A Last Week CFA Schedule and Checklist for Success

There’s just two weeks before the December CFA exam and there’s finally some light at the end of the tunnel. For a lot of CFA Level 1 candidates, the intensity of studying for the CFA exams is something entirely different.

You’ve come a very long way but resist the temptation to glide easily to the test. Using your last week wisely can mean the difference between passing on to the second exam or having to repeat your efforts in June.

Your Last Week CFA Study Plan

Long-time readers of the blog will know I’m a big believer in an intensive study schedule the final week before the exam. Not only can making the CFA exam your job that last week score you a lot of points it can actually be a lot of fun as well.

Think I’m exaggerating that your last week studying for the CFA exam can be fun?

Take next week off from work and commit to an intense study schedule around the CFA curriculum. I always stayed home during the week but I know a lot of candidates that have traveled somewhere for the week as well. Staying in another city not only makes the week more enjoyable but it also gets you away from all the distractions you’ll face at home.

Plan on studying between 10 and 12 hours a day from Sunday through Thursday. This can still leave you plenty of time to relax and take in a few sites around town. I wouldn’t plan on traveling too far from home and your test site, only as far as you can drive in a few hours. That way, you can spend Friday getting back home and relaxing before Saturday’s exam.

If you do stay home for the last week before the CFA exam, try studying in a private location. Reserve a study room at the library and turn off your cellphone. You might want to disable internet browsing if you are studying the CFA curriculum or notes on a tablet, just so you aren’t tempted to waste time.

Set a strict schedule for each day’s studying. Try reviewing at least two study sessions and working as many practice problems as possible. Do at least one full-length practice exam at the beginning of the week to find your problem topics and where you might need to focus.

Make sure you formally limit non-CFA study activities in your schedule. It may seem like only a few minutes but those constant bathroom breaks, walks to stretch out, snack breaks and checking your email can really add up.

Your Last Week CFA Materials Checklist

I usually leave this last-minute CFA checklist for a separate post. I wanted to include it here to give you more time to work on this administration and logistics-type problems this week so you can focus only on studying next week.

Put together your exam-day preparation kit now so you won’t be scrambling to find things just before the Saturday exam. Get a clear plastic bag to hold everything and store it in a safe place where you will be able to find it.

  • Passport identification
  • Your printed admission ticket – I usually printed two just to be safe
  • An approved calculator
  • An extra calculator battery and a small screwdriver – if you want to avoid having to change out your calculator battery, just take an extra calculator instead
  • At least three pencils
  • An eraser and a pencil sharpener
  • Ear plugs
  • Wristwatch

The CFA Institute Program Policy page has all the resource links you need to confirm what you can take to the exam. You will need to visit the page to print out your admission ticket.

You should know where your exam center is located but check out the CFA Institute December Test Center Locations for any updates. If you do not live nearby, it is a good idea to talk to someone that lives near the exam site to ask if there is any road construction or other potential travel problems. If you live more than a few hours from the exam site, you may want to consider staying in a nearby hotel the night before to avoid any problems and get a good night’s rest.

The Institute has published a brief schedule of the CFA Exam Day with recommendations on when to arrive and what to expect. The policy on leaving the exam room after completing one of the sessions has been changed. You are no longer allowed to leave the room after you finish. Everyone will wait to be dismissed together. You are still allowed to leave briefly to go to the restroom but must return to the exam room.

Making sure you get to the exam center and have the right materials isn’t really complicated but there is always one or two candidates that forget something or arrive too late. Prepare your materials and CFA exam day schedule well in advance to take the stress out of these little things. Arriving at the testing location rested and ready will go a long way in giving you the confidence you need to pass the exam.

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

Freelance Analyst Jobs for CFA Candidates

I got a lot of comments and emails about last week’s idea of freelancing as a way to find your passion and succeed as an analyst. I have been freelancing for more than five years and have done it full-time since 2013. Besides making extra money, it can be a great way to build your skill set before you land that dream job.

I thought I would share my story of how I got started as well as some tips for CFA candidates looking into the possibility of freelancing as an investment analyst.

Freelancing Opportunities for CFA Candidates

Freelancing is nothing more than working for yourself, finding small projects where you can and not being held to any single employer. There are two great benefits to freelancing for CFA candidates.

  • The obvious benefit is extra money. You can charge by the project or by the hour with hourly rates ranging from $25 to several thousand dollars an hour for highly qualified CFA charterholders or candidates.
  • You can use freelancing to gain practical experience while you are studying for the CFA exams. Employers want to see that you can apply what the CFA curriculum teaches you before they take a chance to extend a full-time position. I have gotten full-time job offers from people for whom I did freelance work.

There are risks and headaches to freelancing as well. You won’t make much to start and will have to do a lot of work just to get your first clients. You may even have to do some free analysis just to show people what you can do. One of my first projects was a report on the affect of market integration in Latin America. It wasn’t a paid project but something I wanted to do to show my ability as an analyst. It took several weeks to complete but ended up getting me an invite to speak as a panel expert at a Bloomberg conference in New York.

Occasionally you may also run into clients that refuse to pay or have to be reminded several times. This is extremely frustrating, especially if you’ve already delivered the work. Contracts outlining the payment terms help but are not really enforceable unless you want to spend a lot of money on legal fees. It’s rare that this happens but can turn you off freelancing when it does.

Despite the risks and occasional frustration, freelancing is a great option for CFA candidates. It can be fairly easy to get started but you’ll need to make sure you hit the important points.

How to Start Freelancing as an Investment Analyst

Freelancing as an investment analyst is pretty much the same as any freelancing strategy but it’s the job that appeals most to CFA candidates. The truth is that your freelancing business will probably grow to offering other services like white paper reports, content writing and consulting. Of course, the first thing to do if you are already employed is to get written permission to freelance from your employer.

You first need some practical skills. The CFA curriculum is great for understanding how the markets work and some of the tools you’ll use as an analyst but there isn’t much practical exercise in the curriculum. I started with a few financial statement modeling courses and small writing jobs to hone my skills. If you are not a proficient writer, you will need to put in some practice. Even if you are doing almost all your work in an Excel model, you still need to be able to explain the model and potential outcomes in a report. Holding the CFA charter or candidacy will help get your foot in the door, being able to write well will get you the job.

