multiple choice questions format makes it easier for exam takers; however, you must have around 1.5 minutes per question on average.
• No Negative Marking

CFA® Level 2 exam

• The exam format is mini-cases that are 1.5 pages in length on average.
• Each item set or mini-cases has six questions each. Answers to each question may depend on your previously answered question.
• No Negative Marking

CFA® Level 3 exam

• The critical thing to note is that the Morning session is an Essay Type Format where exam takers must solve the case studies and write appropriate answers.
• The Afternoon session is similar to the format of CFA® Level 2, where there are mini case studies with Multiple choice question answers.
• No Negative Marking

Below are the CFA® Topic Areas (2022) in each Level.

CFA® Level 1

• The main focus of the CFA® level 1 exam is to create a solid foundation in Finance.
• Please note that Financial Reporting & Analysis, Ethics, and Quantitative Analysis represent close to 50% of the examination weightage. If you score well on these three topics, there is a good chance of passing the CFA® Level 1 exam. However, other issues cannot be ignored, some of which are easier, and you may score good points on them.
• CFA® Level 1 examination is relatively easier for Finance Graduates and those with prior knowledge of accounting.
• Non-finance graduates (engineers, science, arts, etc.) may find Financial Reporting & Analysis a bit challenging. However, it would help if you did not worry too much. If you spend the appropriate time on this topic, you should sail through. You can have a look at this Finance for the non-finance tutorial.
• As an engineer and an MBA in finance, I found  Financial Reporting & Quantitative Analysis and Quantitative Analysis are easier to study. However, I struggled a lot with Ethics and Economics.

CFA® Level 2

• CFA® level 2 is a slightly tricky exam as compared to CFA® level 1 because of 2 reasons a) curriculum is now more challenging as compared to CFA® Level 1, and b) competition is between serious candidates who have passed the Level 1 examination.
• Four topics – Ethics, Financial Reporting & Analysis, Equity Investment, and Fixed Income represent approx. 50%-80% of the weightage.
• The significant change in the pattern is that there is a 21 item set (each around 400-800 words) with six multiple-choice questions in each session (Morning & Afternoon Session). These six questions may be dependent or independent of each other.

CFA® Level 3

• The main trick in the CFA® Level 3 examination is the essay Type question paper. It is the first time in the CFA® examination that you are expected to write essays.
• The backbone of the essay type question paper is Portfolio Management (representing 45% weightage). It is common wisdom that the essay type question paper creates a make-or-break situation. It is found that the afternoon exam that consists of item set questions is relatively easier for most of the candidates.
• I am a typical laptop and a gadget guy and don't use a pen or notebook. However, after almost five years, I picked my pen for earnest handwriting for this exam and realized that my writing was barely legible. So, I had to practice handwriting to cross the minimum legibility benchmark. Even then, I recall that my hands were hurting after the Morning session, so I better practice (hand) writing.

Below is the examination fees for the CFA® 2022 Exam (Levels I, II, III)

• The exam fees of the Standard Deadline ($1,000) costs more than that of the Early Deadline ($700). In addition, there is a one-time enrollment fee of $450. Also, note that it is much cheaper to register for the exam early.

CFA® results are usually announced after eight weeks of the CFA Exam date. CFA® Level 1 and 2 exam results are available on the CFA® Institute website and through emails. CFA® Level 3 results are available in ten weeks to post the exam day.

Out of every 100 CFA® Candidates, only 15 candidates will finally crack it!

Before we discuss the individual Level the CFA® Exam passing rates, it will be interesting to look at the overall completion rate. Completion rate (%) is the number of candidates who have passed cumulatively CFA® Level 3 exams divided by the total number of cumulative candidates who have ever attempted the CFA® examination. This number provides us a broad idea of how many finally pursued and cleared all three levels.

• Since its inception, a total of 15.4% of CFA® Candidates passed the CFA® Level 3 exams.
• Most recently (2005-2014), a total completion rate of 14.6% was observed.
• It implies out of every 100 CFA® candidates, about 15 CFA® candidates will finally pass CFA® Level 3. However, the remaining 85 candidates may eventually opt out.

Now let us look at the passing rates for each Level.

CFA® Level 1 Exam Passing rate is closer to 45%

• The past ten years saw that CFA® Level 1 examination passing rate was in the range of 43% to 45%, with an average passing grade of 43%
• The average passing rate for the December examination was 43%
• The average passing rate for the December 2018 examination was 45%
• The average passing rate for the June 2014 examination was 40% (attractive!)
• The average passing rate for CFA 2015 - Level 1- 42%, level 2- 46%, and level 3- 54%.
• The average passing rate for CFA 2016 - CFA Level 1- 43%, CFA level 2- 46%, and for CFA level 3- 54%
• The average passing rate for CFA 2017 - CFA Level 1- 43%, CFA level 2- 47%, and for CFA level 3- 54%
• The average passing rate for CFA 2018 - CFA Level 1- 43%, CFA level 2- 45%, and for CFA level 3- 56%
• The average passing rate for CFA 2019 - CFA Level 1- 41%, CFA level 2- 44%, and for CFA level 3- 56%

CFA® Level 2 Exam Passing rate is closer to 44%

• The past ten years saw that CFA® Level 2 examination passing rate in the range of 32% to 56%, with an average passing grade of 44%
• June 2014 examination passing rate was the highest at 46% in the past eight years.
• To clear CFA 2015 you need Level 1- 42%, level 2- 46%, and for level 3- 54%.
• CFA 2016 you need CFA Level 1- 43%, CFA level 2- 46%, and for CFA level 3- 54%
• CFA 2017 you need CFA Level 1- 43%, CFA level 2- 47%, and for CFA level 3- 54%
• CFA 2018 you need CFA Level 1- 43%, CFA level 2- 45%, and for CFA level 3- 56%
• CFA 2019 you need CFA Level 1- 41%, CFA level 2- 44%, and for CFA level 3- 56%

You have a 50:50 chance of passing the CFA® Level 3 Exam. 

