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Cracking the CFA Exam

Cracking the CFA exam

Passing the CFA, or Charter Financial Analyst exam, provides opportunities for financiers to earn higher pay, find new jobs or update their knowledge of the current market. There are three levels and over 2,000 curriculum pages to a CFA exam for which candidates need at least 300 hours of study and preparation. It takes candidates about four years to pass the three phases, and only 1 out of every 5 candidates will succeed. Learn how you can position yourself to successfully pass this difficult and prestigious exam.

To learn more, checkout the infographic below created by Ohio University’s online Master of Financial Economics program.

CFA Exam: The Basics

Over 31,000 investment firms around the world consider the CFA credential as the standard of choice for professionals in the industry. The exams are provided in a series: Level I, Level II and Level III.

Level I CFA Exam

The Level I CFA exam consists of 240 multiple-choice questions that test a candidate’s knowledge of the professional and ethical standards of the industry. The pass rate for this level is 43%.

Level II

Level II provides 20 sets of case studies, with each set consisting of 6 multiple-choice questions. This level will test the ability of the candidate to apply the standards in various situations. The pass rate for this level is 46%.

Level III

Level III consists of 10-item sets with 10 multi-part essay questions. The questions will be based on the application of standards in the context of portfolio management and compliance. The pass rate for this level is 53%.

The CFA Exams

The CFA exams are offered yearly in June on the first Saturday of the month at designated test centers. Candidates who miss the Level 1 exam may also take it in December. All three levels must be taken and passed in sequence and all exams are given only in English.

Requirements for the CFA Exam

Candidates for each of the three levels must have completed a Bachelor’s degree or at least be in the final year of his/her bachelor’s degree program. They should also have a minimum of four years’ professional work experience. In case a candidate does not have a sufficient number of years’ work experience to meet the requirement, a combination of university and professional work experience may be considered. Candidates should also meet the criteria for conduct admission and must have a valid international passport.

Cost of CFA Exams

A candidate who registers for his first Level I exam is required to pay a one-time enrollment fee of $450. The standard fee charged for registration for Level I is $860.

Topics Covered in the CFA Exam

To prepare for and pass the CFA exam, every candidate should study the following topics:

Fixed Income
Equity Investments
Corporate Finance
Portfolio Management
Economics
Derivatives
Quantitative Methods
Alternative Investments
Financial Reporting and Analysis
Ethics and Professional Standards

Who Should Take the CFA Exams?

The CFA exams are considered a stepping-stone to professional development and other career opportunities. Around 37% of candidates take the exams for advancement at work while 18% take it to improve their competency in portfolio management and advanced investment analysis. Around 13% consider the exam a means to improve their professional status among their peers around the globe while 11% see it as a way to increase their chances of getting a job. Ten percent of candidates take the exam to challenge themselves and improve their skills. The rest of the candidates believe passing the CFA exams can help them gain recognition from their employers (both current and potential) and help them improve the level of client trust in the professionals in the industry, thus contributing to its culture of trust.

Majority of candidates (around 76%) are already employed, while the rest are students, unemployed but actively looking for work, or self-employed. A small minority of candidates are unemployed and not currently looking for a job.

Most candidates who take the exams are commercial bank employees, while others work in investment firms and investment banks. Some are employed at consulting firms and accounting companies. The majority of candidates come from different types of employers from a wide range of industries.

What Can the CFA Exam Do For Your Career?

In June 2016, 172,682 candidates took the exams, registering an 8.5% increase since the same period the year before. The most number of candidates came from the Asia Pacific region where 77,510 candidates registered. The second highest number of candidates came from the Americas, where 57,363 registered. Candidates from Europe, Africa and the Middle East totaled 37,809.

What Does CFA Certification Mean For Your Salary?

CFA certification does offer an advantage for professionals in the field. The median total compensation for Charterholders is significantly higher compared to non-charterholders. For example, a CFA charterholder with a bachelor’s degree earns about $154,025 while a non-charterholder with the same qualifications may only earn around $85,875. Comparing the salaries of a charterholder and a non-charterholder with Master’s degrees also shows a substantial difference: a charterholder earns around $215,542 while a non-charterholder earns about $160,000.

Careers for CFA Charterholders

Around 22% of charterholders work as portfolio managers while 15% work as research analysts. Around 7% enjoy positions at chief executive levels, while others focus on careers as consultants. The rest work as risk managers, financial advisors, corporate financial analysts and relationship managers.

Preparing for the CFA Exams

Candidates for Level I exams spend an average of 287 hours, while those who prepare for Level II spend an average of 315 hours. Candidates for Level III exams spend more time preparing, spending about 327 hours.

How Difficult Are the Exams?

Majority of candidates (around 63%) reported that the exams were as difficult as they had expected, while around 28% said that they were more difficult. Only a minority reported that the questions were not as difficult as they had thought.

Of the topics included in the exams, candidates consider fixed income and derivatives as the most difficult, followed by professional and ethical standards, financial reporting and analysis, and alternative investments.

Tips and Strategies For Successfully Taking the Exams

  • Preparedness is key to passing the CFA exams. Keep yourself informed of any changes and create a plan for study to help you manage your time.
  • Use your time wisely to keep a balance across the topics that will be covered. If you can, find someone to study with. The exchange of information will help facilitate better learning and retention.
  • Expect the exams to be stressful, so learn to manage stress to avoid overthinking and panicking. Time is limited during the exam but do not neglect the details. These are usually the areas where important information may be found.
  • Practice. Use your calculator often to familiarize yourself with its functions. At least one month before taking the exam, read all the necessary resources and begin the final reviews. Use mock exams to your advantage and take a minimum of five to get used to the process.
  • Become familiar with the exam. Level I has a testing format that consists of two 3-hour sessions. During these periods, you will be writing a lot, so practice how to write efficiently and legibly.
  • Learn to manage your time. Focusing on what needs to be done will help you work better and faster. Level I, for example, has 40 questions for every hour, so you have 90 seconds to work on each question.

Getting Help

Candidates recommend the CFA Institute curriculum to help other candidates improve their chances. Majority of them reported that the curriculum helped explain concepts and improve their understanding of the most important topics.

What to Expect From the CFA Institute

The CFA Institute provides a number of resources for candidates, including curriculum e-books, planners for interactive study, topic reviews, mock exams and mobile apps to help prepare for the test. Candidates also report that they prepared best with topic-based practice exams, end-of-reading problems, mock exams, curriculum assigned readings and other preparatory materials.

Where to Find CFA Societies

Most states have local CFA societies. In the Americas, there are 60 accredited universities who are CFA Program Partners; in Europe, Africa and the Middle East, there are 49 accredited universities while Asia Pacific has 40.

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