What to do after Failing the CFA Exam

So you got the bad news that you failed the CFA exam last June and you’re feeling pretty low. Even though you’ve got plenty of company with between 47% and 58% of candidates failing one of the CFA exam levels, it still feels like a personal defeat.

First of all, don’t stress out over a CFA exam fail. Over a 20- or 30-year career, one year doesn’t make much difference at all. Having to repeat the material may even make you a better professional by really cementing the curriculum in your mind.

The most important thing is that you learn something from the experience and understand how you can avoid it in the future. I talked with five candidates that failed the CFA exam in June, three that failed the CFA level 2 exam and two that failed the third exam. Each candidate had something different to share and a different strategy for passing the CFA 2016 exam.

Check out their story and relate it to your own and your chances of passing your next CFA exam will improve significantly.

Why did you fail the CFA Exam?

Take a moment and evaluate your CFA study plan. What band did you appear in for the exam results? The ten bands are approximately equal score so each is likely between 3% and 5%, meaning the band 9 and 10 candidates missed passing by only a few questions.

For many candidates, it is just a matter of time spent studying. The average passing candidate spends around 300 hours studying for the exam. That’s just over ten hours a week on a six-month schedule, but try to cram it into three or four months and your commitment increases to 20 hours a week or more. A lot of candidates plan on putting in 15 or more hours a week studying and decide to wait until February to start but then have something come up that takes their time away.

That’s what happened to James from Portland. He started studying in late February and thought he would have plenty of time. He got a job offer in March and was working more hours than he expected through June. Besides James’ story, I hear the problem from a lot of candidates. Between heavy workflow around the end of the quarter and other life events, you never really know how much time you’ll have to study. That’s why you need to start as early as possible, even in December, to give yourself plenty of time.

The CFA level 3 essay section catches some candidates by surprise. Arnav of Mumbai told me that he was extremely confident of his knowledge of the material but just couldn’t write fast enough on the essay section. His hand started hurting after a couple of hours and he ran out of time before he could finish.

You absolutely must practice the essay section for the level 3 exam. Besides learning how to write down your thoughts quickly, you need to train your mind and muscles to be able to do it for three hours. It can be really tiring for candidates that don’t practice. The CFA Institute makes this as easy as possible by publishing the actual morning section exams along with guideline answers. You can sit down and take the essay questions just as if you were sitting for the exam.

We’ve covered a lot of the old CFA essay exam questions on the blog. Click through to this post on How to Pass the CFA Level 3 Essay Section for strategy and links to individual essay questions.

What could you have done differently to pass the CFA Exam?

I know a lot of CFA candidates that neglect doing practice problems, something that tripped up Jennifer of Miami. She told me that she meant to work the problems but it was just so much easier to read the material and not do the work.

Working practice problems can be a pain sometimes but they are absolutely critical. Not only is it an active learning technique, proven to help you retain information, but it also keeps you from zoning out as you read the material.

Paul from New York fell into the trap of having too many distractions during his study routine. I am guilty of this one as well. When I was studying for the first CFA exam, I would often study in front of the TV. I would be distracted often and would spend much of my study time just focusing back in on where I was in the book. Beyond the TV distraction, a lot of other things in the home are going to distract you from really focusing on the material. That’s why it’s always better to find a quiet place outside the home, maybe at the library, to do your studying.

Koki of Tokyo thought he would pass the exam by just reading through the curriculum once and working the practice problems. Many candidates believe that because they did well in school, always remembering things for the test, then they will do equally well remembering the CFA material for the exam. The CFA curriculum is an incredible amount of material and you have to remember it all in one six-hour sitting. It’s entirely different than having to remember a few weeks worth of lectures for a college exam.

Studies show that you need to review something between five and seven times to commit it to memory. Besides reading through the curriculum and working practice problems, you should consider other ways to review such as flash cards, study guides and talking your way through it. Finquiz Notes are designed to be used with the official curriculum so you can review and highlight important information while you are studying. The more times you can cover the material, the more likely you’ll be to remember it on the exam.

Taking an honest look at what happened on your CFA exam is the first step to passing the next exam. Check out these five stories from candidates and reevaluate your own study plans. With a little work, you’ll be well on your way to earning the charter.

‘til next time, happy studyin’
Joseph Hogue, CFA

Why I Sacrificed Three Years of My Life and am Glad I did!

The CFA exams are tough! No doubt about it. To pass the exams, you’re basically saying that you’re willing to work a part-time job for six months of each of the next three years…and you’re going to pay someone to do it.

I did it and about 165,000 candidates make the decision every year. After making the decision, many candidates constantly fight with the question of whether it’s all worth it. Only half the people pass their exam in any given year.

Despite all the time and sacrifice, I would do it all again and am glad I took the time for one of the most difficult professional challenges in finance.

The Best Textbooks You’ll Ever Read

Like all candidates, I sat through my undergraduate work and wondered if there was anything more boring than a college textbook. I studied for two degrees, Finance and Communications Studies, and even the analytical material in the finance texts usually seemed completely academic and impractical. Don’t just theorize about the capital markets, help me see how it actually works and fits together!

The CFA curriculum is some of the best textbooks you’ll read, written by actual market participants as well as a few academics. It won’t teach you everything you need to know about a specific job but the breadth of information will get you through just about any topic in asset management. No one really knows where their career will take them but the CFA curriculum gives you a good start in a lot of different fields.

As a CFA candidate, you’ll work harder than you ever did in any undergraduate course. I pretty much breezed through my undergraduate studies. I did the reading and went to class and was able to easily pass the exams without really trying too hard. The CFA exams are different. It’s an immense amount of material and you need to remember it all for the six-hour marathon exam. This kind of challenge forces you to be a professional and to really put the effort into the curriculum.

Surround Yourself with Success

Not only are the CFA exams worth it in themselves, for the challenge and information, but having the charter has opened a lot of doors for me. I have been able to open my own freelance consultancy and have had many clients hire me on the basis of having the charter. I don’t guarantee any special insight or performance as a matter of holding the charter but it does command a high level of respect from a lot of people in the financial market.

Through society and CFA Institute events, I’m able to network and partner with some of the best minds in the business. The Institute keeps a great flow of materials for professional development on its website and I’ve seen several new ideas pop up there before they became commonly accepted rules within the larger financial community.

There are a lot of you, candidates, that will be reading this while questioning whether to start or to continue studying for the CFA exams. I certainly faced my own ups and downs over the three years of studying. It is a lot of time spent with your nose in the books when you could be spending it with friends and family. Some people may even tell you that it doesn’t matter and they did fine without the charter.

Earning the CFA charter isn’t a golden ticket and it doesn’t mean the work is over once you’ve gotten your charter. It does mean a lot of things though and I’m glad I pushed on through. I think you will be just as glad you made it. Stay strong and keep studying.

‘til next time, happy studyin’
Joseph Hogue, CFA

Boys enjoying beautiful yellow sun and green grass. Copyrights FinQuiz.com

Boys enjoying beautiful yellow sun and green grass. Copyrights FinQuiz.com

Study Groups for the December Level 1 CFA Exam

With the start of the study season for the December Level 1 Exam comes a rush of calls for study groups in CFA groups on the internet and locally. Studying for the CFA exams can be an extremely solitary and uncertain pursuit so candidates look for help and confidence in groups.

But should you join a study group for the CFA exam? If you do join a group, how much time should you commit and what are the advantages or disadvantages?

We’ve posted a few articles on the Finquiz CFA blog about participating in groups but I thought I would reinforce some of the most important ideas. We’ll look at some study group options, benefits and risks to watch out for before tackling the question of whether you should join a study group for the CFA exams.

What are your options for CFA Study Groups?

I remember studying for the CFA exams, from 2009 through 2011, and joining study groups. Since then, technology has brought new options to CFA study groups but candidates are still using the old methods as well.

First, you’ve got the old school method of in-person study groups. Maybe I haven’t grown up with the technology that enables the other study groups but I still like in-person groups above all others. They take a little longer, through travel time, and a little more coordination to set up but these study groups can be an indispensable networking tool. Through your study time together, you’ve got a chance to develop a real friendship with some of the people that will lead the profession in your city or region.

There are live study groups that meet over Skype or Google Hangouts. This is the next best thing to the in-person groups. You lose a little of the interpersonal nature because you can’t really talk one-on-one with anyone but it’s still face-to-faces so you can build some good connections. Virtual groups can save a lot of travel time and are easier to put together than in-person groups.

Next you’ve got web-enabled study groups on Facebook and in other website forums. These can range in formality from an open forum that allows posting to a closed-group that controls the study plan and questions. You lose a lot of the networking benefit unless you interact with members outside the group. The benefit is that they allow everyone to post and reply on their own schedule.

Lastly, you’ve got the newest type of CFA study groups in messaging software like WhatsApp. These are so popular that they are continuously the most commented discussions in the CFA Candidates LinkedIn group. I’ve gotten mixed reviews from candidates about these groups. They can be helpful because you can multi-task while participating, checking in occasionally on new messages, but you lose all of the networking benefit to groups. I sat in on one of the groups a few times and the flow of messages can get overwhelming.

What are the risks you want to avoid in a CFA study group?

The biggest risk to any study group is going off-topic and letting the group go unorganized. It’s fine to trade a few off-topic comments here and there, that’s all part of being sociable, but it helps to set a schedule and bring the group back on topic quickly.