You will also need a basic website to present yourself as well as highlight some of your previous work. The site does not have to be expensive but should be professional-looking. You can launch a website for as little as $5 a month for hosting and just use basic WordPress themes.

Your freelancing business should be doing something you enjoy. You are probably not going to make much money at first so it helps to enjoy the work and be able to see future benefits.

Getting your first jobs will be difficult unless you already have some work experience to present. Make sure it is permissible to present your previous work from employers before posting it on your website. A few websites like Seeking Alpha will allow you to post short analysis and may even pay you to do it. Take some time to read through other articles to see how to put something together and publish. You may also want to reach out to other freelancers and offer to help with their projects. You’ll learn a lot in just a few short months and will have a portfolio of projects to present.

You might try posting for projects on the freelancer websites like Upwork and Freelancer but I have never seen much from these. In more than five years, I have only gotten four projects from these types of sites. Your best bet is reaching out to contacts to let them know you are freelancing and asking if they will refer your name to anyone in need of help.

After a while, people will start coming to you from your website and referrals. Make sure you only promise work that you can complete and deadlines that you can meet. The first job for a client is nice but you will only succeed if you can keep clients coming back for more work. Do well enough and you may find that you continue freelancing even after you pass the CFA exams.

‘til next time, happy freelancing!
Joseph Hogue, CFA

How to Find your Hustle and be a Success

I know a lot of you are just starting your careers and getting your first jobs. I thought I would share an experience that changed my life and that might save you from the misery that plagues so many people.

I get a lot of questions about how to be successful. Some readers are looking to do well at work while others just want to achieve financial independence and retire early. I can relate because I asked the same questions for many years.

The response isn’t what most people are expecting. Instead of hearing how to work less and achieve more, the real secret may actually be in working more.

How the Hustle Changed my Life

Like so many people, I started my professional career in my 20s and hated every minute of it. I had three jobs before I was 32 and felt like I was trapped in the rat race. They were good jobs, all professional positions in finance, but I spent half the time thinking of what I was going to do on the weekend.

I understood that I needed something different. I couldn’t spend the next 30 years of my life hating my job.

Earning the CFA charter in 2011 was a start. It opened up my opportunities but I still didn’t know how to find the job I wanted and how to be successful.

My wife and I knew we wanted to move back to Colombia from the United States and decided to make a plan shortly after I passed the CFA exams. I started freelancing, writing investment analysis for financial advisors and institutional investors. It was tough balancing a side job with my 9-to-5 job but I knew that once we moved, we would have to depend on my freelancing income.

I worked an extra 20 or 30 hours a week on my side job to build it as quickly as possible. By the time we moved back to Colombia in 2013, I was ready with regular clients and a steady income.

But in freelancing and working for yourself, if you’re not hustling then you’re not making any money. I determined to work even harder.

That was just over two years ago. Recently, a blogger friend posted a question on Facebook asking why I hustled. I didn’t have an immediate answer.

While I started hustling out of necessity, working around the clock to support my family and get ready for our move, it wasn’t about the money anymore. I have more than enough clients and we don’t worry about money.

After thinking about it, I realized that I still hustle because I love the challenge. The hustle is a part of my life and I have never been happier. I realized that the secret to being successful and happy with your job is not working less but finding something that you love and working more.

How to find your Hustle

Are you hustling? If you aren’t working everyday like your job and your financial security depends on it, you’re missing out on a huge opportunity. You will never be as successful or as happy as you can be.

I found my hustle by breaking into freelancing but you can find yours at your traditional 9-to-5 job. It can be harder because people are not always rewarded for their hard work in a traditional job. You might have to deal with senior workers that benefit from your work simply because they have been around longer. Work hard enough though and your reward will come.

If you don’t feel like your hustle is at your current job, you first need to decide where your passion is in work. Having a hustle has to start with a passion or you’ll just burn out from the stress. Finding what you enjoy doing and making it a career will help you get through the tough days without giving up.

If you haven’t considered freelancing, check out how to freelance and some websites that connect freelancers with clients. Starting a freelance side job, you’ll work harder than you ever have but you will develop a real expertise. You’ll love the sense of pride from being great at your job and you’ll start to enjoy the challenge of working harder.

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

The Best Part of the CFA Charter and You Don’t Even Need to Pass the Exams

As a CFA charterholder of more than four years, I can tell you about the benefits of having those three little letters after your name. I’ve gotten my foot in the door to jobs that wouldn’t have been available and have found that I can charge more for my freelance services.

But it turns out, there’s another benefit to the CFA program and you don’t even need to pass the exams to take advantage. This benefit will help you open doors as well. It will connect you with all the right people and will help you shape your career.

I’m talking about connecting with the CFA community through the resources on the CFA Institute website.

We’ve covered some of the great resources on the CFA Institute’s website before. Earlier this year, we ran a five-part series on landing your dream job from networking to interviews. I’ve talked about how to fill the void after studying for the CFA exams by becoming more active in your local CFA society.

But there’s still some great resources and benefits I wanted to highlight, especially for the new readers that might not have seen the older posts. Check out the CFA resources below to network, keep informed on the industry and even make a name for yourself.

Again, best of all, your CFA candidate login gets you access to all of them. You don’t need to pass the exams to start benefitting.

CFA Institute Blogs

The CFA Institute Blogs are a relatively new resource on the website with posts dating back a few years. There are nine linked blogs though a few have been discontinued.

The most active blogs are the Enterprising Investor and Inside Investing. New posts are published on a daily basis and anyone can submit an article for publication. Not only are the blogs a great resource for staying up-to-date on market issues but could turn out to be an excellent way to distinguish yourself.

Check out the posts on one of the blogs to get a feel for the kind of issues discussed and how your expertise might fit in on the blog. Depending on your experience, you might need to research a particular topic to build enough expert knowledge to add something but it is easily doable.

Consider approaching a local CFA charterholder to team up for an article. They can provide the direction and you can do the research. Getting published on one of the CFA Institute blogs and building your expertise in a subject area is sure to get noticed by employers.

CFA Local Societies

I am a big supporter of the local CFA societies and sat on the board of directors to the Iowa society when I lived in the States. Besides the obvious benefits of networking with the people that direct the financial community, going to society events is just plain fun!

Check out a few of your local society’s events. Don’t worry about ‘networking’ at first, just talk to people and have fun. Going into the events without a motive other than just to talk to people and enjoying yourself will help lessen the stress of an unfamiliar room.

