Before You Take the CFA Exam, Here's What You Should Know

The chartered financial analyst (CFA) credential is widely sought after by financial advisors, but passing the CFA exam is no easy task. Only around half of the people who take the test pass the first level.

The exam is divided into three levels, each of which requires at least six months of study time. It's possible that the series will take longer than three years to complete.

Candidates must complete 4,000 hours of professional work experience over a 36-month period before getting the CFA certification. Here are some tips for passing this challenging exam.

Learn more about the CFA Exam

According to Chris Wiese, a CFA and the organization's senior head of learning, experience, and assessment development, the exam's topic areas are listed on the CFA Institute's website and cover quantitative investing knowledge areas such as statistics, accounting, and economics. There is a separate issue area for each of the major asset classes.

Exam Passing Rates for the CFA

According to Wiese, candidates usually retake one or more of the levels. For Level 1, the pass rate is between 45 and 50 percent. Level 2 has a much greater pass rate than Level 3, and Level 3 has a slightly higher rate than Level 2. Of course, according to Wiese, the increased success rate at Level 3 is related to the fact that these individuals had already completed the prior two levels.

What Is the Most Effective Way to Prepare for the CFA Exam?

The CFA Institute's website, according to Wiese, contains everything a test taker needs to pass the exam, including practice questions. Candidates who need help studying might reach out to local CFA societies or use third-party exam preparation software.

According to Derek Burkett, vice president of Kaplan Schweser, which created a CFA test study course, the length of time it takes to study depends on the person's educational background and function in the investing field. Candidates normally study the subject for at least 300 hours each level.

Reading and re-reading is an age-old practice that many candidates fall back on, but according to Burkett, it only gets students so far. He recommends taking practice examinations to assist them reinforce their information.

According to Wesley Llado, a CFA and associate vice president of asset management at First Long Island Investors, practice examinations are beneficial in familiarizing candidates with exam themes, and he used practice exams to pass.

The practice questions, according to Llado, help test takers learn the concepts behind mathematical formulae and when to employ them. "I feel that many applicants learn the formulas but don't know what to do with them or when to utilize them," he continues.

He recommends that test takers should start studying at least six months ahead of time. "This isn't a college exam where you can cram the previous week's or even the previous month's worth of material. It could work for Level 1, the most basic of the three. It will not, however, work for Level 2 or Level 3 "he proclaims

The CFA Institute recently made several changes to the test in response to COVID-19. According to Wiese, in 2020, the corporation will postpone exam days and use the extra time to improve the examination. It's now four and a half hours long, thanks to computerization. There are also fewer multiple-choice questions. "We already know if someone knows the material by the time we've asked around 180 multiple-choice questions," Wiese says, so asking more questions didn't yield any further information.