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This is why you fail the CFA exams

CFA exam fail

How it is when you miss the target

The CFA exams are nothing if not popular. Every year, nearly 200,000 people from hundreds of different countries register to take one. Every year, over 100,000 people will fail.

Around 20% of everyone who registers for a CFA exam won’t turn up. At least 40% of those who do turn up will fail.In June 2015, just 42% of people passed CFA Level I and 46% passed Level II. Level III is the only CFA exam which a majority of candidates typically pass – and even then, the margin is small – just 53% passed CFA III in June last year.

Why do so many CFA candidates squander their chance? Clearly the exams are hard. Clearly the CFA Institute wants to preserve the mystique – it wouldn’t be quite the same if 80% of candidates sailed through. Nonetheless, if you don’t want to crash and burn, there are things you can do about it – although, admittedly, it may be too late to make much of a difference now.

1. You fail the CFA exams if you haven’t studied for at least 300 hours for each one 

It’s become a cliché to say that you need to study for 300 hours if you want to pass each CFA exam. But it’s true. The CFA Institute issued the following handy graphic after the June 2015 exams showing how long students had studied for.

CFA exam fail


Source: CFA Institute

So, basically, students study for 300 hours at least.

If anything, 300 hours may not be enough. Speaking on forums, past CFA exam candidates say they only passed when they increased their study time considerably. “The first time I studied about 300 hours. The second time I increased it to around 400,” says one candidate who was successful on round two. “I spent more than 800 hours studying and I’m not sure I can do better next time,” says another candidate who failed.

Naturally, there are always people who claim to have studied less. Take Graeme Hein, a Canadian-based technologist with an interest in finance. Hein told us he passed CFA Level I after studying for just 30 hours and using half the allocated time in the exam. “It’s not hard if you’re decent at math,” he says.

2. You fail the CFA exams if you have no exam strategy

The CFA Institute doesn’t release the passing scores for its exams (which vary in any case), but the pass score for CFA Level I is thought to be around 70%. One candidate claimed to have a strategy for answering the questions in Level I which involved focusing first on the 50% of questions you can definitely answer correctly. If you can nail 50% of the answers first, he says you’ll create a strong enough foundation for achieving the pass grade.

3. You fail the CFA exams if you rely upon the CFA’s own study materials

The CFA’s own study materials are a necessary but not sufficient source of information for passing the institute’s exams. 89% of respondents to the CFA’s June 2015 candidate survey said they found non-CFA Institute study notes useful for passing the exams. This compared to just 81% who said they found the CFA’s own materials helpful.

“The CFA’s books are just too much information,” says another candidate. “Something like Schweser condenses things and makes it all more palatable.”

4. You fail the CFA exams if you have a life

Do you have a family? A job? A hobby? Are you prepared to put all of this aside while you study for some fiendishly difficult exams which you may not pass. If the answer is no, you might not want to bother. “Is the juice worth the squeeze?” says one candidate. “For some it is, for others not so much.”

Anecdotally, it gets harder to handle the demands of the CFA the older you get. When you step into the exam hall, CFA candidates say you’ll see hardly anyone over 40.

“The CFA exams are becoming a rite of passage for people in their 20s who have nothing going on,”” one 40-something ex-analyst told us. “Once you have a wife and family, a house and kids, there are just better ways of spending your time.”

Nonetheless, one 62 year-old says he passed the CFA last year: “If you can do it, you can do it.”

5. You fail the CFA exams if you don’t focus on the most difficult topics

So you thought the quantitative questions would be the hardest? Wrong. According to the people who took the CFA exams in June 2014, the hardest topics in the CFA syllabus are actually fixed income, derivatives and portfolio management. If you want to pass, you need to make sure you’ve paid special attention here.