Remember, you aren’t restricted to only participating with your local society. Use the societies strategically to guide your career where you want it to go. If you want to end up in a particular city or at a particular firm, try contacting people in that city or with that firm.

CFA Institute Insights & Learning

The CFA Insights & Learning site is the main page for some great continuing education material.

My favorite section is Research & Financial Tools with topic-specific calculators, spreadsheet models, questionnaires and data sets for just about any need. The section is a great resource for data sets that has saved me a lot of time.

The Institute provides some excellent content for your clients in the For Investors section. This is material you can share with clients and other investors to help them understand the financial markets and basic investing principles.

The area also hosts the CFA Institute’s initiative on the Future of Finance, a long-term global effort to shape a trustworthy, forward-thinking financial industry that serves society. This project is on the forefront of the industry and will be a huge issue for years to come. It could be one area where you can make a name for yourself.

CFA Career Resources

Probably the most popular resource with candidates is the CFA Career Resources section with its resource library of presentations and the JobLine platform. The resource library hosts webinars, articles and presentations on everything from skills development to networking for that dream job. There are currently 2,623 jobs listed across five regions and by 175 employers on the CFA Institute’s JobLine.

It’s easy to let time slip away between study seasons for the CFA exams. You finish up the June exam and don’t even want to think about the curriculum or anything with CFA in its name. Pretty soon, it’s January and you have to start studying for the next exam. You’ve let a great opportunity pass by without taking advantage.

You’ve still got two months before you need to start thinking about your next CFA exam. Use those months to take advantage of all the CFA Institute has to offer and some of the resources available. If you haven’t attended a local CFA society event, make it a goal to attend at least one before the end of the year. If you’ve attended some of the events, make it a goal to start getting involved by volunteering. You won’t regret it and you will open up doors you didn’t even know where there.

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

How NOT to be Surprised by the CFA Exams!

Less than half the candidates taking the CFA exams each year pass. It’s a statistic most of you know but never ceases to amaze me. How can an exam be so difficult that less than half pass each year?

You could blame the CFA Institute for making it so difficult and adjusting the minimum passing score but the fact that no one with an average of 70% has ever failed takes some of the blame off the Institute’s shoulders. Having to answer about two-thirds of the questions correctly doesn’t seem like too much to ask for a professional exam.

What if it’s something else? What if candidates just aren’t prepared for the exams? Spending upwards of 300 hours doesn’t seem like a lack of preparation to me so maybe candidates just aren’t preparing correctly for the CFA exams.

Each exam can be surprising for its own reason. This specific challenge in each exam catches candidates off guard and leads to a ridiculously-high rate of failure.

Learn what to expect on each CFA exam and how to study for it, and you’ll be better prepared than half the candidates already.

CFA Level 1 Exam: Information Overload

The first thing that surprises candidates on the CFA level 1 exam is the sheer amount of information they are expected to remember. Through undergraduate studies, most of you have been responsible for textbooks of information but you haven’t had to master all the material for one mammoth-size exam.

The CFA Institute doesn’t feed you the information in manageable chunks and then ask you focused questions every couple of weeks. The Institute turns on the firehose and drowns you in knowledge of which you’re supposed to drink every last drop.

Maybe the firehose analogy is a little extreme but it seems that way at times.

The trick to passing the CFA level 1 exam is that you don’t need to know every excruciating detail within the curriculum. Much more important is the basic ideas and concepts around each study session. Understanding the qualitative ideas in the curriculum is much more important than being an expert in one topic. This means reviewing every study session and getting a basic understanding across the entire curriculum.

Understanding the main ideas will help you immediately eliminate at least one potential answer for each question and should help you pick out the most appropriate answer.

It also helps to use multiple resources when studying for the CFA level 1 exam. Getting the curriculum from several different perspectives, i.e. official text, study notes, videos, flash cards and practice problems, helps to build repetition and memory.

CFA Level 2 Exam: A Quantitative Monster

After figuring out that the first exam is all about basics and qualitative information, the CFA Institute throws you a curve ball with the CFA level 2 exam.

The second CFA exam is all about formulas and quantitative detail!

While the CFA level 2 exam includes the same topic areas as the first exam, the topic weights clearly show a focus on three subjects. Financial Reporting & Analysis, Equity Investments and Fixed Income will account for up to 65% of your exam score and a large chunk of that is in quantitative calculations.

Top it off with the fact that you have a different format in the vignette questions, having to read through a story and then answer a set of questions.

Avoid being surprised by the quantitative material on the second exam through understanding the conceptual reasoning in the formulas and repetition.

Try memorizing every formula on the CFA level 2 exam and you could end up in an asylum for the criminally-insane. There are just too many letters, abbreviations and craziness. If WACC = (Vd/(Vd +Vce))rd (1-t) + (Vce/(Vd+Vce))rce) doesn’t make you go cross-eyed you are a stronger person than I am. Think about it intuitively and it makes sense.

The overall cost of a firm’s funding capital is the cost and proportion of equity and debt. The percentage of each funding type relative to the total is multiplied by its cost. Debt is tax advantaged, so you need the after-tax cost.

Understanding the conceptual reasoning behind each formula will help you recall it on the exam and you won’t drown in a sea of math.

The second trick really is no trick at all. You just have to work those practice problems over and over again. Use flash cards to write out the especially-difficult problems so you can review them several times a day until you’ve got it down. Work the end-of-chapter questions for each study session and use a question bank of problems if you’ve got one available.

CFA Level 3 Exam: Essays are a Physical, Emotional and Intellectual Challenge

Most CFA candidates understand that the essay section will be difficult but few realize how difficult it’s going to be until they’re half way through the morning session and sweating through their shirt.

The three-hour morning section of the CFA level 3 exam is a physical, emotional and intellectual challenge for which few really prepare well. It isn’t about just understanding the material, it’s about being able to construct your own answer and being physically able to write for three-hours straight.

There is really no better resource than the old exams provided by the CFA Institute. The Institute releases the last three years’ worth of morning essay questions on its website along with guideline answers.