  • Don’t make the same person act as schedule-keeper every meeting. Nobody wants to be the bad guy, constantly nagging the group to stay on topic. Rotate the role each time the group meets.
  • Everyone in the group has to make the same commitment to the process and the schedule. You’re not accountable to anyone for grades like in school groups but the group breaks down if one or a few people are always missing or forget to read their assignment.

In-person groups and internet-live groups should probably be limited to about six people or less. This helps make sure that everyone has a chance to participate and that you don’t get too many people talking at once. Forum and chat groups can include more people but it still helps if there are a limited number of ‘virtual’ seats. Having hundreds of people participate makes it difficult to differentiate between the real contributors and those just hanging out.

Don’t be afraid to question someone’s answer or rationale behind an answer. You will either learn where you were wrong, improving your own score on the exam, or you will avoid everyone learning the wrong material which will improve everyone’s score. On the same note, don’t take it personally when someone questions one of your answers. You are all there to learn.

Should you join a CFA study group?

Now that you know your options, some of the benefits and the risks to joining a CFA study group, you can make a better decision whether to join one or not. Study groups can be an inefficient way of learning the material, eating up your time and possibly even giving you misinformation from wrong answers. They can also be great motivators through the group support system and an excellent way to network.

I participated in study groups and I would recommend everyone try them out at least once. Maybe I’m old fashioned but I still prefer the in-person groups to any other method. Try putting together a weekly or bi-weekly group in your area, close enough that no one has to travel more than 20 minutes for the group. Limit the group to under two hours and stay on schedule. Going out socially after the group can help keep group-time focused.

I would caution against participating in more than two groups. Spending more than a few hours a week in group is seriously going to cut into your study time. Groups can be great for discussing problems and questions but they are not as efficient as reading the material yourself and working end-of-chapter questions.

If you can’t manage to coordinate an in-person study group or a live-internet group, you might try one of the forum or chat groups. You might have better luck than I did with these groups but remember to keep it organized and on-topic.

I’d love to hear how you are using CFA study groups to further your studying and prepare for the exam. Let me know if I missed any pointers or any of the risks you’ve seen in groups.

‘til next time, happy studyin’
Joseph Hogue, CFA

You need someone at steering wheel in any group. Copyrights FinQuiz

You need someone at steering wheel in any group. Copyrights FinQuiz

Ethics Practice Roundup for CFA Level 1 Exam

We’ve covered eight practice problems in the CFA Level 1 ethics material over two prior posts, available by clicking CFA Level 1 Ethics and CFA Level 1 Ethics Practice. This post will wrap up our practice problem review and look at a few key points to the Ethics and Standards topic area.

At the very least, you need to cover every end-of-chapter question in the Ethics study sessions at least once during your CFA exam prep. You may also want to consider a question bank of item sets as well to get a little more practice. The Ethical & Professional Standards topic area accounts for 15% of your CFA level 1 score.

Not only will you need to master the material for the exam, you’ll see it again in the CFA level 2 and level 3 exams where it’s worth as much as 15% of your score on each. The fact that you could see questions on all three exams covering roughly the same material makes for a great opportunity. Learn the material early in level 1 and you will save a lot of study time leading up to the other exams.

CFA Level 1 Ethics Practice Problem Review

We’ll work two more practice problems in this post. Be sure to check out the prior two posts for eight more ethics practice problems. When you’re working the problems, make sure you read through the given answer to get an understanding for how the CFA Institute is looking at the ethical dilemmas.

CFA Ethics Question #1

Tom Hart works for IAM Investment Management, a struggling firm that is likely to close soon under the weight of redemptions. Tom wants to start a small independent practice so he will have something to work on if the firm closes. Which of the following statements is correct under the Code and Standards?

A. CFA Institute members and candidates are prohibited from pursuing independent practice that might be in competition with their employer.

B. Tom needs to obtain written consent from his employer for the independent practice since it could result in compensation or other benefits in competition with the firm.

C. Since the firm is likely to close, Tom does not need permission from his employer and can start his independent practice. He must disclose his independent practice only when he starts making money.

CFA Ethics Question #2

Meg and June have been good friends since high school and are sitting down to a cup of coffee. Meg, the CFO of a large retail clothing chain, mentions that sales are booming and the quarterly results should look very good. June, an investment adviser, writes a research report to clients suggesting they buy shares of a retail exchange traded fund on the potential for high industry sales this quarter. June also buys shares of the fund, which includes shares of Meg’s company, for her personal account.

A. June violated the Code and Standards by buying shares of the fund but not by making the recommendation to clients.

B. June did not violate the Code and Standards by either action because she did not directly act on the information by buying shares of Meg’s company.

C. June violated the Code and Standards by both actions, buying shares of the fund and recommending that clients do so.

Question #1 Answer: B

Under Standard IV – loyalty, members and candidates may undertake independent practice as long as they get written permission from their employer. The requirement is not contingent on actual compensation or benefits but the potential. This is like the ‘perception of conflict’ standard held by the Institute. All necessary disclosures and requirements must be upheld if there is the potential or perception of conflict in a scenario.

Question #2 Answer: C

June violated Standard II – material non-public information because both her purchase and recommendation appears directly related to the information she received from Meg. The information would likely influence the share price of the fund¸ making it material, and it is non-public because it has not yet been released.

Wrap-up of CFA Level 1 Ethics Practice

Many of the ethics questions on the exams will offer one answer that the action was not a violation and then two questions that claim a violation but for different reasons. For this reason, you not only have to know if an action is a violation of the Code and Standards but also why it is a violation. Practicing ethics problems will help to practice matching violations to specific Standards.

Another favorite of the CFA Institute is the problem where someone makes two statements and the candidate must decide whether one, both or neither statement is a violation of the Code and Standards. One statement is usually clearly a violation or not but the other is often ambiguous. For these, you really need to study the Standards for claims that can be made and things you can say.

The ethics material on the CFA exams is actually not too difficult if you spend a little extra time studying before the first exam. I earned 70% + on the topic in the second and third exam without spending a lot of time refreshing just because I drilled on the material extensively while studying for the first exam. Do the same and you shouldn’t have any problems.

‘til next time, happy studyin’
Joseph Hogue, CFA


CFA Exam Changes 2016 – LOS and CFA Curriculum Changes

The CFA Institute revised a lot of the exam curriculum for 2016 and may emphasize these changes on the exams

The CFA Institute has released the 2016 CFA exam curriculum and the changes from last year’s material range from immaterial to must-read. Make sure you know which study sessions and learning outcome statements (LOS) were changed and how it could affect your studying.

New candidates to a specific level may not feel that curriculum changes are important. They didn’t read the previous year’s curriculum for that exam level so why should changes matter?

CFA curriculum changes are important because they highlight the thinking of the CFA Institute. The LOS and readings were changed for a reason and that reason may mean a higher likelihood of the material appearing as a question on the exam.

We published our update to the CFA curriculum changes for each level in separate posts last week. Make sure you click through and check out content changes for your exam level.

Click here for the CFA Level 1 2016 Changes
Click here for the CFA Level 2 2016 Changes
Click here for the CFA Level 3 2016 Changes

What the CFA Institute Changed on the CFA 2016 Exams

The 11th edition of the Standards of Practice Handbook was just released in 2014 and changes hit the exam last year. This means that the Ethical & Professional Standards topic area was largely unchanged in the 2016 CFA curriculum. Two readings are dropped and one added to the CFA level 3 curriculum but the LOS have remained largely the same.

The CFA level 1 curriculum saw the most changes this year with one new reading and a change to about half the LOS. There are 29 new LOS with 23 changed LOS and eight removed from the curriculum. Study session 7 and 9 (FRA) see the most LOS changes. The introduction to risk management (study session 12) has been moved from the level 2 exam and it looks like the Institute wants to start emphasizing the material earlier in the curriculum.

Level 2 CFA candidates will want to pay attention to the changes in the Portfolio Management topic area with three new readings out of four. Besides the new readings and new LOS, I would bet that these changes carry over to some fairly big changes to the topic area in the level 3 exam next year.

How to Study for CFA 2016 Curriculum Changes

The CFA Institute does not say whether it favors CFA exam curriculum changes for item sets on the exams but you should be ready for the new LOS and readings to appear. While a wording change in an LOS might not be significant, changing a reading is a big step.

Changing a reading in the CFA curriculum may mean that the Institute wants to emphasize a change in the market regarding that topic. In this case, it would be intuitive that they would want to test candidates on the material to make sure they are up-to-date with market forces.

Changing a reading in the curriculum may also mean that the Institute wants to clarify the topic or provide a more easily understood perspective. In this case, whether this year or next, you would think the Institute would want to test the changes in the content to compare against previous exam results.

Either way, you can bet that many of the LOS from new readings will make it on to the 2016 CFA exams.

Perhaps as important as some of the changes is the fact that the institute did not change the CFA exam topic weights. The CFA Institute changed many of the topic weights on the 2015 exam, balancing out the weights a little more evenly. Traditionally important topics saw their weight decrease while other topics picked up a few points. This meant that you could no longer focus your study time on just a few topic areas to get maximum points.

