In a few days, approximately 50,000 candidates globally will take one of the Chartered Financial Analyst (CFA) exams, which are given the first week of June, while you can also take Level I in December. If you're one of them, you have reason to feel stressed. The pass rate isn't high (43% of the 51,134 candidates who took the Level I exam in June 2016 passed, which is in line with past years) and the amount of studying you're advised to do is enormous.
If you want to pass the CFA Level I, you’re advised by the CFA Institute to spend six months preparing and to do between 300 and 400 hours of studying per exam during that time.
“Success is strongly correlated with the date you start revising,” says Nathalie Columelli, a former Deutsche Bank trader who now coaches people in the CFA exam.
Now is therefore not the time to be cramming for the June exam. Now’s the time to be starting to study for the exam in December!
"I like telling people to start studying six months before the exam, because it puts time on your side," said Jamie Ziegler, the founder of JZA Coaching and a member of the CFA Institute’s retained speaker program. "By covering less material per day, and increasing the number of days, it also gives the brain a greater chance to absorb the material, as the result of more nights of sleep."
In other words, the earlier you start studying, the greater your chances of success.
“This is the best moment to start revising [for December],” says Patricia Donnelly, head of consultant services at BNP Paribas Investment Partners and former president of the CFA Society France. “It’s generally calm at work and on the markets. If you start now, you can get ahead before things heat up after the summer.”
Six months is a long time. And during that time it’s easy to go astray and to spend less time studying than you’d intended.
To prevent yourself from neglecting study times, Columelli advises using Outlook to block out 12 hours of revision time every week over the next six months. If things get in the way, make sure you transpose those blocked out hours to other times.
Philippe Maupas, president of CFA Society France, advises that students need to build two or three completely free weeks into their study schedules. That way, you can absorb any professional or personal issues which might come up. If nothing comes up, you can simply have a break. Or you can use that extra time to go back over the most difficult parts of the syllabus.
A common mistake is "not building 'life' into their study calendar, and running out of time," Ziegler says.
“The best thing is to use a revision technique that you’ve employed for previous exams and that's worked for you,” says Columelli. “Some people work best in the mornings, others at night. Some like to go to the library, others will work in their office or at home – each to their own!”
Corporate finance student, Bastien Doutreleau is currently doing an internship in Spain and preparing to take the CFA level II exam in December. When he studied for Level I, Doutreleau said he watched CFA videos and is regularly exchanged information with professionals who’d already passed the exam. Talking to those people with successful careers helped remind him why he decided to take the exams in the first place. On the other hand, Doutreleau said that he avoided CFA exam forums, which can be stressful places when you’re studying.
Ziegler suggests a secret weapon for those candidates who decide to use it: Meditate 5-8 minutes a day, ideally before getting ready to study.
"Meditating clears the mind, calms the nerves and relaxes the body," Ziegler said. "In other words, it creates the ideal environment for deep concentration, problem-solving and memorization – and the research backs this up.
"I believe students need to find the methods and routines that work best for them, whether it’s solo or in a group," she says. "And all students can benefit by building a short meditation practice into their study schedule."
The CFA itself offers materials that will help you prepare for the exam.
“With your login and password you can access a heap of information and advice from the CFA site itself," says Columelli. “Candidates too often neglect this,” she adds.
Donnelly suggests that students nearing the end of their study period look at the list of ‘Learning Outcome Statements (LOS)’ provided by the CFA Institute. They’re especially good for running through during a commute, or on the morning of the exam, she suggests.
"Buy study aids – audio as well as print," said Jeffrey Keil, the owner and principal member of Keil Fiduciary Strategies, a mutual fund business consulting firm. "Don't assume that older versions of the texts will suffice – they may not be up-to-date."
Expect fintech questions on this year's exams and even more in years to come when there will be a new set of introductory readings.
Some candidates spend way too much time on practice questions, drilling and drilling, rather than really taking the time to memorize the curriculum and understand the concepts. Also, don’t focus obsessively on certain parts of the curriculum that you think will make up the bulk of the test while neglecting others.
“It’s essential that you’re able to respond to the questions without stopping and that understand each one quickly and in the sort of conditions you’ll encounter in the exams,” says Bastien, who regularly put himself through timed mock exams prior to level I. "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," he said.
Go over hundreds of prior exam questions and understand why the answers cited are the best choices," Keil said.
"Throw in twists to the questions and see if you can work out how the different scenarios change the answer," he said. "Work through the math, by hand, for the numeric questions using many different scenarios – make sure you are fast.
"Don't underestimate how well you must know the materials and how fast one must work to get through the entire exam," he said.
Each of the ten units is important for CFA level I, says Maupas. You can’t leave anything out.
The first time he took CFA Level I, Bastien says he didn’t devote enough time to the economics material, on the grounds that it involved 300 page of coursework for just 10% of the marks in the exam (while other units were 100 pages of coursework for 15% of the exam). This was a big error, he admits.
It’s particularly important that you know the small subjects without much coursework extremely well. This is especially true for the ethical and professional standards section, says Donnelli. “A wrong note here can compromise your success in the whole exam if you’re on the border of passing and failing,” she says.
The passing score in the CFA exam is a matter of utmost secrecy, but is thought to be around 70%.
If you want to pass, you’ll therefore need to be good at everything (see point six).
Bastien advises against studying one particular area at a time. Instead, he suggests proceeding in the style of a ‘crab’ and covering several disciplines at once during study sessions whilst alternating theoretical with quantitative disciplines.
Columelli advocates paying particular attention to details on subjects you're traditionally good at in order to avoid careless mistakes. Work harder on the subjects where you achieve irregular results during mock exams, she adds.
“As the exam draws closer, you need to treat yourself a bit like a baby,” says Columelli. “Eat regularly, go outside, take in some fresh air at least twice a day.”
If you’re in a full time job, Donnelli advises taking some half days. They’ll help you relax and give you more time for studying. Some employers will even offer time off for exam preparation, she says.
The CFA website has important information on the materials you can take into the exam – read it carefully. Make sure the information on your passport conforms to what you’ve written on the CFA entry forms. Recharge your calculator batteries. Give yourself enough travel time – remember that quite a few people will be converging on the exam hall.
As with all exams, you should:
- Start with the easy questions.
- Always give an answer. You have nothing to lose.
- Make an intelligent guess if you don’t know the answer.
- Don’t panic. At worse this is just preparation for your next attempt!
"Remind yourself that, if you don't pass, you have to wait some time to take the next shot," Keil says.