  • Don’t just review these past morning sections, actively work them as if you were sitting for the exam. If you haven’t prepared the muscles in your hand to write for three hours when you arrive at the exam, you are going to regret it.
  • Learn how to bullet-point your responses to include all the relevant information. This will save you a ton of time on the exam. See how it’s done in the guideline responses.
  • When you’re writing out your answers on old exams, practice writing out your thought pattern. The CFA Institute awards partial credit for the essay portion but you have to demonstrate a certain point within the answer. Writing out your reasoning makes it more likely that you’ll hit on a few of those points and get the highest score possible.

Passing the CFA exams means being prepared for each exam and not being caught off guard by differences on each. Ask other candidates what surprised them most and understand how to study for each exam.

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

Will I Pass the CFA Exam: A CFA Studying Checklist

As much as we cover strategies and studying here on the Finquiz blog, one of the most difficult questions a candidate faces is, “How do I know if I’m ready to pass the CFA exam?” You can practically quarantine yourself away for months, studying every formula and note in the curriculum, and still the question will nag you.

Go into the exam shaken and worried that you’ll end up in one of the fail bands and you’ll have a harder time remembering the material. Without being able to know if you’ll pass the CFA exam, it’s difficult to find the confidence to not be worried.

It’s an ironic dilemma.

To that end, I’ve put together a checklist for passing the CFA Exam. Plan your CFA studies out to check off each point on the list and you can go into the exam with the confidence of your success.

Checklist for Passing the CFA Exam

First off, this isn’t a scientifically-developed checklist. The CFA Institute hasn’t provided any data or guarantees to prove the points. It’s just my experience of what makes a candidate successful after three years of taking the exams myself and another 3+ years of writing exam prep.

I’ve spent more years studying the curriculum than most. I’ve talked to more candidates than I can count about their experience. I can confidently say, if you have done the points below, you have a great chance of passing the CFA exam and you can be confident of your success.

I have read the official CFA curriculum at least once all the way through

There’s really no substitute for the official curriculum. On an exam where more than half the candidates fail and just a few points could make the difference, do you really want to put all your faith in condensed study notes?

The curriculum is extremely long and can get boring at times but you need every detail. I would recommend you read through it at least once and then review once more just to be sure.

I have read through the official CFA curriculum once again or through condensed notes once or twice

Part of the ‘secret’ to passing the CFA exams is just plain repetition. There’s an immense amount of material that you need to remember over the six-hour test. Studies show that you need to see something about seven times in order to commit it to memory. It might not be possible to read through the official curriculum that many times in your limited time but you can easily cover the material a few more times through condensed study guides.

Besides reading through the curriculum and reviewing it through notes a few times, you’ll want to build repetition through practice problems and other resources.

I have worked at least 120 practice problems for each study session

The CFA level 1 exam consists of 240 questions, split between morning and afternoon sessions. Working 120 practice problems for each of the 18 study sessions means over 2,000 problems and a full three-hour session practiced in each.

You won’t be able to get all the practice problems from the end-of-chapter sections of the curriculum. This is where question banks and study guides come in handy. You can refer to questions in older versions of the curriculum, usually available at the library or through members of the local CFA society, but you have to make sure they aren’t outdated.

I created flash cards with the most difficult problems – most of which I now know

This one serves a couple of purposes. It measures your use of different resources for mastering the CFA curriculum. Using different resources beyond just reading helps to keep your studying from becoming boring and gives you another way to look at the content. It’s one more repetition closer to the seven or so you’ll need to remember the material.

Being able to easily work problems you once found difficult is also a sign of progression and learning. Constantly progressing through your mastery of the CFA curriculum is more important than you might think. Besides understanding more of the material, you’ll become more confident from the regular reinforcement in the fact that you are learning more.

I have kept close to my original study schedule or if I lost some time, I made it up within the next week

This one is more a test of your commitment. Too many CFA candidates allow themselves to deviate from their schedule, promising to make up the time but never getting around to it. It becomes easier to skip studying all-together.

I have taken at least three mock exams and measured my results in each

How can you have any idea of how well you’ll do on the CFA exam if you don’t replicate the experience with a mock exam? Not only will it test your knowledge of the material but will also test your endurance to sit through the two 3-hour sessions.

Make sure you track your results for each mock exam, overall and for each topic area. Besides studying the material, it will help uncover any weak spots you may need to hit again.

Being able to say you’ve done everything on the list doesn’t guarantee you a passing score on the CFA exam but it does demonstrate your commitment to the process and a good review of the content. Remember, the idea isn’t just to check off that you’ve completed one of the points but to have the confidence that you’ve done what it takes. It’s not the end of the world if you’ve stumbled in a few of the points and can’t quite check them off, just try to get as much study time in from here to exam day.

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

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

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

Working More December Exam CFA Ethics Questions

Last week, we talked about the importance of the Ethics & Standards topic area across all three CFA exams. Its importance in the CFA level 1 exam is heightened by the fact that new candidates may not know what they are up against within the topic.

Reading through the Code & Standards can seem obvious and many CFA candidates believe their moral compass will guide them to the most obvious answer on the exam. When they get to the exam, they’re surprised by the level of ambiguity in the questions and cannot decide between two seemingly correct and ethical answers.

We started working through a few ethics questions last week but will continue this week with five more. It is extremely important that you study these questions and the ones in the curriculum to learn how the CFA Institute asks questions within the Ethics topic and how it expects you to answer.

CFA Ethics Question #1

Roberts is in charge of a group of analysts at BB&T, only some of which are CFA charterholders or candidates. For a large project, he is delegating some of his supervisory duties to one of the analysts to lead the group. What are his responsibilities under the Code and Standards if he delegates tasks to the group.

A. His responsibilities under the Code and Standards apply to conduct of those with CFA designations but not to those that are not subject to the code. For those employees, only legal obligations apply.
B. He is no longer responsible for the group’s conduct because he delegated supervisory duties. That person is now responsible.
C. He is still responsible for all the analysts’ conduct under the Code and Standards.

Answer: C

Under Standard IV, Responsibilities of Supervisors, someone bound by the Code and Standards may delegate supervisory responsibilities but is still accountable for all actions of subordinates. Further, a supervisor is responsible to the Code and Standards for all actions whether their subordinates are bound by the Standards or not.

CFA Ethics Question #2

Babbitt & Coolidge Investments (B&C) has been hired to manage a follow-on issuance of shares for Argon Tech. The brokerage unit of B&C has a sell recommendation on Argon Tech but some fundamentals have improved and a review of the analysis is due. The head of the investment banking division has asked the reviewing analyst to look at the new information and upgrade the shares to buy. According to the Standards, what may the brokerage unit do?