The table below shows the topic weights for the 2016 CFA exams. Financial Reporting and Analysis, Equity, Fixed Income and Ethics still carry the most weight across all three exams but other topics will contribute significantly to your total score.

2016 CFA Exam Topic Weights

2016 CFA Exam Topic Weights

After reading through the curriculum, working practice problems as you go, make sure you actively test your understanding in each topic area. You should be aiming for at least 70% in all topic areas and try for 80%+ in the core topic areas.

Don’t forget to check out the CFA 2016 curriculum changes for your test level linked at the beginning of the post. You can download a pdf copy of the CFA exam changes on the Institute’s website by clicking here and scrolling down to your exam level.

‘til next time, happy studyin’
Joseph Hogue, CFA

Soothing City - Copyrights FinQuiz.com

Soothing City – Copyrights FinQuiz.com

CFA Level 1 Changes 2016: CFA Curriculum Updates

Miss these CFA level 1 changes in the 2016 curriculum and risk missing out on those important few points that could get you a passing score

The CFA Institute has published its curriculum changes for the 2016 exams. The CFA level 1 changes for 2016 are relatively light compared to last year but still extremely important. I have always suggested candidates get a jump on studying by reviewing prior year curriculum before their own books arrive but you have to be ready for the changes.

You can download a pdf copy of the CFA level 1 changes for the 2016 curriculum by clicking through this link. The curriculum changes are available in a combined document or individually for each of the 18 study sessions.

CFA Level 1 Changes 2016 in General

Only one reading has been added this year and about half of the learning outcome statements (LOS) in the CFA level 1 curriculum have been affected with changes. There are 29 new LOS with 23 changed LOS and eight removed from the curriculum.

Fortunately, the CFA level 1 changes do not affect topic weights in the exam as they did last year. Last year’s CFA curriculum changes to the topic weights in each exam caught a lot of candidates off guard. The table below shows the topic weights for each CFA exam.

2016 CFA Exam Topic Weights

2016 CFA Exam Topic Weights

There is no real proof to say that you need to study new or changed curriculum material more than older material. It seems intuitive that the CFA Institute would want to highlight changes in the curriculum by putting it on the exam but there is no way of knowing for sure since we can’t talk about exam questions. There aren’t many changes to the 2016 CFA level 1 curriculum so take a little time to make sure you master them.

CFA Level 1 Changes to Curriculum

The 11th edition of the Standards of Practice Handbook, effective July 2014, is still relatively new so its no surprise that the Institute has not changed much from last year’s level 1 exam. There are no changes to the Ethical and Professional Standards study session on the exam.

The changes to the CFA level 1 2016 curriculum do not affect study session two or three of Quantitative Methods.

The changes to the CFA level 1 2016 curriculum do not affect study session four through six of Economics.

Study session seven, the introduction to Financial Reporting and Analysis, is the first part of the CFA level 1 2016 curriculum where we see any changes.

  • LOS 7.2.1b and 7.2.2e have added or removed words but there is no change to the intent or the material you’ll need to study.
  • LOS 7.2.2a is new: Describe how business activities are classified for financial reporting purposes

Study session eight includes a new LOS (8.2.1d): Describe key aspects of the converged accounting standards issued by the International Accounting Standards Board and Financial Accounting Standards Board in May 2014.

Study session nine is where we see the most CFA level 1 changes to the LOS

  • 9.2.1c now asks you to “compare” the different inventory methods across perpetual and periodic inventory systems.
  • 9.2.1d through 9.2.1h have been removed and replaced
  • 9.2.1d through 9.2.1l are six new LOS

Make sure you spend some time on inventories section (Reading 29). There is a new focus on the material and it accounts for a big portion of the changes.

Reading 30 of study session nine on Long-Lived Assets has also been changed significantly

  • 9.2.2c and 9.2.2d have been removed
  • 9.2.2f now only asks you to describe the different amortization methods and calculate amortization expense
  • 9.2.2 (b,c,d,e,g,k,o,p) are all new LOS on the 2016 CFA level 1 exam. That’s a quarter of the new LOS in just one reading so you can bet the Institute will be looking at the section for the exam.

Reading 31 (Income Taxes) has one change, LOS 9.2.3h has been changed to be more specific. You now need to, “Explain recognition and measurement of current and deferred tax items.”

The changes to the CFA level 1 2016 curriculum do not affect study session ten of Financial Reporting and Analysis.

The changes to the CFA level 1 2016 curriculum do not affect study session eleven of Corporate Finance.

Reading 42 (Risk Management: An Introduction) in study session 12 is new. The seven LOS for 12.2.1 are new so make sure you master the reading. You will revisit risk management in more depth during the CFA level 2 and level 3 exams so make sure you get a really good base of understanding in the first exam.

Study session 13 (Equity) includes one LOS change. LOS 13.2.1g has been replaced. You no longer have to compare behavioral finance with traditional finance but must instead describe behavioral finance and its relevance to market anomalies.

LOS 14.2.1 of study session 14 (equity) includes some wording change to d, g, h and j. Most of the changes do not affect what you need to learn. Make sure you understand how barriers to entry affect price competition and how the macroeconomic picture influences industry growth and risk.

LOS 14.2.2 f and g include some wording changes. Neither of the changes is really material but more to better define what you need to understand.

LOS 15.2.1 of study session 15 (Fixed Income) changes the word ‘functions’ for ‘content’ in the 2016 curriculum. It seems this a more general approach to the section.

LOS 15.2.2e is new and places a little more emphasis on sovereign bonds.

LOS 15.2.2f and 15.2.2i include wording changes to take the emphasis off sovereign bonds and highlight risks of repurchase agreements.

LOS 15.2.3 of Reading 55 (Intro to ABS) includes a lot of changes so make sure your pay attention to the section. LOS 15.2.3 (b, e, g, h, i) include wording changes but do not change the intent very much.

LOS 15.2.3 (c and f) are new while 15.2.3e has been replaced.

LOS 16.2.1 (d and e) include wording changes but do not materially affect your studying. You no longer have to explain how embedded options affect interest rate risk.

LOS 16.2.2b is new, you must now describe default probability and loss severity as components of credit risk.

LOS 16.2.2f includes a wording change but only to better define that you need to know the four Cs of credit analysis.

LOS 16.2.2i has been removed.

The changes to the CFA level 1 2016 curriculum do not affect study session 17 of Derivatives.

LOS 18.2.1 of Reading 61 (Intro to Alternative Investments) include wording changes but do not affect the material or what you need to learn.

The majority of the CFA level 1 changes to the 2016 curriculum occur in study sessions 7 and 9 (Financial Reporting), study session 12 (Portfolio Management), and study sessions 15 and 16 (Fixed Income). Most of the wording changes do not amount to much but pay attention to the new reading (SS 12) as well as the new LOS. The easiest way to do this is just to highlight the sections that include the new LOS and make sure you understand the material when you get there.

‘til next time, happy studyin’
Joseph Hogue, CFA

Yes - there are people on the giant rock. Copyrights FinQuiz.com

Yes – there are people on the giant rock. Copyrights FinQuiz.com

Practicing Ethics for the December CFA Level 1 Exam

With just four months left to the December CFA Level 1 exam, it is time to start studying and there’s no better way to begin that talking about the ethics material. Readers of the blog will know that I am constantly reinforcing the importance of study session 1, the material on The Code & Standards.

The material is important for several reasons. First, the topic will be a considerable part of your exam score at all three levels. Ethical and Professional Standards is worth 15% of the CFA level 1 exam and between 10% and 15% of the other two exams. There are some additional readings to study for the level two and three exams but the core material will remain the same throughout. Learn the Code and Standards early and you’ll bank a ton of saved study time ahead of the other two exams.

A second reason for the topic’s importance is the fact that it catches so many CFA level 1 candidates off guard. Too many candidates go into the first exam thinking they can rely on a basic tenet of, “Don’t lie, cheat or steal,” to pick the most obvious answer to each question. They neglect to study the topic area and are horribly surprised when they see the exam questions.

The questions over ethics on the exam do not have obvious answers! Even the ethical person will need to study the example questions in the curriculum to understand how to answer the section.

Finally, the CFA Institute is explicit that the ethics section is used as a tie-breaker for any candidate score that is close to the pass-fail mark. Do well on this section and it might just pull you up from a band 10 fail.

Studying Ethics for the CFA Exam

With the importance of the ethics material, you want to give it plenty of time in your study schedule. We have studied the material in several posts, outlining the most important parts of the Professional Conduct Program (PCP), the Components of the Code and the seven standards.

We won’t go over the three segments of the material because I want to get to the most important part of your study for the ethics section, working problems. You will need to commit the components and the standards to memory, click through here to read our outline of the CFA ethics and standards, but working problems is extremely important.

It’s only through working problems from the end-of-chapter curriculum that you will get a feeling for the actual exam questions. Work enough of these and the correct answer will start to become clearer. Neglect these questions and every multiple choice may sound like a viable answer.

For copyright reasons, we won’t be able to reproduce the question from the end-of-chapter questions. We will instead change the content of the question but keep the intent and the methodology for the answer.

