How to remember 90% of what you studied?

This post is going to offer the most important advice on HOW to study for the Chartered Financial Analyst exams, or really any exam.

Unfortunately, it is the one of the hardest things to get through to candidates. Too bad since candidates that simply read through the curriculum or watch videos will remember about half of the material. Is it a wonder then that half of the students fail each level of the exam in any given year?

The most important advice I can offer is understanding the difference between active and passive learning. Passive learning is where the student does not participate but simply absorbs the material through sensory perception- examples include attending a lecture, listening, reading and watching a video.

Active learning is when the student takes a participatory method through discussion, presentation, simulation or practice. Active learning promotes problem solving, critical thinking analysis and synthesis of the information.

The importance of active learning is displayed in the graphic below, based off a study by Edgar Dale on teaching.

With the limited time you have left to study, and the intensity of the material in the CFA exams, is there any question which methods you need to use while studying? Granted, you will still need to read through the material to start, but you shouldn’t spend your entire study time (or even a large portion of it!!) simply reading. This is why a condensed notes program is so important. You can go through the FinQuiz curriculum notes in a fraction of the time it takes to get through other provider notes or the curriculum itself.

This will leave time for the real money-making study activities, the studying that is going to get you points on the exam!

So what are the active learning strategies for the CFA exams?

1) Form a study group

This will make it necessary to talk the material out loud. A great way to run the group is by dividing the topics between members, each member ‘teaches’ the group a topic each week. Make sure each member ends up ‘teaching’ each topic so you cover all the topics multiple times.

2) Practice Problems, Practice Problems, Practice Problems

The FinQuiz test bank includes almost 5,000 questions created directly from the curriculum and more than 100 item sets. ** I know it is a pain focusing your study time on practice problems. Don’t forget, I was a candidate just last year. You can plan on doing problems all you want, but it won’t make a difference until you actually sit down and do them.

Level 3 candidates, this means working the old exam essay questions released by the Institute. The last three years of the morning session are available on the Institute’s website. We will be working through some of the old essay questions on this blog and cover the important topics you need to know.

3) The end of chapter questions and blue-box examples within the curriculum are an invaluable source of practice problems and scenarios. Use these in conjunction with a test bank of questions to make sure you get all the active learning you need.

4) If you can’t find a study group, write the topics out or use this blog as your active learning venue. Let me know if you want to write a blog post on a particular topic or study session. We are always looking for guest posts and any way that will help our candidates pass the exams.

So active learning is probably not the easy solution you were looking for to pass the exams. Sitting down to a heaping bowl of exam questions is probably not your favorite dish, but it will get you closer to that charter. I am looking at mine right now as I sit in my office. Stick with it a little while longer, find that motivation to study a little more, and you’ll be looking at your charter soon!

Happy Studying,

Joe Hogue, CFA

P.s. Surely there’s got to be more examples of active learning methods than the four above. What other ways have you used to actively participate in the material?

Last updated: September 30, 2016 at 6:13 am

CFA Level 3- Five points to enjoy the exam

CFA Level 3 experience

After CFA Level 2 exam, I enjoyed the final exam of the series though it presents its own challenges. If you approach it wisely, following these five points, CFA Level 3 exam can be just as enjoyable when you take it.

CFA Level 3 – It’s all about the Essays

The essay portion of the exam terrifies many candidates and for good reason. Not only are you asked to come up with your own answers, much more difficult that picking it out of three options, but the essays present a physical challenge as well. When is the last time you spent almost three hours straight writing by hand? The post-exam party is filled with more than a few horror stories about muscle cramps and aching hands. You must physically prepare yourself by doing consecutive essay problems and writing for hours or you will not make it through the morning section.

CFA Level 3 – Essay questions topics

Most of the topic areas are fair game for essay questions. The first two questions will always be on individual and institutional wealth management so being ready for those two topics can give you a huge confidence boost for the rest of the test. I covered the essay section in more detail in a prior post linked here.