CFA exam fail


Source: CFA Institute

6. You fail the CFA exams if you don’t have a study plan 

300 hours is a lot of life. You’re not going to pass – especially if you’re also working full time – unless you devise a proper revision plan. CFA blog site 300 Hours advises 12-13 hours of uninterrupted study over a 26-week period. “Success is strongly correlated to the date you start revising,” one ex-Deutsche Bank trader turned CFA coach told us. If you’re looking for a guide to CFA study, we have one here.

7. You fail the CFA exams if you are working long hours and trying to study over a six month period

Is it really possible to work put in 12-13 hours of study time per week if you’re also putting in 100 hour weeks in a bank? Not really. “It is useless to try to pass any CFA in six months if you’re sleeping three hours a night and working 14 hours in M&A, weekends included,” says one banker who passed CFA Level I after setting aside 18 months to study.

One seasoned fund of funds analyst told us she didn’t take the CFA because it wasn’t mandatory when she was a junior, but that she wouldn’t have had time anyway: “I was working 14 hour days.”

8. You fail the CFA exams if you don’t spend enough time on practice questions under timed conditions 

The closer you get to the exam, the more time you should be spending on practice questions. Mock tests under timed conditions are essential for passing the CFA. Find out what you don’t know, learn it, and test yourself again. “This is the best way of finding out how good you are and what you still need to work on. It will also give you confidence before the big day,” one candidate told us.

“My only piece of advice is to practice the exams under timed conditions,” says another Charterholder who passed all three exams first time.

9. You fail the CFA exams because you’re a ‘quitter’ 

Most people fail the CFA exams. If you’re trying to pass all three and to become a CFA Charterholder, a failure is almost inevitable. It’s a rite of passage. Passing the exams becomes an obsession for those concerned (only 6% of June 2014 candidates told the CFA they planned to give up if they failed). According to urban myth, there is someone who took CFA Level III 14 times before he passed and became a Charterholder. You could do the same – if you’re prepared to give up 4,800 hours of your existence.

One Charterholder (who passed all three exams first time, admittedly), says failing is actually an advantage in life. “If you re-do the exam after a faill it gives you a good foundation and a broader skill set. This helps in a structurally changing environment like finance.”

10. You fail the CFA exams if you’re sleep-deprived 

Academic studies show that four or more days of partial sleep deprivation involving less than seven hours sleep per night will effect your ‘neurobehavioural function.’  If you repeatedly restrict your sleep to between, ‘3 and 6 hours in bed’, you will suffer a ‘decrease in cognitive speed/accuracy’ and reduced working memory. None of this happens if you spend at least eight hours in bed every night.

As ever, there are exceptions. “I actually passed level 2 after getting only 3 hours of sleep. I just couldn’t sleep. Adrenaline carried me,” says one CFA exam taker. 

11. You fail the CFA exams if you don’t think they’re worth it

You have to want to pass the CFA exams. You have to feel they’re worth it. The bad news is that Level I is becoming a necessary condition for some finance roles, but this doesn’t mean it’s sufficient. “So many people exert themselves for the CFA, but sales and trading headcount is going to be falling over the next decade and I’m not going anywhere,” says one veteran trader.

12. You fail the CFA exams because your spouse/girlfriend/boyfriend/friends don’t support you through it

If you’re going to spend 300 hours of your life studying and you’re going to be working 50 hours a week, you’re not going to see your significant other much. You’d better hope they’re ok with this. Ideally, you want the sort of partner who says things like this, “My boyfriend passed with >70% all sections. We both stayed up all night before and he was 99% sure he failed. I actually cried tears of joy upon hearing the news. Congrats to everyone!!!” Unfortunately, that may be asking too much.

Comments (9)

  1. nice reading while studying for CFA… encouraging I’d say. thanks efinancialcareers

  2. As a recent CFA charterholder who passed each level on the first attempt, I can say that each point made is absolutely accurate…but would HEAVILY emphasize the first point made.

    Take two pieces of information:
    (1) “in June…42% of candidates passed CFA Level I,…46% passed Level II,…54% passed CFA III”
    (2) Average hours spent studying: 283 hours (Level I), 313 hours (Level II), 324 hours (Level III)

    Given that the average candidate failed Levels I and II (and came close in Level III), and spent ~307 hours studying their respective level, you can rest assured that you’ll want to take a great deal more than 300 hours to even have a shot at passing each on the first attempt.