CFA ethics question #1

A research analyst decides to change his recommendation for Greenway Corporation from a buy to a sell. He emails his recommendation change to all the firm’s clients on Monday. The day after the email, a client calls with a buy order for Greenway. The research analyst should:

A. Accept the order
B. Advise the client on the change in recommendation before accepting
C. Not accept the order because it is against the firm’s recommendation

Correct answer: B

Standard III, fair dealing requires that clients be notified fairly of all changes recommendations. The client may not have seen the notification and must be informed. If he still wants to make the trade, he must be allowed to do so even if it is against the firm’s recommendation.

CFA ethics question #2

A research analyst for Broward Brokerage & Investment Banking is asked to write a research report on Brown Forman Corporation. Howard B&I has represented Brown Forman’s acquisitions for the past 20 years. Several senior officers of Howard B&I are also directors of companies with which Brown Forman has business relationships. What is the best course of action for the analyst?

A. Write the report but must refrain from expressing any opinions because of the special relationships between companies.
B. Should not write the report because the Howard B&I officers’ service as directors to Brown Forman subsidiaries.
C. May write the report if the special relationships are disclosed in the report.

Correct answer: C

Standard VI – Disclosure of Conflicts states that all conflicts of interest must be disclosed in research and recommendations. An analyst is not prevented from writing a report because of conflicts but must disclose them in the report. The fact that no opinions are expressed does not clear the analyst of the responsibility to disclose conflicts.

CFA ethics question #3

Jameson is an advisor to the board of trustees of a non-profit foundation. The trustees have given Jameson all the fund’s financial information including planned expenditures. A wealthy contributor to the foundation phones Jameson to say that he has found a potential contributor but needs to show him the foundation’s financial information by the end of the day. Jameson does not have time to contact the trustees, he should:

A. Send the alumni the information because disclosure would benefit the endowment fund
B. Not send the information because it is confidential
C. Send the alumni the information but promptly notify the trustees

Correct answer: B

Standard III establishes the preservation of confidential information to a client. Confidential information cannot be released without permission, regardless of whether the disclosure may benefit the fund. Information can only be released, without permission, if it concerns illegal activities or disclosure is required by law. Information may also be disclosed on an inquiry from the CFA Institute’s Professional Conduct Program.

We will work through more questions over the next couple of weeks to give you a better idea of what the CFA Institute is looking for from the material on the Code and Standards. I cannot stress enough the importance that candidates for the CFA level 1 exam study the actual ethics questions in your curriculum. These are going to be very much like what you see on the exam and the correct answer will not always be obvious.

‘til next time, happy studyin’
Joseph Hogue, CFA

How to Get a Job in Finance

Getting a job in finance, with or without the CFA designation, is a tough task. Understand the process and what employers are looking for to get your foot in the door.

Probably the second most frequent question we get here at FinQuiz after, “How do I pass the CFA Exams?” is whether the CFA designation will get you a dream job in finance. Sadly, the short answer is, “No, of course not! What are you thinking?” No one thing is going to have employers beating down your door, short of paying someone to give you a job. Having the CFA designation or progress to the charter will help and it’s something employers look for but you have to know the rest of the process.

What do employers want in a job candidate?

The first thing you need to do is understand what employers want in a job candidate and what they want in candidates for that dream job in finance.

Employers want someone dedicated to their professional life. As much as supervisors may talk about finding people that balance work and life, about how important it is that employees enjoy their social lives, they really want someone that isn’t afraid to put in the hours and get the job done. A lot of new finance hires are going to be expected to put in 60+ hours a week, especially during end of quarter reporting or around a big deal. Showing that you can dedicate yourself to the job will help put you higher on the list.

  • Beyond the experience from loading your schedule with extra-curricular activities, or professional activities if you’re already working, managing a busy schedule shows employers that you aren’t afraid to put in the extra time to get things done.
  • Highlight projects that required an intense schedule and extra work on your part, leading to how you successfully pushed the deal through.

Employers don’t want “well-rounded” candidates. Asset management is competitive and it’s a team effort. If employers wanted people that were good in everything, you wouldn’t have separate teams for fixed-income, equities, alternative and about a hundred other ways to segment the industry. It’s fine to have an understanding of the industry and the CFA curriculum does a great job of broadening your knowledge, but you need to excel at something.

  • Spend some time talking to people in the industry to learn about specializations. You are going to need to network anyway so this is a great way to start by reaching out to people in your local CFA society. Once you have talked to enough people and know what path you want to take, develop a special skill that will help you stand out in the crowd.
  • The traditional route has been to learn as much as you can about a specific sector or industry but there are other skills you can develop. Learn how to value and trade a specific product on the fly or how to code trading programs. Develop an investment or trading strategy and track the gains versus a benchmark. Networking with people in the industry should uncover a few potential skills you can work to that will fulfill an employer need.

Finance is still about who you know

As much as your dedication and special skills will help you get the job, the industry is still very much a networking game. Spamming out your resume to every job board and corporate vacancies page will get you half as many interviews as reaching out personally and making the right connections. For this, there is no better opportunity in town than those presented by your CFA society.

  • Develop your personal brand. A personal branding strategy is something we’ve talked about before on the blog. Check out the prior post and put together a strategy for how you want people to see you. This is going to play into your networking and that all-important first impression when someone asks you, “So, what do you do?”
  • Check out the profiles on a few key CFA society members before you go to events. Start with the board of directors or anyone that appears to show up frequently to events. Learning a little about them will help to break the ice if you meet in purpose. When you meet them, don’t comment that you studied their profile but casually remark on a comment they posted in social media that you saw or bring up an industry-related question that they might know something about.
  • While CFA society events will provide a ton of networking opportunities, check out some other industry groups and events. You’ll be able to go to most functions at least once as a guest before making any kind of commitment. Talk to the people at the event and decide whether it might be worth it to become a regular member. A lot of these groups will be so anxious to grab new members that they’ll get you a mentor and really help jumpstart your job search.

Most of the time at these networking events, the conversation will turn naturally to how you are doing finding a job or for what kind of job you’re looking. Don’t force it but when it gets there, be ready with a very brief pitch on what you’re looking for and how your past experience has led you in that direction.

Develop yourself as an asset to an employer in your dream job and talk with enough people and you’ll be on your way in no time.

‘til next time, happy job hunting
Joseph Hogue, CFA



The Most Important Blog Post You Will Ever Read

It’s the second week in June and I can hear crickets chirping in the background. Most CFA candidates are taking a well-deserved vacation from anything CFA-related and it will be several months before they start thinking about what’s next.

That makes this post all the more important for you few candidates that are reading it.

In fact, this post may be one of the most important you read during your time as a CFA candidate or as you progress through your professional career as an asset manager.

Frankie Goes to the CFA

If I were to tell you that now is the time to really start taking advantage of the opportunity to reach out to the CFA network or to develop your professional skills, most of you would think me a sadist. At minimum, you’d probably quote a little from Frankie Goes to Hollywood with, “Relax, Don’t do it!”

And you deserve a little rest and relaxation. You’ve been through a third of one of the most difficult professional designations and you’re probably feeling a bit more than tired.

Take a couple of weeks to reconnect with friends and family. Maybe even take an actual vacation (unless you spent your vacation time on an awesome CFA study vacation).

Then get back to work…and don’t take a few months to do it! Taking advantage of the next six months can make the difference between having a good career and having a great career.

First, you’ve got about six months before the rest of your CFA candidate peers even start thinking about their next exam. The industry is an extremely competitive one and you need to set yourself up as something different, a true asset to your employer. Unless you’re a genius or have some kind of natural gift, the way you do this is by working just a little harder than the next guy.

The second reason you need to take advantage of the post-exam lull in your responsibilities is to get into the frame of mind as a real professional. If you’ve got a full-time job then you probably realize this already but many people take summer breaks or other extended-time vacations for granted. Real professionals don’t get weeks off around the holiday or months off during the summer. I’m not saying you shouldn’t enjoy your college years or should become a workaholic, but you need to get it in your head that professional development is continuous and never-ending.

How to Use your Next Few Months before the next CFA Season

It doesn’t mean you have to pick up the curriculum to the next level of the CFA exams just yet. Six months of studying is generally all most need for the exams so you can wait until January if you like.

There are other ways you can use this time though, some of which could actually be a lot of fun.

  • Don’t pass up the opportunity to get involved in your local CFA society. Most societies plan monthly or regular social events and offer a great way to start networking for your career.
  • Read through some of the published research from the CFA Research Foundation or even better, submit a research proposal and get your work published.
  • There are more than 200 books listed on the CFA Institute website, many worth continuing education credits. Read through special topics that will give you an insight and advantage over peers, or just read a few for interest.
  • The CFA curriculum is an excellent academic program but it lacks some of the real practical experience you’ll need in the industry. Take a cash flow or valuation modeling course and learn how to put together your own model in excel.

None of these tasks take a seriously long time and can be pretty enjoyable if you put your mind to it. Being a professional doesn’t mean foregoing everything else in life but it does mean putting challenges in front of yourself even outside your normal schedule.

Put together a healthy mix of projects to keep your mind sharp and keep developing your skills.

‘til next time, happy studyin’
Joseph Hogue, CFA

One Minute of CFA Inspiration

Less than a week to the CFA exam and I thought I would share a little bit of inspiration with you in a video from YouTube.

The video is a one-minute clip of quotes from the 1987 movie Wall Street, a drama about the good and the bad side of the industry. If you’ve never seen the movie, and I find it hard to believe that a CFA candidate hasn’t, the antagonist is an asset manager named Gordon Gekko. Gekko is the stereotype of the power-hungry ‘80s corporate raider.