A. Increase the recommendation but only to a hold since it is still a conservative recommendation
B. Place the company on a restricted list and only offer factual information in the report
C. Assign a new analyst that is willing to take the new information into account and assign a buy rating

Answer: B

Under Standard I, Independence and Objectivity, the firm should discontinue issuing recommendations on the stock to avoid the appearance of a conflict. Analysts must refuse any requests to change recommendations even if the change is only to a slightly higher recommendation. Changing the analyst assigned to the stock does not eliminate the conflict of interest.

CFA Ethics Question #3

Tye is an analyst for Buckmaster & Walters and is about to make a new recommendation. According to the Standards, which actions will help ensure fair treatment of brokerage clients?

A. Inform everyone in advance that a recommendation is about to be made so everyone can be ready
B. Since institutional clients need more time to review for suitability under their plans, they should receive the information before individual accounts
C. Time between the decision and dissemination of the recommendation should be reduced

Answer: C

The question deals with Standard III, Fair Dealing. Answer A may allow the recommendation to be leaked out since more people know about the coming release. Firms should limit the number of people that know a new recommendation release is eminent. Answer B is a clear violation as it discriminates between clients by size and assets. Reducing the time between the decision and dissemination of the recommendation helps to avoid it being leaked ahead of the release.

CFA Ethics Question #4

Portfolio Manager Jacob has done very well and one of his clients wants to keep the manager motivated. The client promises to compensate Jacob, above what the firm is paying him, if he can continue to beat the index each year. Jacob is a CFA charterholder and should:

A. Turn down the extra compensation because it could create a conflict with performance on other accounts
B. Turn down the extra compensation because it could lead him to unethical behavior by incentivizing the outperformance
C. Get written permission from his employer prior to accepting the agreement for extra compensation

Answer: C

Standard IV, additional compensation arrangements, does not prohibit compensation beyond that made by an employee’s firm. The employee is still bound by the Code and Standards to not let the additional compensation interfere with fair dealing among accounts and other ethical behavior but may accept additional compensation if it is disclosed and approval is granted in writing by the firm.

CFA Ethics Question #5

Redbeard, an advisor and CFA charterholder, recommends his client invests in U.S. Treasury bonds. The client accepts the advice based on two statements made by Redbeard.

I) The default risk on U.S. Treasuries is effectively zero since the bonds are backed by the U.S. government
II) Based on the historical return to U.S. Treasuries over the last twenty years, you are guaranteed to earn at least 5% over the next several years.

Did Redbeard violate the CFA Code and Standards with either statement?

A. Neither statement is a violation
B. Only statement I is a violation of the Code and Standards
C. Only statement II is a violation of the Code and Standards

Answer: C

Standard I, misrepresentation, requires that all those bound by the Code and Standards separate fact from opinion. The first statement is a fact given the government’s backing of the bonds. The second statement is an opinion based on historical performance and what the advisor thinks will happen in the future. Guarantees of future returns must not be made unless they are contractual within the investment.

Did any of these Code and Standards questions stump you? For the ones you missed, make sure you go back through the question and really understand the CFA Institute’s way of thinking. Don’t forget to review those questions where you guessed correctly. Working as many ethics questions from the curriculum is critical to learning how to answer the questions on the exams. We’ll cover a few more next week before moving on to other topics for the December CFA exam.

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

Should you Ask for a CFA Exam Score Retabulation?

The results of the June CFA exams were released last week, marking the end to a long and difficult exam season. Less than half the level one candidates (42%) passed the exam with level two candidates doing a little better with 46% passing their CFA exam. These are both above the ten-year averages at 39% for the first CFA exam and 44% for the second exam.

Results for the level 3 CFA exam are due out on August 11th with an average pass rate of 53% over the last ten years.

Around this time, I get a lot of emails asking if candidates should request a retabulation of their CFA exam score. The CFA Institute offers the service, for a fee, but is it really worth it?

Understanding CFA Exam Results

CFA exam scores are given on a pass-no pass basis with a 10-level scoring system for those that did not pass. While the minimum passing score is never released, we know that no candidate has ever failed a CFA exam with a percentage score of 70% or higher.

The scoring band system of 10-levels for candidates that did not pass is an equal-band measure, meaning that each band is the same number of points. The number of points separating you from the next higher band are not known either but you can put together a rough estimate by thinking through it. If we assume anyone with a 70% passed and that even the candidate guessing on every question should have gotten a 20%, then we have about 50% within the ten bands or about 5% in each band.

There are a total of 360 points available on each CFA exam with individual questions worth three points each, not counting the essay portion of the level 3 CFA exam. That means, if there is a 5% difference from one band to the next, that you need to have answered as many as six more questions correctly (6*3 = 18 points) to make it to the next band.

This is a very rough estimate and we can’t know the actual numbers. I would say it is probably a maximum for the percent in each fail band. Even if each band is only 3% then you still have 10.8 points or at least three questions within each band.

What does this mean? For retabulation to change the score on your CFA exam to the next band, your original score will likely need to be wrong by at least three questions.

Should you Request a CFA Exam Score Retabulation?

A retabulation request for your CFA exam score is due by the 11th of September along with your payment of the $100 fee. The CFA exam retabulation form is available here and must either be mailed or faxed to the address on the form. It takes between one and three weeks to receive your retabulation results by email.

Retabulation will not change an incorrect answer to a correct one and will not get you extra points on missed questions. The process is done by hand but only checks to make sure the machine scored your answers correctly, noting which circles were marked.

For example – If you marked B, the correct answer, but the machine read your answer incorrectly as marking C then a retabulation would result in a higher score. Retabulation of your CFA exam does not change the answer you marked, nor will it make a judgement call and give you partial credit for an incorrect answer.

Retabulation of the level 3 essay questions will not change the score given for a segment, only that your scores were added up correctly.

If the retabulation changes your score, you are refunded the $100 fee. If your score remains the same, your fee is not refunded.

There is no data released on scores changed by retabulation but I have never heard of anyone that got a higher score, much less anyone that changed a no-pass to a pass. If you are in the final fail band 10, you might consider it but it is still unlikely to make a difference. The accuracy rate on optical mark recognition (bubble-sheet scanners) is above 99% which means only 1% of tests have any error, much less an error on multiple questions.

