The CFA exams are nothing if not popular. Every year, over 240,000 people from over 340 different countries register to take one. Every year, over half of them will fail.
After the last CFA exam sitting in June 2019, just 41% of people passed CFA Level I - the lowest pass rate since 2011. 44% 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 56% passed CFA III in June last year.
Why do so many CFA candidates squander their chance? Clearly the exams are hard. Clearly, too, 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. However, like all cliché's it's true. Four years ago, the CFA Institute issued the following handy graphic after the June 2015 exams showing how long students had studied for.
Source: CFA Institute
It says that 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. One candidate 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. "The CFA's books are just too much information," says one 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."
The CFA is at least open about the pressure the exams will put upon your family life. "Tell family, friends, and colleagues about your efforts and what the next few months will be like for you," they say on their website. "That will help you focus on your studies without guilt, or at least without having to explain over and over."
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.
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. "The quantity of information to be mastered requires a balanced and persistent approach," says the CFA itself.
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 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. 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.
Photo by Julian Dutton on Unsplash
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