I have never liked the not-so-subtle lesson about morality in the movie. Yeah, Gekko was supposed to be a villain and broke insider trading laws but man he was hard-driving and I think a lot of us can relate to his spirit. Beyond all the lessons from Oliver Stone that capitalism is bad, we know that it is Adam Smith’s self-interested invisible hand that pushes each of us to be the best analyst and the best asset manager we can be.

It’s that hard-driving spirit in all of you that led you to tackle the CFA exams, three of the most difficult professional exams out there. It’s also that hard-driving spirit within all of you that will help you allocate funds to projects like start-up companies and billion-dollar projects that will make the world a better place.

Let the engineers say they create things…their creations wouldn’t get off the ground without your financing.

Let the social activists shriek about the social good… it’s the returns you make on assets that give people the financial security to help the less fortunate.

Let the regulators talk about too big to fail…for those of us in the industry, failure is not an option.


This is your wake-up call pal! Go to Work!

And a few jokes to get you by…

A young banker decided to get his first tailor-made suit. As he tried it on, he reached down to put his hands in the pockets but to his surprise found none.

He mentioned this to the tailor who asked him, “You’re a banker, right?” The young man answered, “Yes, I am.”

“Well, whoever heard of a banker put his hand in his own pocket?”


A man visits his bank manager and says, “How do I start a small business?” The manager replies, “Start a large one and wait six months.”


What’s the problem with banker jokes? Bankers don’t think they’re funny, normal people don’t think they’re jokes.


A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.


An accountant is having a hard time sleeping and goes to see his doctor.

“Doctor, I just can’t get to sleep at night.”

“Have you tried counting sheep?”

“That’s the problem – I make a mistake and then spend three hours trying to find it.”

Just one more week of studying to go! You’ve worked your butt off and you are going to do well, I know it.

Good luck next Saturday!
Joseph Hogue, CFA

CFA Mock Exams, Harder than the Real Exam? And how to Use them?

Mock exams are some the most important practice you can do for the CFA exam. Whether it is a live exam or from an online service, the resource can help measure how you will do when the actual CFA exam comes around in June.

Third-party providers generally started offering their live mock exams over the last couple of weeks, normally on a Saturday to mimic the actual exam experience. I am writing this on Friday (22nd) and haven’t talked to anyone that took their mock exam this Saturday but have talked to some candidates taking exams on the previous Saturday.

One of the most frequent questions I get this time of year is how difficult are the mock exams compared to the actual CFA exam and how do I use the resource for success?

How difficult are CFA Mock Exams?

I have talked to several candidates that have taken CFA mock exams this year, from FinQuiz and from other providers. It is difficult to compare the level of difficulty on mock exams with the actual exam because of difference in candidate opinions. Candidates I’ve talked to have generally found that the Level 1 mock exams by most providers were more difficult than the actual exam. Candidates that took FinQuiz mock exams last year said the Level II mock exam seemed slightly easier than the actual exam but pretty close while candidates taking the Level II mock exam from other providers claimed that it seemed much easier than the actual exam.

My own experience with mock exams, so many years ago, seems to echo the opinion I’ve heard from candidates. Level 1 mock exams seem very difficult because it’s all very new. The actual exam seems more generalized across the curriculum and not particularly detailed. The CFA level 2 exam is extremely detailed and it may be difficult for third-party mock exam providers to mimic the same level of difficulty.

The CFA Institute includes one mock exam in the cost of your registration. The mock exam is designed to mimic the actual test in length and relative weights but may not be exactly like the June exam. For level 1 and 2 CFA candidates, the mock exam is composed of two three-hour sections. The level 3 CFA mock exam is just one three-hour section and does not include an essay section.

For CFA level 3 candidates, you can replicate the exam experience by taking the mock exam along with last year’s morning essay section or a combination of previous year’s essay questions.

I’ve talked with a few candidates that have taken the CFA Institute mock exams this year and have heard similar comments as previous years. The mock exams put out by the Institute seem to be fairly difficult, though we will not know how difficult relative to the actual exam until later. In the past, including the years that I took the exams, the mock exams by the CFA Institute seemed more difficult than the actual exam. If you did not score as well as you would have hoped on the mock exam, use it as motivation to study harder but do not get too discouraged. You may still have a very good chance at the June exam.

The CFA Institute also makes short practice tests available for an extra fee. The tests are shorter than the mock exams and based on specific topics to help you focus your studying. You may not need them if you have access to the FinQuiz question bank, both are designed to be relatively close to the difficulty you’ll find on the actual exam.

How to Use the CFA Mock Exams

More important than the relative difficulty of mock exams is how you should use them in your study for the actual CFA exam.

Mock exams serve two purposes for candidates. First, the obvious reason for mock exams is to test your mastery of the curriculum. The mock exams include questions from each topic area, forcing you to draw from memory the entire curriculum. Many candidates are surprised, having only ever studied topic-based questions, how little they remember when they quiz themselves on the whole curriculum at once.

The second purpose for mock exams is to mimic the exam setting and the endurance you’ll need on that first Saturday in June. If you do not take a mock exam, you may be surprised at how tired you get sitting for six-hours at an exam table. Taking the CFA exam takes mental and physical endurance and you really need to build up your stamina before the actual exam.

With just two weeks left to the CFA exams, you need to be fine-tuning your study time. I recommend taking at least one mock exam per week. If you do not have access to a mock exam, you can construct one through end-of-chapter or question bank problems. Take these tests at the beginning of your study week to see in which topics you are weakest and might need extra study throughout the week. Taking at least two six-hour tests will also help you build up a little stamina ahead of the actual exam.

Again, don’t get discouraged if you do not score as well as you’d like on mock exams. The practice sets may not be a perfect match for the actual CFA exam. The important idea here is that you not neglect the need to sit for a mock exam, both to guide your studying and to test your endurance.

‘til next time, happy studyin’
Joseph Hogue, CFA

What to Expect on CFA Exam Day

The day of the CFA exam is quickly approaching and I am getting questions from candidates about what to expect on that first Saturday in June. The CFA Institute has a page on its website that outlines the day’s structure but I thought I would walk you through it and provide some additional insight.

Your CFA Exam Day Begins

The day of the CFA exam is fairly straight-forward and simple. Most testing sites open their doors hours before registration begins. Getting to the testing facility early is a great opportunity to sit back and relax, study your flash cards or get to know some of the other candidates. Don’t overlook this networking opportunity!

Wear comfortable and layered clothes for the CFA exam. This is no time to impress people by wearing a three-piece suit. You do not know how warm it will be in the exam room. Many will have the air conditioner working and some will have it turned up too high. Dress in layers that can be removed depending on the inside temperature.

Before 8am, you will be allowed to check-in for the exam. This is basically just telling them you are there and presenting your identification. You will still need to present your admission ticket and ID to get into the testing room later.

At 8am, candidates will line up to enter the testing room and find their seats. You will leave all your personal belongings outside the testing room so either don’t bring anything valuable or leave it somewhere safe. Check the CFA Institute website for what you can and cannot take into the testing room.

The exam rules will be read at 8:30 am. It is extremely important that you pay attention and be patient. Do not open your exam book or do anything until told to do so. You will be given a candidate pledge and reminded of the CFA Institute’s strict code of ethics, after which you will sign the pledge.

At 9am, testing will begin. You are allowed to use the restroom while testing but it will still count against your time. Better to use the restroom before the exam begins, especially if you are a coffee drinker.

Do not ask the exam administrators any CFA-related questions. They have been hired to proctor the exams and most likely know nothing about the CFA other than how to conduct the exam.

If you finish the session early, you are allowed to leave the testing room. If you are still testing at 11:30am, you must stay until everyone is dismissed at noon.

The exam administrators will verbally notify the room when there are 30 minutes and 15 minutes remaining. In addition, they may note the time remaining on a whiteboard at 30 minute intervals.

The afternoon session is exactly like the morning session. You will begin the check-in at 1pm and the announcements will begin at 1:30pm. The test will begin at 2pm and go until 5pm.

Remember, you must sit for both morning and afternoon sessions for your exam to be valid. You are allowed to leave the test site for lunch but do not go too far. Eat a moderate-sized lunch so you are not too hungry but not too full for the afternoon session.

While you will want to talk to other candidates, resist the urge to talk about specific exam details. There are plenty of other things to talk about besides the exam and many candidates will be nervous enough without discussing it anyway.

By this time in your life, you have sat for countless exams. The CFA exam is really no different other than perhaps a little longer. The best thing you can do for exam day is try to relax. Staying calm and confident will actually help you recall the curriculum and pass the exam.

Being ready for CFA Exam Day Problems

We posted an article last November, what you need in your CFA Exam Emergency Preparedness which is definitely worth your time to look over. Most candidates have their basic exam resources ready but fail to have what-if resources available. It is unlikely that you’ll ever need any kind of emergency resources, I didn’t in the three years I took the exams, but that worst case, what-if scenario should be enough to convince you to take the time.

  • Admission tickets are now available on the CFA Institute page linked above. I always printed out two copies in case something happened to one of them.
  • Bring at least three or four pencils, all pre-sharpened. You probably won’t need more than one or two but it is nice to have them ready and not spend time sharpening.
  • Bring an extra calculator battery and screwdriver. Better yet, just bring an extra calculator to save yourself the time of changing out a battery.
  • Bring ear plugs just in case something threatens to distract you at the test site.