It is extremely painful to feel like you wasted the last six months of your time but a retabulation isn’t likely worth the fee. Thinking about the tests in a larger context will make it a little easier. Really, how much difference does it make whether you pass this year or next when considering a 30- or 40-year career. Your additional studying only means that you will have a stronger grasp on critical material and the opportunity to be a better professional.

Take your CFA exam fail as what it is, a learning experience. Commit to hitting the material early next year and mastering the curriculum.

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

How to Network on LinkedIn…the Right Way!

I get between three and five requests a day to connect on LinkedIn. Do you know where most of those requests end up? I am active in at least six professional groups on a daily basis and see countless posts by members. Do you know what I do to the majority of posts?

The answer to both questions is the same, Ignore!

LinkedIn has emerged as a huge resource for professional networking and promotion but most people do not use it effectively.

If you ever want to leverage your connections into the career of your dreams or if you really want to use LinkedIn to promote your business, you need to use it correctly…i.e. not how most people use it.

Professional Networking on LinkedIn

I am active in quite a few groups from alternative finance to CFA exam preparation and investing. I publish upwards of 30 pages of content across different websites each week so I get a lot of connection requests on LinkedIn.

I would say, of the 20 connection requests I get every week, I accept less than ten of them.

Why? Because I do not know the person and cannot see the value in a connection.

LinkedIn makes it entirely too easy to send out connection requests, so easy that it deceives people into thinking that they are actually networking. How many of your LinkedIn connections do you think would actually be able to remember anything about you, or even how they know you?

Sending out connection requests with no introduction and no follow-up will yield absolutely no benefit in the future. In fact, having so many connections makes it difficult to find the real connections you have and the people that can actually help you the next time you need it.

If you are going to send out a connection request on LinkedIn, follow these steps:

  1. First, think about how the connection can be mutually beneficial. Why should the other professional want to accept your request?
  2. Visit at least one other page about the other professional – whether it be a blog post, their profile on the corporate website or something they have submitted to LinkedIn Pulse. Spend five minutes to get to know them beyond a group post you saw on LinkedIn.
  3. Find their email or contact information if possible. What good is it having a connection if you cannot reach them? If you connect with many others on LinkedIn, you may have a difficult time finding their profile later so it’s best to have another way to contact them.
  4. Send an email to introduce yourself and why you would like to connect. Using the reason why a connection would be mutually beneficial almost guarantees you will get the connection on LinkedIn.
  5. Change the default LinkedIn request note. Your personal note is limited here but try to reference how you know them and why you want to connect.
  6. Follow up after the connection with a thank you and reinforce why the connection can be beneficial for both of you.

This simple process will take you no more than 15 minutes and will make real connections on LinkedIn. Try to check in with what your connections are doing from time to time, checking out any change in job title or anything they publish on LinkedIn. Letting a connection go stale without any messages for more than a year means you’re unlikely to get any help when you need it.

Promoting your Business on LinkedIn

I spend a lot of time promoting my content from various blogs on LinkedIn and other social networks. One of my biggest pet peeves one of the worst things you can do on a social network is to spam groups with irrelevant messages.

You’ve seen these posts. Posts about how to make money working from home in a CFA Candidates group or posts about stock market investing in a group about business networking.

The click-through rate on social media posts is less than 3% for posts relevant to the audience. For those spam posts, the click-through rate is even lower. Not only are you annoying group members by posting irrelevant content but it’s a waste of time because no one is going to click through to the article.

Probably the most important reason not to spam groups with irrelevant posts, it’s unprofessional! After working so diligently to earn the CFA designation, do you want your colleagues to see you as a spammer?

I get upwards of 10% of my visitors from LinkedIn and it can be a great resource for promoting your business, but you have to do it right.

Before posting an article or promoting your post to a LinkedIn group, follow these steps:

  1. Is the content relevant to the group? Even if members are in the same industry as the content, it still might not be relevant. For example: I see a lot of market analysis posts on the CFA Candidates group. Is that content really relevant to the group’s goal of helping people prepare for the exams? Ask yourself why members come to that group and what information is directly relevant to that purpose. If your content is not directly relevant, find another group to post it in.
  2. Add more to the post description that simply pasting the link to the article or content. Social media is about being…social! Copying your link to ten different groups is not social. Describe the content in a brief summary and ask related questions about it. Try to generate a conversation around the content and you’ll have much more success with getting it shared.
  3. Make sure you respond to questions and comments about the content. This is a part of being social and engaging with other professionals. Simply pasting your link and then ignoring any feedback is spamming rather than being a part of the community.

It’s easy to spam LinkedIn groups and to send out connection requests with a click of the mouse, but it’s not networking. Make sure you are using LinkedIn as the amazing professional tool it can be and not wasting your time with poor practices. Use it correctly with the processes above and you’ll build your professional brand quickly and will have no trouble getting the job you want or promoting your business.

‘til next time, happy networking!
Joseph Hogue, CFA

Most Common Finance Job Interview Questions

We’ve talked a lot about getting a job in finance lately, or at least getting an interview. We looked at lack of experience and how to gain some practical experience even without a finance job last week. A few weeks back, we looked at how to break into finance from another industry and some of the challenges you might find.

This week, it seemed only natural to tackle the next challenge in your finance job hunt, the interview! We’ve covered how to get a finance job from networking to interviews in a five-part series last year but have never looked at actual interview questions. This week, we are going to look at the top 10 most common finance job interview questions and things to think about in your response.

Of course, these aren’t the only questions you might see but each has a pretty good chance at being asked regardless of which position you’re applying. Besides preparing for these specific questions, thinking through your answers will help prepare for other related questions.

The 10 Most Common Interview Questions for Finance Jobs

1) Why should we hire you? What do you bring to the table that others do not?

You do not need to know the other candidates for this one, just yourself. Prepare at least two selling points before you go into the interview, something that you’ve accomplished or that set you apart. Do you have stronger experience or any particular project to which you can point? What have you done that others have not?

2) What challenges have overcome?

This shows perseverance and dedication, two characteristics you will need in a challenging industry like finance. Your example can be personal or professional. While you may have overcome a physical challenge, focus on the mental traits that helped you overcome it. Your future employer wants to know that when hours get long or the team needs to play damage control, you will have what it takes to step up.

3) What would your previous supervisor and coworkers say about you?

