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

What to Expect on CFA Exam Day

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

Your CFA Exam Day Begins

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

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

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

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

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

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

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

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

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

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

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

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

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

Being ready for CFA Exam Day Problems

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

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

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

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

100 hours of CFA Study in 3 Weeks!

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

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

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

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

CFA Study-thon Weeks One and Two

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

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

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

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

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

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

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

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

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

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

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

Your CFA Last Week Study Plan

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

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

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

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

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

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

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

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

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

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

Which Level of the CFA is Most Difficult?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The answer: YES! Keep going!

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

Never stop studying for the CFA exam

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

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

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

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

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

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

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

2015 CFA Exam Topic Weights

2015 CFA Exam Topic Weights

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

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

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

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

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

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

Good luck.

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

10 Weeks and 10 Goals for the CFA Exams

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

Study Goals

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

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

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

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

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

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

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

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

Networking Goals

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

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

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

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

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

Go Old School for Real CFA Benefits

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

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

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

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

Why you still need live study groups

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

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

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

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

How to blend the old and the new

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

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

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

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

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