    Unless, of course, you have the utmost conviction that you are an above-average candidate…as a disproportionate number will so believe.

  3. I meet all but reasons 3 and 8. I studied for about 8 hours, doing 2 modules of the online practice exam. I work full time, go to school full time, and have a new infant daughter born 6 months before the Level I exam. Expecting failure, I only showed up to take the exam because I had paid for it, live 2 miles from the test facility, and figured that I might as well take it to help guide my preparation for the re-exam I fully expected to have to take. I was quite shocked to get an email that I passed! Here are my tips:

    1) Take intermediate accounting (2 courses at SeattleU). There is so much accounting that I thought maybe I had accidentally sat down for the CPA exam. The fundamental level accounting class that everyone in business school takes (or is waived if you have a business undergrad) is woefully inadequate for what the exam covers.
    2) Jump right into the practice exams and let them guide your studying. Don’t even try to read the CFA materials, which is a ridiculous volume.
    3) Definitely study the ethics module since you’re unlikely to have studied that in school and much of it is particular to the CFA. There are a lot of questions on this module.
    4) I relied heavily on the technique of eliminating 1 or 2 answers, maybe even 3, and choose from what’s left. If you can’t solve a problem but can eliminate 3 answers, you just got it right! Eliminate 2 answers and you have a 50/50 shot. I answered at least half the exam this way.

  4. Apparently you did not even take the exam considering you dont know that there are only 3 answers on exams and not 4.

  5. #2 is so false. The opposite is true. CFA materials are the only way to go. I tried out tons of supplementary materials and they sucked so bad its not even funny compared to the official materials. I used: Wiley CFA prep course, Apptuto MCQ questions, Allen CFA prep, Analystnotes (the worst), schweser secret sauce (alright), BBP test bank (the best). All of the “supplementary” materials had practice questions that were totally different than the real CFA questions. They were filled with errors, typos, and incomplete answer solutions. BBP was the exception: error free, complete answers, and as close as you get to the wording, difficulty and format of the real CFA exam day questions. BUT if you do all the CFA EOC questions and website questions you will be fine. Using “supplementary” sources does more harm than good unless you happened to pick the best one.

  6. Look, I know it’s virtually unheard of in the industry to have an element of humility, but perhaps it’s fair to say that maybe some people just aren’t smart enough?

    This would apply to every other qualification in the world, why not to aspiring financiers as well?

    The alternative is that EVERYONE is capable of passing, and that frankly devalues the qualification. Additionally, outside of its value as a signalling tool to demonstrate you are able to sit still and read boring books for hours, it would make it a complete waste of time (which is another perspective worth exploring. Yes I’m a charterholder).

  7. I passed all 3 levels first time. Advice to those who don’t is not to cram too much ib the end but to do a small amount everyday consciencously. Also to take a lot practice exams – few of my colleagues failed because they spent too much time on the coursework but not enough time stimulating exact exam conditions. Hope this helps

  8. Yes in theory everything should be based on the CFA textbook. In reality it’s a different story. It will take more than 300 hours to read all the readings ONCE. Is reading once enough? No. Given everybody has jobs and has limited time studying, I think using third-party service will definitely help. Personally I used Schweser, AnalystNotes and Wiley. The main thing I used were their mock exams. Similar quality, and they all helped me greatly in passing my level 1 and level 2 exams (my first tries).

  9. Passed all 3 in 18 months whilst having a fairly relaxed job. L1 is easy and doable in about 100 hours. L2 and 3 – to be 90% sure, you need 500 hours. To have 50/50 chance, you can do in 300 hours but you need a bit of luck.

    Exam technique is also v. important. Good blend of skimreading, mindmaps, EOC questions, little red boxes in official texts with quick feedback and revision.

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