Don’t wait until the day before or even a few days before the CFA exam to plan your day. This day is too important and you cannot afford to let anything go wrong. Besides making sure you get to the exam as planned, putting everything together will really help to lower your stress level on the day of the big test. You are going to be nervous enough with the CFA exam itself, don’t add to it by worrying about logistics.

‘til next time, happy studyin’
Joseph Hogue, CFA

100 hours of CFA Study in 3 Weeks!

I took an informal survey of my CFA candidate contacts recently and was pretty happy with the outcome. Of the nine candidates I talked to, most had started studying for the 2015 CFA exams sometime between late January and early March. Candidates reported spending around 10 or 15 hours of studying and had just over 200 hours total on the CFA curriculum.

There were a few outliers in the group. One candidate had started studying in December and had been over the curriculum for more than 400 hours so far. She was very confident she wouldn’t have a problem on the exam.

Another candidate though was not as confident. He was one of those starting later and had not devoted as much time. He estimated that he had only spent about 150 hours studying and wasn’t quite through the entire curriculum yet.

Asked if I thought he could still pass, I told him that I would not feel confident going into the CFA exams without at least upwards of 250 hours of studying under my belt. To which he replied, “How do I get 100 hours of studying in just three weeks?”

CFA Study-thon Weeks One and Two

Studying 100 hours for the 2015 CFA exams, or even more, in three weeks may not be a problem for some candidates. If you can put other classes or responsibilities aside for a few weeks while you cram for the exams, then it doesn’t even amount to a full-time schedule.

Other candidates are not as fortunate. Devoting all your time to the CFA exam isn’t possible when you have a full-time job, a family or a full schedule of college courses.

But you can still get in another 100 hours of studying before the exams, picking up a ton of additional points and maybe putting you over the pass-no pass level.

Many candidates are expecting to take the last week before the exams off to study but would find it hard to take the whole three weeks off work. It is still possible to spend around four hours a day studying over six days a week. This would accumulate 48 hours of study time over the next two weeks.

I wouldn’t recommend you study all seven days of the week. You need time to relax and studying every single day is just going to leave you strained and not retaining information. I would take one of the weekend days off from studying. It may be tempting to take a workday off from studying but it is much more relaxing if you have one day where you don’t have to work or study. You’ll come back to your schedule much more recovered.

We’ve talked about ways to find more time to study for the CFA exams here on the blog before. With just a few weeks left, you will need to find more time and use that time as efficiently as possible.

Start your week with a full-length mock exam or a full set of questions, hitting every topic area from the curriculum. After working through the questions you missed, remember to review the ones where you got lucky guessing, you will review the percentage score in each topic to guide your studying over the week.

If you are consistently scoring less than 50% on any topic area, you will need to go back to the curriculum or summary sheets to review. Even on the non-core topics, scoring less than half of the points available will severely drag your overall score down.

For those topics in which you consistently score above 80%, I would review a one-page summary once or twice a week just to keep the material fresh.

In those topics where you are scoring between 50% and 80%, you will want to work out a schedule of flash cards, summary sheets and practice problems. Time spent on these three resources is about as effective and efficient as you are going to find. Use all three resources and cover a topic area each day, finishing up with a small set of practice problems. Do another set of practice problems on the following day, before you start the new topic area, to make sure you retained the information.

You might have to stretch it a little and get a little less sleep, but studying four hours a day should not be impossible for most people.

Your CFA Last Week Study Plan

Longtime readers of the blog will know that the last week before the exam was my favorite time of the year when I was a candidate. Not only is the excitement of the upcoming test like chugging a keg of coffee, but really devoting the week to the curriculum is a lot like being a professional analyst.

You are going to be spending around half your time as an analyst researching and reading information about your coverage universe. Really digging into the curriculum and studying for eight or ten hours a day is a lot like that and you may be surprised how excited you feel to get started every day.

I’ve covered study schedules for the last week before the CFA exam as well. There are really two key points you want to build into your schedule.

  • First, treat your study schedule like a job. If you can take the time off work for that last week then the CFA exam will become your job. Put in at least an eight-hour workday, stopping for a five minute break each hour and half an hour for lunch.
  • Second, don’t stay home to study. There are too many distractions at home and you need a more test-like environment. The public library is usually a good place to study since it is fairly quite but has some background noise that will simulate the actual exam noise.

Start each day with an hour or so of practice problems. Too many candidates put practice problems off until later in the day and end up either not having the time or are too tired to really do their best. Do a few sets of practice problems early to review the previous day’s information and to make sure you get them in. You retain much more information when you use active learnings strategies and practice problems are some of the best.

The rest of the day’s studying will be a lot like your previous schedule, just at a longer interval. Try hitting one or two topics in detail each day and review another one or two topics. You don’t necessarily have to review every study session over that last week but should cover at least 12 to 15 of the sessions.

If you studied for four hours a day, six days a week during the previous two weeks then you’ll need about 52 hours to meet your 100-hour study mark over the week to the exam. That amounts to just under nine hours a day over six days. These will be long days, especially towards the end of each day but you have to stay focused. Just keep telling yourself that it is only a few days to one of the biggest exams of your life.

This is only an example of what you might do to prepare for the 2015 CFA exams over the next three weeks. Your own plan may differ and you may find it easier to do more or less studying. Spending 300 hours isn’t a formal rule for the CFA exams, just an average we’ve seen across successful candidates. More important than the total time you spend is how well you do on practice and mock exams, so use them as a guide.

The countdown is on! Just 26 days left to the 2015 CFA Exams! Good Luck!

‘til next time, happy studyin’
Joseph Hogue, CFA

Which Level of the CFA is Most Difficult?

Logging in to the CFA Program Candidates group on LinkedIn last week, the first post I saw was a common question I get from candidates. The candidate had been preparing for the Level 3 CFA exam and was wondering how it compared to the first two exams.

I get this question, or variations of it, quite a bit. Candidates want to know what they’re up against with the next exam and everyone wonders which is most difficult.

As usual, candidates on the LinkedIn Group came through for their peer and the post had 21 replies in about a week. I thought I would address the question here on the blog as well.

Are the CFA exams as easy as 1 -2 -3?

My own experience was that the first CFA exam actually seemed fairly easy. The second exam, living up to what I had heard from most other candidates, was much harder. The amount of formulas and detail you are expected to remember seems to increase by ten-fold from the first to the second exam. Unlike the third CFA exam, where you know some topics will appear in the morning section, you really have no idea what will be on the level 2 exam. This means you really need to spend a lot of time covering as much of the curriculum and in as much detail as possible.

I’ve heard a lot of candidates say that the level 3 CFA exam seemed more difficult than the second exam. I think this depends greatly on your preparation and comfort for the essay section of the exam. The afternoon section of the level 3 exam is no different than the second exam in format or difficulty (in my opinion). As for the morning essay section, I was actually surprised how easy it seemed after studying prior years’ exams.

You’re experience may be different but I would say the second exam was clearly the most difficult for me. The level 1 CFA exam was the second most difficult but only because you have no idea what to expect so you’ll need to study more to cover the uncertainty. The third exam can actually be relatively enjoyable if you study the prior years’ essays.

Do you need the same amount of studying on each CFA exam?

When it comes down to answering how much time is needed for each exam, it’s not really about time but about how you study. Each exam is a little different and requires a different approach to studying.

I spent way more time than was necessary studying for the first CFA exam, but then it is always hard to say how much is going to be enough. Between reading the curriculum, study notes and watching videos, I covered the material seven times and that’s not counting practice problems. When I got to the exam, I was surprised how easy and generalized the questions seemed. Knowing now that the CFA level 1 exam focuses on general concepts, I would suggest that you cover everything multiple times but don’t worry as much about the details. Understand the idea behind each LOS and broad concepts in each section.

The CFA level 2 exam is very different from the first. You will need to know deep details in the LOS to do some of the longer calculations and process. For this exam, I would concentrate on really mastering the more important topic areas. Using the topic weights for the exam, make sure you are scoring above 80% or higher on the most important topics. To get to this level of mastery, you might have to spend a little less time on other topics.

Responses from CFA level 3 candidates on the forum post were typical of what I usually hear and easily remedied with a smart adjustment to your study plans. More than a few of the candidates ran out of time or did really poorly on the morning essay section of the exam. While I thought the CFA level 3 exam was much easier than the second exam, it would have been impossible if I hadn’t spent so much time practicing prior years’ essay questions. This is something we talked about in last week’s post and absolutely critical to your success on the last CFA exam. If you spend your time studying the essay questions from prior exams, you can spend less total time than on other exams and still do well.

Last month ahead of the exam. You’re almost there!

‘til next time, happy studyin’
Joseph Hogue, CFA

Value of the CFA Charter and Why you Need to Keep Studying

Many of you have been studying non-stop for the CFA exams for months and are feeling a little overwhelmed and maybe even questing if it is all worth it. I thought I would share some of my own experience having the CFA charter as well as testimonials from around the web from other charterholders.