This is just as much personal as it is professional. You are going to spend about half of your waking hours with the people in the room and on the team, your personality needs to fit well with theirs. As with all answers, its best to answer the question directly and then reinforce it with a specific example. Don’t just say your coworkers would say you are hard-working and fun, give examples of instances that prove you have those traits.

4) Walk me through the Income Statement or Statement of Cash Flows

Even if you have no experience in finance, you can expect a few technical questions. The most likely of these are questions related to basic financial statement accounting and analysis. The employer wants to know that you have at least a basic understanding of these topics so they’re not starting from scratch in training. Be brief with these answers, just hitting on the most general line items.

5) What is your greatest strength and weakness?

This is about the lamest question I’ve ever heard and I don’t know why employers still ask it, but they do. For your strength, hit on one of the selling points you prepared for why you are the best candidate.

For your weakness, don’t take the feeble way out and say you work too hard or something like that. Provide a genuine short-coming but how you are trying to fix it. Your employer wants to know that you can honestly look at yourself and seek improvement. Remember, you need to reinforce your answers with specific examples for proof.

6) What is working capital and how does it apply to cash flow modeling?

Another technical question but fairly easy if you have spent a little time preparing your practical knowledge of the financial statements and modeling. When you’re answering these statement or modeling questions, be sure to touch on how the statements are connected through different accounts. This shows a broader understanding of how everything works together instead of just that you’ve memorized one process.

7) Where do you see yourself in five years?

Your career path needs to be aligned with the position and opportunities at the firm. No employer wants to invest money in someone through years of training only to find out that the employee’s ambition is outside the company. Know the career path from the job for which you are applying to an intermediate and senior position in the firm.

8) Talk me through what happens on the three financial statements after a capital investment

Again, it’s important that you know how changes on one financial statement affect another and how the process works itself out. For a capital investment, there is no income statement impact at first but cash decreases on the balance sheet while PP&E increases. The investment is also a cash outflow on the Statement of Cash Flows. As depreciation accumulates on the balance sheet, decreasing cumulative PP&E, net income is reduced from the expense while depreciation is added back to operational cash flow.

You probably do not need to go as detailed as ratios and other ideas, just the general process to show you have a working knowledge.

9) What sports or other competitive activities do you enjoy?

Finance is a competitive industry and you need that drive to be successful. By showing that you participate in sports, and enjoy the competition, you are showing that you will go a little further to help the firm succeed. Besides giving an example, it’s best to be able to point to an accomplishment. Anyone can go out jogging a few days a week, your employer wants to know that you pushed yourself to win.

10) What stock would you pick right now and why?

This is more about your presentation skills and ability to sell than it is about analysis. There are going to be reasons to buy or sell any investment. Your employer wants to know that you can rationally and intelligently pitch one side of the argument and convince clients, the portfolio manager or others on the team.

Remember, it isn’t only about what you say but also about how you say it in an interview. Have confidence in your answers and try not to stammer for the perfect thing to say. As an analyst or asset manager, people will look to you as an expert and trusted source. Employers are looking for someone that can speak clearly and confidently to convey that trust to clients.

Try to keep your answers to less than two minutes to avoid rambling. Employers don’t expect you to detail everything in a short interview, just make sure you hit on the general ideas and key points. Silence is ok and don’t stretch to keep adding to an answer just because they haven’t stopped you.

Finally, it’s ok to say that you do not know something. It is much better to say you do not know than to stammer through a guess. It will come across as lacking confidence at best or like you don’t know what you’re talking about at worst.

‘til next time, happy interviewing!
Joseph Hogue, CFA

Why you still don’t have a job after the CFA

The journey to the CFA designation is extremely long and difficult. It’s understandable that candidates believe the charter will virtually guarantee them a job and just as understandable the disappointment they feel when they still don’t have a job after earning the designation.

While the CFA curriculum is one of the best sources of professional education in the world, it is still just education. A lot of candidates are still shut out of their dream job because they just don’t have the experience or practical knowledge required.

What more do employers want?

Of course qualifications vary according to specific jobs but many of the employers I talk to say the same thing when asked about their perfect job candidate. They say that the CFA designation or progress to it is a great start, ensuring them that the candidate has a strong base of core knowledge, but they also need someone with practical experience.

While the CFA curriculum may help you understand the ‘what’ and ‘why’ of asset valuation, it doesn’t do such a great job of explaining the ‘how’ of analysis. The material on financial statement analysis is detailed but it is not integrated well enough that candidates can use it practically.

Employers are willing to train new hires but they don’t want to start from scratch. They don’t necessarily want 20-year analyst veterans but they want candidates that already know the basics of cash flow modelling and working in Microsoft Excel.

How to get experience without getting a job

So we’re left with the chicken and the egg problem facing candidates. They can’t get a job because they’ve got no experience but can’t get experience without a job.

There’s actually a pretty easy solution.

There are several credible websites that offer self-study courses on financial modelling and other practical valuation courses. Before I talk about a couple I should note that FinQuiz is in no way endorsing any particular site or study course. Those below are only the ones I have used and have found to be detailed and informative.

Your first stop should be a basic financial modeling course, something to show you how to construct your own financial statement model in Excel. An integrated financial statement model is the backbone of an analyst’s work, integrating all the previous information from the company’s regulatory statements and working through a proforma of your own assumptions. Wall Street Prep offers a basic course and a premium course that includes the basic model, discounted cash flow modeling, M&A modeling and a leveraged buyout model. When I was putting together my team for a sell-side research department a few years ago, it drove me crazy how many candidates did not know the basics of constructing a model and how to integrate credible assumptions into the valuation estimation process.

I have also taken the Real Estate and REIT modeling course at Breaking into Wall Street. I already had some development and commercial RE experience before the course but was surprised at the amount of detail. I would generally recommend that you focus on basic modeling courses and not do too much training in a specific industry until you get a job and find out in which industry you’ll be focusing. Some employers may want their analysts to start as generalists first. The course is very good though and might help you get in the door to a RE development or REIT analysis firm.

Simon Benninga has published a very respected book on financial modeling through the MIT Press. It may be harder to follow than the videos that come with a self-study course but a new copy of the book will come with a data disk of models.

