CFA® Exam

CFA Examination

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:

[The] qualification is roughly equivalent to a specialized postgraduate finance degree, including a mixture of economics, ethics, law, and accountancy… Whereas there are tens of thousands of finance degrees available around the world, 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. It took me 3 attempts to pass CFA® Level 3. 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 (works along with the CEO of a global firm and lives in Dubai) has also passed 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 this 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 am now hoping to spread awareness of this most valuable the CFA® program through my blog. This article focuses on nuts and bolts of the CFA® examination –

• • About the CFA® Program
  • Why Pursue CFA®?
  • CFA® Exam Format
  • CFA® Exam Weights / Breakdown
  • CFA® Examination Fees
  • CFA® Results & Passing Rates
  • CFA® Curriculum Books vs. Schweser Notes
  • Enrollment Requirements
  • Scholarship Opportunities
  • Useful CFA® Exam Prep Resources

What is the CFA Exam?

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.

Roles	Portfolio Management, Wealth Management, Investment decision making, Investment Analysis
Exam	The CFA® Program consists of three examinations (Levels I, II, and III).
CFA® Exam Dates	CFA® Level 1 – conducted twice in a year (1st week of December & 1st week of June); CFA® Level 2 & 3 worked once a year (1st Week of June)
The Deal	Each of the CFA® program’s three levels builds on the preceding one, and each concludes with a full-day six-hour examination. Candidates must pass each test before advancing to the next higher level, but are permitted to repeat an investigation if they fail to pass.
Eligibility	You must have one of the following: Bachelor’s (or equivalent) degree Be in the final year of bachelor’s degree program Have four years of professional work experience Have a combination of professional work and university experience that totals at least four years
Program Completion Criteria	Successfully pass the three exams; Have four years of professional work experience in the investment decision-making process; Join CFA® Institute as a regular member
Recommended Study Hours	A minimum of 300 hours of preparation per CFA® exam level is recommended.
What do you earn?	CFA® Charter

 

Why Pursue the CFA® Exam?

Given the time, money, and effort, is 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, and 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.

You may download the full details of the survey here – CFA® Survey.

CFA® Exam Format

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

CFA® Exam	CFA® Level 1	CFA® Level 2	CFA® Level 3
Focuses on	Basic Concepts in Finance	Equity, Fixed Income & Accounting	Portfolio Management Application
Exam Format	Multiple Choice with 3 choices	Item Set/ Mini Case Study	Item Set + Essay
Questions	240 MCQ	20 Item Sets	10 Item Sets + 12 Essays
Morning Session	120 MCQ	10 Item Sets	12 Essays
Afternoon Session	120 MCQ	10 Item Sets	10 Item Sets
Duration	6 hours	6 hours	6 hours

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, one must note that on an average, you have around 1.5 minutes per question.
• No Negative Marking

CFA® Level 2 exam

• The format of the exam is mini-cases that are 1.5 pages length on an average
• Each item set or mini-cases have 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 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

CFA® Exam Weights / Breakdown

Below is the CFA® Topic Areas (2020) in each level.

Topic Area	CFA® Level 1	CFA® Level 2	CFA® Level 3
Ethics & Professional Standards	15%	10-15%	10-15%
Quantitative Methods	10%	5-10%	–
Economics	10%	5-10%	5-10%
Financila Reporting & Analysis	15%	10-15%	–
Corporate Finance	10%	5-10%	–
Equity Investments	11%	10-15%	10-15%
Fixed Income	11%	10-15%	15-20%
Derivatives Investment	6%	5-10%	5-10%
Alternative Investments	6%	5-10%	5-10%
Portfolio Management & Wealth Management	6%	5-10%	30-40%
Total	100%	100%	100%

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 3 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 in 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, you must 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 Finance, I found  Financial Reporting & Quantitative Analysis and Quantitative Analysis a bit 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 CFA® Level 3 examination is the Essay Type Question Paper. This 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 & a gadget guy and don’t use much of a pen and notebook. For this exam, I picked my pen for earnest handwriting after almost 5 years and realized that my writing was barely legible. I had to practice handwriting a bit to cross the minimum legibility benchmark. Even then, I recall that my hands were hurting after the Morning session, so better practice (hand) writing.  

CFA® Examination Fees

Below is the examination fees for the CFA® June 2020 Exam (Levels I, II, III)

CFA 2020 Exam Registration Fees and Deadlines
Registration Deadlines	New Candidate	End Deadlines
Enrollment Fee	Total:- US$ 700	ends 2 October 2019
Standard registration fee	Total:- US$ 1000	ends 12 February 2020
Late registration fee	Total:- US$ 1,450	ends 11 March 2020

• • There is a first-time enrollment fee of $700. Also, note that it is much cheaper to register for the exam early. The exam fees of the 3rd Deadline ($1,450) costs almost twice that of the First Deadline ($700).

CFA® Results & Passing Rates

CFA® results are usually announced after eight weeks of the CFA Exam date. CFA® Level 1 and 2 exam results are available both 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 3 levels.

• • Since inception, a total of 15.4% CFA® Candidates passed the CFA® Level 3 exams.
  • Most recently (2005-2014A), the total completion rate of 14.6% was observed.
  • This 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.

Year	Total CFA Candidates	CFA Level 3 Pass Candidates	Completion Rate
1963-2014A	1997397	306795	15.4%
2005-2014A	1344097	195815	14.6%

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

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

• • The past 10 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 higher at 40% (attractive!)
  • The average passing rate for CFA 2015, you need Level 1- 42%, level 2- 46%, and level 3- 54%.
  • The average passing rate for CFA 2016 you need CFA Level 1- 43%, CFA level 2- 46%, and for CFA level 3- 54%
  • The average passing rate for CFA 2017 you need CFA Level 1- 43%, CFA level 2- 47%, and for CFA level 3- 54%
  • The average passing rate for CFA 2018 you need CFA Level 1- 43%, CFA level 2- 45%, and for CFA level 3- 56%
  • The average passing rate for CFA 2019 you need 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 10 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 8 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 10 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%.

CFA® Curriculum vs Schweser?

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

Attribute	CFA® Curriculum Books	Schweser
Cost	$150 + shipping	$649
Pages	2600+	1000-1100
Depth of Coverage	In-depth	Summarized
Mock Tests	1-2	6
End of Chapter Questions	Yes	Yes
Question Bank	No	Yes

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. This 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, however, I feel they are sufficient enough 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 CFA® Level 1 exam preparation and used this strategy to pass 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 here would be to yet not touch the CFA® curriculum books and spend time on the Mastering Schweser concept as per the time-table is given in the below graph.

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 would advise you to look at CFA® Blue Box Examples (discussed within the chapters) and then End of Chapter (EOC) Questions. This 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 $1000 on registration of the exam. Why waste this attempt?
  • Consider the withdrawal option if you have already registered for CFA® Exam. The withdrawal policy offered by CFA® institute may come handy. Click here for details. 

Enrollment Requirements

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 that totals 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.

Scholarship Opportunities

CFA® Institute provides two types of scholarships –

Access Scholarship

• • This is a need-based scholarship designed for those who are not able to afford the full CFA® program fees.
  • In addition to financial needs, other factors are also considered academic, professional, or other accomplishments of the candidate, 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

• • This 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.

Useful Resources for CFA® Exam Prep

• • 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

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