Your own reasons for taking the CFA exams and reaching for the charter may be different but there are some really strong reasons to stick with it. We covered a couple of reasons last week why you should keep studying for the CFA exams even if you fall behind. The biggest reason is that studying for the exams is really no different than the research and professional development you are going to be doing throughout your career. You will need to constantly update your skills and stay on top of recent news to be a good analyst. Mastering the CFA curriculum is one of the best sources you’ll find for professional education.

Three Perspectives on the Value of the CFA Charter

The CFA Institute posts six chartherholder profiles on the website and some really interesting stories of how others have found value in the CFA designation.

Rana Atallah, CFA of Kuwait points to the fact that many jobs are requiring the CFA charter as a prerequisite or at least a preferred status. Something that has been extremely important during recessions, Rana says she has had more flexibility and the charter provides her with more choices in terms of employment.

During the financial crisis, a lot of people found that having the charter meant the difference between keeping your job and being one of those cut. For those looking for a job, having the charter can make you more competitive though you’ll still need to prove yourself through experience and results.

Maria Kahane, CFA of France credits the tough CFA curriculum with helping to keep ahead of the fast­-paced world of global finance. She speaks to the global acceptance and reputation of the charter with, “The charter is applicable wherever you are in the world; it’s the same questions if you’re in Hong Kong, if you’re in New York, if you’re in Paris. An it’s the only certification I know that has this global positioning.”

David Wellinghoff, CFA of Boston was able to use the CFA program to make the move from software engineer to a job in the financial industry…and he was able to do it in one of the most competitive times for employment, 2008. Besides helping to get his foot in the door by showing that he had the technical knowledge for a job in asset management, employers with the CFA designation understood the commitment it took to sit for the exams.

My own experience as a CFA Charterholder

My own experience as a CFA charterholder has been similar to some of the testimonials you’ll read on the internet. I earned the charter in 2011 and have worked as an independent analyst and financial writer since 2012.

It’s tough being an independent analyst (working on your own and selling research independently) and I’ve no doubt that having the CFA designation has helped me get assignments. I’ve had at least four clients over the last few years specifically tell me that they were interested in talking to me when they saw the designation.

Besides the credibility the charter has with employers, I benefited greatly from the breadth of the curriculum. Being able to talk on a variety of topics across different asset classes and investments helps me secure more projects and deliver on the task.

So even if you are struggling with the Level I CFA exam and that light at the end of the tunnel is just a distant speck, keep at it and you will see the benefits. Passing the CFA exams is no easy task but then we wouldn’t be doing it if it were easy. I’ve seen my share of easy certifications in the industry and the money ends up being a waste because they don’t have the same credibility as the CFA charter.

Stay strong, less than two months to the exam!

‘til next time, happy studyin’
Joseph Hogue, CFA

What to do if you fall behind in studying for the CFA exams

A question I start getting a lot this time of year is what should a candidate do if they fall behind in their CFA exam study schedule. There are now eight weeks before the June exam and time is running out to put in the average 300 hours most candidates need to prepare.

Whether you started with plenty of time but ran into challenges or whether you just procrastinated starting your CFA study plan, you may be questioning whether it is worth it to continue from here.

The answer: YES! Keep going!

We’ll hit on a couple of reasons why you should push through even if you don’t think you’ve got a chance of passing the exam. Then I’ll try to suggest some ways to change up your schedule and possibly still pass the exam.

Never stop studying for the CFA exam

The biggest reason to keep studying for the CFA exam, even if you don’t think you’ll pass? Because you are not REALLY studying for an exam, you are studying to be a better analyst and a better professional. You are not going to stop studying once the exams are over. You’ll still need to keep yourself updated on how to analyze and manage assets, it’s just that after the exams you’ll call it “professional development.” The material in the CFA exam curriculum is some of the best you’ll find in the industry. There is no such thing as wasted time studying your curriculum books.

Another reason to keep studying is that you never know how well you will do on the exam. I have seen a lot of candidates struggle and then rationalize putting the books away because they, “probably won’t pass anyway.” This is one-part fear and one-part laziness. If I have to play the part of tough love here I will, “get your butt back in there and keep studying!”

How to change up your CFA study schedule to make up for lost time

So what do you do if you’ve lost some valuable time studying for the exam? First, don’t assume that you can’t still hit that 300-hour study target. With eight weeks left, you could start now and spend six hours a day, six days a week and still make it. Even if you cannot devote that much time every day, you could easily put in 50 or 60 hours in one week if you took it off from work.

Don’t let the time crunch be an excuse to study less or to only hit certain sections.

If you truly can’t get in the time between now and that first Saturday of June, there are still some ways to try getting enough points to pass the exam. The most obvious strategy is to focus on the topics that will get you the most points on your respective CFA exam.

The graphic shows the new CFA topic weights on each exam, updated last July. Topic weights leveled out a little so a few topics no longer dominate the tests but there are still places where you should spend more time.

2015 CFA Exam Topic Weights

2015 CFA Exam Topic Weights

Ethics is still extremely important because it is basically the same across all three exams. Master it on the first exam and you’ll save study time later. It is also used by the CFA Institute to determine a pass decision for candidates that are close to the minimum passing score. Don’t assume you know ethics, make sure you study the questions at the end of the chapter and get a feel for how questions will be asked on the exam.

Balance your time between the “core” topic areas and everything else. Do not completely neglect secondary topics but you should be aiming for at least a 75% pass rate on questions within the core topics. Make use of question banks and chapter questions to gauge how well you are doing. If you haven’t been doing many problem sets yet, you really need to get on it and use these to help guide your study plan.

Besides concentrating on core topic areas, shift your studying to active learning-type activities. They are harder than passive activities like reading or watching a video but you will remember much more of the material that you cover doing problem sets and writing things out.

Designate one day a week as your hardcore study day where you will do nothing but study. Go to a secluded spot, maybe the library, early in the morning and study for at least 10 hours. You can take 5 to 10 minutes off each hour to rest and 30 minutes for lunch. Turn off your phone and the wifi connection on any devices. This will get you upwards of 60 hours of actual studying over the next eight weeks (excluding break time). Putting in another two or three hours for each of five days will get you upwards of another 80 hours. As long as you’re not starting from scratch, that should get you close to the 300 hours.

Remember, 300 hours isn’t a hard and fast rule that you must achieve to pass the CFA exams. It’s just an average amount of time candidates report spending. The important thing is to put in the effort to learn the material. If you master the curriculum, you will pass the exam whether this year or next.

Evaluate why you’re running behind, change up your schedule if you need to and go pass that exam!

Good luck.

‘til next time, happy studyin’
Joseph Hogue, CFA

10 Weeks and 10 Goals for the CFA Exams

Ten weeks left to the 2015 CFA exam and it is time to start really defining what you are going to do to get there. As CFA candidates, most of us are driven and goal-focused people so I thought I would set a challenge for you. Give yourself 10 goals to accomplish over the next 10 weeks to make sure you pass the CFA exam.

Study Goals

1) Read through the six most difficult study sessions of the curriculum, one last time. You may not have time to hit every page of the curriculum again, but you should try to cover your sticking points. Candidates typically do really well on a third of the material, o.k. on another third and then not so well on another third of the curriculum. Figure out where you are having trouble and really hit it hard so you can get at least some of these points.

2) Read the study notes one last time. You should be able to get through the condensed study notes one last time to review all the study sessions. This is going to keep everything fresh so you don’t go into the exams with a long lag between the test and covering any specific material.

5) Master 10 concepts or problems with which you’ve really struggled. Even if you’ve avoided them, you know which parts of the curriculum are giving you real problems. These are the problems or LOS that you have basically given up on and that you’re just hoping do not come up on the exam. Pick one a week to finally master.

6) Do 2,000 more practice problems. Whether from the end of chapter sets or from a question bank, practice problems are one of the best ways to study for the exam. Make sure you really read through the answer to make sure you didn’t just guess correctly and really understand the material.

7) Take at least 6 mock exams. Sit down for a practice run at least six times, using either test bank questions or actual mock exams. Building an average across the six mock exams will help to see where you are on each topic area. Besides helping you learn the material this is really going to put you in shape for the real exam. Sitting for a six-hour exam can be physically taxing and you need to be prepared.

8) Spend a week super-studying! Believe it or not, this was always one of my favorite weeks within the CFA study schedule. Spend a whole week devoted only to the CFA exam. Go somewhere on a study vacation for the best vacation you ever had, something I detailed in a prior post.

2) Spend less time worrying about the exam and know you will pass. The stress leading up to the exam is a killer. Resolve to worry less about passing the exam. Whenever you feel the anxiety building or find yourself questioning how you’ll do, just take a deep breath and relax. Remind yourself all the hard work you’ve put in studying and know that you will pass the exam.

8) Put all your test materials together a week before the exam and check your route to the testing facility days before the exam. Being prepared for the exam doesn’t just mean knowing the material. Have everything ready and know your way to the testing site well before exam day. It’s rare but there are candidates every year that miss the CFA exam because they were late or couldn’t find their identification.

Networking Goals

Anyone that has read the blog for a while knows that I am a big advocate of networking and using the CFA exams to reach out to the rest of the financial community. You can pass all the exams but if you’ve been in a shell for three years, you’re still going to have trouble getting a job if you don’t know anyone.

9) Answer at least 10 questions from other CFA candidates. Getting help when you need it is about being ready to give someone else a hand when they need it. The CFA exams are a great time to help out your fellow candidates.