• The past ten years saw that CFA® Level 3 examination passing rate in the range of 50% to 76%, with an average passing grade of 56%
• The 14-year average pass rate for all three levels of CFA (from 2003 to 2016) was 52%
• The CFA® Level 3 (June 2018) examination passing rate is 56%.
• The CFA® Level 3 (June 2019) examination passing rate is 56%.

To answer the above question, let us first look at a high-level comparison between the two.

Please note that there are many packages available at Schweser. For the above comparison, I have included the price of their essential self-study package. Before I attempt to answer the above question, the most critical question you must ask yourself is how much time you intend (consider reality) to spend for CFA® Level 1 Examination. Your preparation (CFA® curriculum notes vs. Schweser notes) will depend on the amount of time you are willing to spend.

Below are my set of tips that may prove useful (only applicable to CFA® Level 1 examination

If you have a 5-month Exam Preparation Time?

Let us face the truth; you do not have lots of time to prepare and pass this CFA® Level 1 examination. However, you have just enough time to give your best shot. With this, I recommend the following –

• Forget about the CFA® Curriculum Books. Just going by common wisdom shared on the majority of the CFA® forums, it takes around 200+ hours to go through the CFA® curriculum books (which you are short of)
• Go through the Schweser Video Tutorials. It may take a max of 20 hours, and these are a good starting point to prepare yourself for the exam.
• Once you have looked at the videos, go through the Schweser notes in detail. Though these are the summary version of CFA® books, I feel they are sufficient to ensure that you pass the exam. Reading Schweser notes will take around 80 hours or so
• The remaining time (if any) you must spend on attempting as many Mock Papers as you can and concept revision.
• I had only five months for the CFA® Level 1 exam and used this strategy to pass the CFA® level 1 examination.

If you have 200-250 hours for exam preparation?

If you can spend 200-250 hours preparing for the exam, then you will be in a dilemma – Should I touch CFA® curriculum books or should I look at Schweser notes or Both?

• Frankly speaking, you will have to decide either of the two, but not both. Either you can read through the CFA® curriculum books once (yes, only once!), or you can master Schweser by learning from their video tutorials, reading notes a couple of times, practicing mock papers, etc., all in 200-250 hours.
• My suggestion would be not to touch the CFA® curriculum books and spend time on the Mastering Schweser concept as per the timetable given below.

If you have the luxury to spend 300 hours?

If you have 300+ hours, then I would highly recommend a mix of CFA® Curriculum books as well as Schweser notes.

• The best way is to start with Schweser Video Tutorials and move to Schweser notes to ensure you have covered all essential concepts from exams.
• After that, I advise you to look at CFA® Blue Box Examples (discussed within the chapters) and then End of Chapter (EOC) Questions. It may take another 80-100 hours.

If you have less than 100 hours

• A piece of brutal advice, Go home! Do not try your luck. You would have already spent more than $1,000 on registration for the exam. Why waste this attempt?
• Consider the withdrawal option if you have already registered for the CFA® Exam. The withdrawal policy offered by the CFA® institute may come in handy. Click here for details.

To be eligible to enter the CFA® Program, there are two primary requirements –

• Have US Bachelor’s (Or Equivalent Degree) or be in the final year of your bachelor’s degree program at the time of registration
  • or have four years of qualified, professional work experience (does not have to be investment-related)
  • or a combination of work and college experience of at least four years.
  • Please note that Part-time positions do not qualify, and the four-year total must be accrued before enrollment.
• Have a Valid International Travel Passport – This is required for CFA® Exam enrollment and registration.

CFA® Institute provides two types of scholarships –

Access Scholarship

• It is a need-based scholarship designed for those who cannot afford the full CFA® program fees.
• In addition to financial needs, other factors are considered academic, professional, or other accomplishments, a candidate's interest in pursuing the CFA® charter, obstacles overcome by the candidate, etc.
• More than 2,600 Access Scholarships are awarded to CFA® Program applicants each calendar year.

 Awareness Scholarship

• It is given to critical influencers in academics and the financial community.
• This awareness scholarship is designed to raise awareness of CFA® Institute programs among key influencers by allowing certain strategically positioned groups and individuals to distribute and receive exam registrations at discounted rates.

For further details, you may refer to the CFA® Scholarship Page.

• CFA® Course of Study - CFA® Institute
• CFA® Level 1 Sample Material - Schweser
• CFA® Video Tutorials - Irafanulla
• CFA® Exam Information - Wikipedia
• CFA® Discussion Forum - AnalystForum
• CFA® vs. FRM Exam

Happy Learning! If you learned something new or enjoyed the post, please comment below. Let me know what you think. Many thanks, and take care.

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