The two websites above are well respected for their course material. If you choose another provider, check around with other candidates to get feedback on the material. As a sneaky way of getting your foot in the door, you might try asking around the local CFA society about modeling courses. Asking a few charterholders their input on modeling courses lets them know that you’re willing to do what it takes improve your skills and get a job. You might just have one waiting for you after you finish the course.

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

What do CFA Candidates do when They’re not Candidates?

A recent post on the CFA Candidates LinkedIn group caught my eye, actually it’s one of the most popular posts on the forum. One candidate questioned the odd sensation of having too much time after the CFA exam, the odd feeling of boredom he is experiencing.

And he’s not alone. The post has more than 51 likes and 32 comments just over a few days.

It is an odd feeling, something like an educational Stockholm syndrome. At first you dread the exams and the amount of study time required. After a while, you begin to rely on the exams for something to do and pretty soon you need the constant challenge.

But with the next study season still at least four or five months away, what is a candidate to do when there’s no CFA exam to study?

What to do when you are not studying for the CFA exams

I’ve talked a few times about the idea that your development as a professional analyst go well beyond just the CFA exam. Just last month we posted four things candidates should be doing over the next few months before they begin studying again. Besides networking at local CFA events, there is a library of books waiting for you on the CFA Institute website and through the CFA Research Foundation.

I thought it would be interesting to look at some of those 32 comments to see what other candidates are doing with their “free” time.

Of course, some are rightly enjoying the extra time with their friends and family. As a professional, you’re always going to have busy times and you need to fit social time in when you can. I never wanted to be the best analyst in the world if it meant also being the most isolated person in the world.

Quite a few candidates are filling their time with industry reading on market risk analysis, economics and the like. Besides the strictly educational books, you might try some of the more entertaining books related to finance. One of my favorite authors is Niall Ferguson, author of The Ascent of Money: A Financial History of the World. It’s not exactly Harry Potter but those of us in the industry will be just as captivated.

Other candidates are using the break to work on other professional licenses like the Series 7 or to study for the FRM or CIMA. I know several charterholders with the FRM designation and there is some overlap so you shouldn’t have much of a problem with the curriculum. I would still recommend some practical courses as well like a cash flow modeling course or something to get you practicing actual financial analysis.

One candidate said he was mowing the lawn, which must be a huge lawn to take up that much free time!

My favorite response was the candidate attending Toastmasters and taking a writing class. As analysts, we get more than enough practice with quantitative concepts and financial statement analysis. The problem is that most emerge with their designation but not able to intelligently put two sentences together. If you ever want to be successful on the buy-side or the sell-side, you have to be able to write a report and pitch your analysis. Toastmasters is a public speaking organization and a great opportunity to practice your presentation skills. Top it off with a writing class and you’ve got the recipe for an analyst that can drive his ideas home.

You won’t spend the next four to six months doing just one thing so mix in a few ideas from the list. Enjoy your new free time with the family and do some reading. Network with your new CFA candidate friends and learn to speak in front of a group.

And go mow your lawn.

‘til next time, enjoy your free time!
Joseph Hogue, CFA

How to Break into Finance from another Industry

Breaking into a role in investment analysis or asset management is tough and can be even tougher for candidates from other industries. Focus on your strengths to land your first finance job.

Last week’s post about getting a job in finance brought up another question we receive often here at Finquiz. The CFA exams attract candidates from a wide range of sectors and one of the most common questions is, “Can the CFA designation help me get a job in finance if I’ve only got experience outside of finance?”

The short answer here is yes…it can help, but it will not immediately land you offers from large asset management firms. As we saw last week, landing your dream job as an analyst is difficult enough for those with strong experience in the field. Your lack of experience in finance will be a roadblock on your resume but you may be able to turn knowledge of your prior industry into an advantage if you can get your foot in the door.

You’re in a Social Field Now

Depending on the industry you’ve worked in previously, networking and making contacts may be a new challenge for you. Those coming from engineering or other technical fields may not have needed to network at social events or build a name for themselves around the industry other than through their work.

Asset management is a social industry. While those in corporate finance may not need to network as much, investment managers and others in the sector depend on their connections to bring them leads on accounts and deals. This makes it difficult for outsiders to get a foot in the door because they don’t have the connections with people filling positions on their team.

It makes networking through your local CFA society and other connections so much more important if you’re trying to break into a finance position. Other CFA candidates will have built their file of connections through four years of undergraduate as well as at their current position. You need to put in the extra effort to meet people and make up for lost time.

  • Attend CFA Society networking events and consider volunteering for the society
  • Look for other industry events or conferences in your area
  • Try finding a mentor within the industry from any of your existing contacts

Turn your Disadvantages into Advantages

Your disadvantage of not having asset management or finance experience may be able to be used in your favor. You will still need to get your resume noticed through networking but once you’ve got an interview, you may be able to use your previous experience to get a leg up on other job candidates.

Many analysts come directly from the sector or industry they cover. Sell-side firms are always looking for people to give them deep technical knowledge of an industry, especially in fields like pharmaceuticals, technology and energy. Not only does your experience in the industry give you a deeper knowledge of the business but it lends you more credibility as an analyst.

Before you make the leap into asset management, spend some time to really understand the business model within your industry. It’s not enough to know the technical specifications of a product, you need to know how the product is manufactured, how it is marketed and what the industry looks like on a competitive basis. You need to show potential employers that you are an expert on the industry and that goes well beyond just having experience in one particular role.

Progress to the CFA designation is a strong plus for people coming from other industries, even more than for those already in finance. The CFA curriculum is broadly based and many universities use it as a model for a graduate program. Having passed the three CFA exams or progress to the designation shows you have the basic knowledge of finance and how the industry works.

That said, I would still recommend you take a basic cash flow modeling course online as well. The CFA curriculum covers some detail in financial statement analysis but really doesn’t go into practical application. Working through a modeling course will help show you how the financial statements are integrated and how to work through to a proforma valuation. Look through several reports on companies within your prior industry. Are there areas where you can use your previous experience to improve on the analysis?

Whatever you do, do not present yourself as a “well-rounded” candidate with knowledge across different fields. Employers do not want someone that knows a little about a lot. Employers want an asset that can bring detailed experience about a particular field and apply it to outperform other analysts.

Getting a job in finance is certainly not impossible though it may feel that way for candidates without any industry experience or connections. Make the connections you need through networking and highlight your experience in another field. Stick with it and don’t get discouraged.

‘til next time, happy job hunting!
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