10) Attend at least one local CFA society event or CFA Institute event. These last few months before the exam are a great time to network because the local societies get a little more active with events and people are still sticking with their resolution to be more active in the community. Attend at least one event and get to know a few of your colleagues.

Don’t stop at just 10 goals. Set mini-goals each week that you can achieve if you push yourself just a little harder. Set larger goals for the year that you can really reach for and make a bigger difference. Don’t get frustrated if you miss a goal, just learn from it and push on.

‘til next time, happy studyin’
Joseph Hogue, CFA

Go Old School for Real CFA Benefits

Reviewing the trend to WhatsApp groups to study for the CFA exams in last week’s post brought up something really interesting. Looking through the posts on the LinkedIn CFA Candidates’ Forum, I noticed an almost complete lack of requests for live study groups.

Of the few requests on the page, most got few responses and nowhere near the thousands of comments received on the calls for WhatsApp study groups.

One candidate posting for a local CFA study group even changed course after receiving no responses, saying he could start a WhatsApp group.

Have CFA candidates completely abandoned live study groups and real human interaction???

Why you still need live study groups

I grudgingly accepted live study groups when I was a candidate. We didn’t have as much choice but there were a few online options as well. Live study groups seemed terribly inefficient at times but there are still some important reasons to seek out other candidates for live groups.

Maybe I’m just an old-timer but live study groups just seem easier and more natural. The conversation is more focused rather than a bunch of people posting different questions at once. I’ve participated in a few WhatsApp groups and sometimes it can seem like everyone is talking at once. With live study groups, you establish a formal start and stop time and can get a little better focus.

With live study groups you get an immediate answer to your question and don’t have to worry about it getting lost in the streaming feed of questions and answers. You can also get a sense of who in the group has done their reading and which candidate’s answers might not be exactly correct. Every year that I would join a live study group, there was always at least one candidate that wasn’t prepared and his answers did more harm than good.

The most important benefit to a live CFA study group will always be networking. These are going to be your peers right in your local market. Unless you plan on moving to another state after you pass the CFA exams, you are going to want to know these people throughout your career. Even if you move away, many of these people will continue to be great contacts.

How to blend the old and the new

As with most things, the answer lies somewhere in the middle. Technology can really help to make things easier but don’t forget the benefits of face-to-face interactions.

Take advantage of the ease of WhatsApp study groups but consider a short meetup of a few local candidates in the group. Use this time in a live study group to go over more difficult sections and review any questionable answers you got from the WhatsApp group.

If you can’t put together a live meetup of local candidates, the next best thing is Skype or other video conferencing option. The idea here is to limit the number of candidates to less than seven candidates so everyone gets the chance to participate.

I would love to hear from some of the millennials in the group about their view on live study groups and WhatsApp. Maybe I just haven’t been exposed to WhatsApp groups enough to really get a feel for them. Have you found them easier to manage that live study groups? How about the advantages and disadvantages of each?

‘til next time, happy studyin’
Joseph Hogue, CFA

Using WhatsApp to Study for the CFA Exams

How times have changed since I took the CFA exams. Even though it was only six years ago that I sat through the Level 1 CFA exam, the change in technology has been dramatic. When I first started studying for the exams, online groups were still growing but not widely used among candidates. Now I see that WhatsApp messaging is quickly taking over as a way to group study.

The top three posts on the LinkedIn CFA Program Candidates forum are all WhatsApp study groups and have nearly 2,800 comments, most of them numbers of people wanting to sign up.

But is a WhatsApp group worth your time? How can you use the messaging service to best prepare for the CFA exams?

The Benefits of a WhatsApp CFA study Group

I’m too old for these new software programs so I talked to a few candidates that are using WhatsApp to connect and study for the CFA exams.

The most common response to the main benefits were:

  • The ease of sharing audio recording and pictures of materials. Users really like the fact that they can share short notes they record or a picture of the material they are studying. This really helps those of us that are not as comfortable with typing out text messages.
  • Others like that WhatsApp can easily share contacts around a group. This is one benefit I had never heard of and could be a new networking tool.
  • Users in CFA study groups liked that WhatsApp can be used across different devices so they can transition pretty easily across their laptop to their phone. Being mobile also helps candidates study on the go and when they have time.

Looking through the comments from happy WhatsApp users, I’m a bit jealous that we didn’t have the service to use when I was a candidate. I like the fact that you can quickly share voice recording and add many people to the group. I think the networking aspect could be something that a lot of candidates do not yet fully appreciate.

And the drawbacks of using WhatsApp for CFA study groups?

Using WhatsApp wasn’t all they hoped for some CFA candidates that wrote back that they preferred more traditional study groups.

  • The size of groups and geographic differences annoyed some candidates. They may be exchanging some really good notes with a sub-group of candidates but had to scroll through all the other comments and talk from other members. Candidates also commented that messages to their questions would appear hours, even days after they posted because everyone is on different schedules for when they study and post.
  • Some have reported that WhatsApp was automatically saving stuff to their memory and slowing down the performance of their phone. This should be a relatively easy fix but is still something to think about.
  • The most common complaint was the cross-talk and unrelated conversations that plagued some groups. It is pretty easy for a couple of candidates to start an unrelated conversation that can pull others into it. Pretty soon, everyone is spending an hour gossiping or just texting and not really studying for the CFA exam.

With the benefits and drawbacks in mind, we can start to put together the do’s and don’ts of using WhatsApp for CFA study groups.

  • Try to keep the conversation relevant to studying for the CFA exams. This is a big one for any study group and can save you a lot of time. Getting to know each other and building that relationship is important for networking but you are there for a purpose.
  • Avoid one-on-one conversations with other people in the group. These are just annoying and detract from the efficacy of the group. If you want to talk directly with someone, call them or send them a private message.
  • Understand that WhatsApp messages are public and do not send anything out that you would not want others to see. I’m always amazed at how quickly seemingly private messages go public and hurt someone or the firm at which they work.
  • Don’t assume that everyone understands your texting abbreviations. Most people understand the common LOL and other abbreviations used but there are those of us that are still neophytes to texting and need things spelled out more completely.

WhatsApp is a tool and like any tool, it must be used correctly. Make sure you are using it for all the right reasons and getting the most benefit for your CFA study schedule.

‘til next time, happy studyin’
Joseph Hogue, CFA

Are You Already Too Late to Start Studying the CFA Exams?

As we get further into March, more candidates are going to start picking up their books and putting those long hours into studying for the CFA exams. If you haven’t started yet, are you already too late? How early do you need to start studying for the exams?

It’s a loaded question to be sure. There are numbers and studies for how much time you need to be successful. As a numbers guy myself, I love quoting the fact that successful candidates spend an average of 300 hours studying for the CFA exams. It is going to ultimately depend on your abilities and how well you prepared for earlier exams.

I’m not going to judge if you haven’t started, or if you don’t plan on starting until later in the month. I’d rather take the time to talk through how you can still make it work and get the good news in August.

300 Hours: A Condensed Schedule

We’ve all seen the surveys by the CFA Institute that claim an average of 300 hours is spent by candidates passing their exam. This obviously isn’t a rule but with all the uncertainty around the exam and your outcome, it’s nice to have a numerical objective to target.

If you did particularly well in a prior CFA exam, maybe scoring in the 70% or above in most topics, then you might not need 300 hours of preparation for this exam. The exams build off of each other so if you built a good base of knowledge at previous levels, current material becomes much easier. Of course, there are also going to be candidates that are just naturally smarter than others and won’t need as much prep time. I wouldn’t assume too much here. Candidates are relatively smart in general and it won’t do you any favors to start getting overconfident at this point in the game.

Whether you need 300 hours or not, it will get more difficult to fit all your study time into your schedule the closer you get to June. If you were aiming for 300 hours, 13 weeks left means you need to put in 23 hours a week. Include the fact that you are sure to have a busy week or two at work or with the family and you may need to devote 30 hours a week studying to meet your goal.

Thirty-hours a week studying is an unlikely goal, especially with a full-time job or a family, so you need to start thinking about optimizing your studying for effect. I am a huge proponent of mastering the material to become a better professional but at this point, your goal is to focus on the material that will get you points and get you to the next exam.

Practice problems and question banks are going to be your new best friends. Working through practice problems, an active learning technique, is generally a good part of your schedule anyway but it becomes even more important at this point. Break your reading up into smaller chunks and work through practice problems more often than you might if you had more time to study. Once you reach 75% on a set of practice problems, you can probably put the topic or reading aside and move on to another. This isn’t going to leave much margin for error but it will help you cover the topics quickly and sufficiently.

You are also going to want to spend more time on condensed study notes and less time on the official curriculum. The Finquiz notes are designed to be used along with the curriculum and you will not want to completely neglect your textbooks, but you may want to skim the longer text to pick out the idea for the learning outcome statement. Once you have the general idea from the curriculum, you can reinforce it with a more detailed reading of the notes.

While it’s possible to start studying for the CFA exams later in March or even in April and still hope for a passing score, I wouldn’t push it too far. Even if you’ve got a heavy workload for the next couple of weeks, start studying in small breaks and then ramp up the time when you’re able. The exams take dedication and hard work but the designation is worth every minute you spend studying.

‘til next time, happy studyin’
Joseph Hogue, CFA