CFA Level 3 – The only exam with prior year’s available

Ok, this one is about the essays as well but I thought it merited its own bullet. The Institute releases the essay section, along with guideline answers, for the last three years. This is huge and I don’t think most candidates take advantage of it. Working through these essay questions not only helps you study the material and practice writing for an extended period, it also helps you write more efficiently and get a feel for the types of information for which the Institute is scoring.

We worked through several essay questions from prior years, click here and scroll through last year’s study plan. While only the last three years’ exams are available, you should be able to get prior years’ essays from members of your local society. Ask around to see if anyone has the PDF copies. It is well worth the effort to have a couple more sets of practice essays, especially in the all-important wealth management topic area. Make sure you check for LOS changes between the test year and the current year for material that has been dropped or changed.

CFA Level 3 High Pass Rate – Don’t get overconfident

You’ve made it through two of the hardest exams of your academic life and notice that the pass rate for the CFA Level III exam is above that of the other two. Sounds like it is time to sit back and ease through to your charter, right?

You have put in too much work to get lazy now. While the pass rate on the Level III exam, 54% in 2016, is higher than that of the other exams it is still incredibly difficult. Think about it, every CFA Level III candidate has had the perseverance and has put in the effort to pass the other two exams but less than half will make it through the exam this year.

Put in just as much time and work for this final exam as you did for the other two levels. Not only will you be rewarded with a passing score, but mastering the essay section will give you the ability to talk through these topics in your job.

CFA Level 3 – Harder to ‘game’ the topic areas

You could clearly see in the other two exams which topic areas were most important and where you should focus your studying. The topic weights don’t help much on the CFA Level III exam. Ethics and the asset classes are weighted but the investment tool topic areas are wrapped up in portfolio management. This uncertainty throws some candidates for a loop and leads to inefficient use of study time.

Fortunately, by studying the prior essay sections, you can get a good idea of topic area importance. Look through the prior three years’ morning sections and you will see that the two portfolio management topics are always considered (with each historically above 10% of total exam points).

Again, studying these previous morning sections can give you nearly everything you need.

Do not wait until you pass CFA Level III exam to start thinking about the charter

You will not immediately be granted the charter after passing CFA Level III exam. You first need to fill out an application for membership and acquire two sponsors that will answer questions on your experience. One of these will need to be your current supervisor, the other needs to be a charter holder from the local society. Now is the time to start talking to society members and establishing a sponsor. In my own experience, it is frustrating when a candidate comes out of nowhere and asks for a sponsor when you have never talked or really know what they do.

CFA Level 3 – Work requirements

You will also need to complete the requirement for 48 months of professional experience. This is the sticking point for a lot of candidates and many have to wait years until they can use the designation. There is not much you can do if you are taking the exam this year and do not have the necessary experience. Review the work experience guidelines established by the Institute, linked here. If your current responsibilities do not qualify, you need to start looking at your options. Consider talking to your supervisor to add some responsibilities to your role that might help qualify.

CFA Level 3 – Study as hard as you did for the other two

As a level III candidate, you are almost there and the anticipation building up to the exam can be unbearable. Take a step back and realize that you still have one hurdle to jump. Study just as hard for the final exam as you did for the other two, maybe harder, and go into that first Saturday of June with the confidence to pass.

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

Last updated: October 7, 2016 at 3:34 am

CFA Level 3 Examination Tips

On CFA Level 3 exam, a candidate has two sessions, one comprising of 10 item-set questions (afternoon session) and the other comprising of 9-15 essay questions (morning session). The afternoon session is quite similar to CFA Level 2 exam and therefore, should be handled in the same manner as the CFA level 2 questions. However, the format of the morning session is unique to this level. The morning session constitutes 9-15 essay questions, with each composed of 1-5 sub-parts. Following are some tips for preparing and attempting CFA Level 3 examination.

Preparation for CFA Level 3 Exam

  • Most candidates believe that CFA Level 3 exam is easy and much less demanding than CFA Level 2 exam. They, therefore, take their preparations slow and easy. This is a grave misconception! Start early and spend at least 10-12 hours a week studying FinQuiz curriculum notes.
  • In item sets, a student is provided with three options, one of which is correct. However, in essay questions, the student has to come up with the exact correct answer himself. Hence, it is imperative that you know, and are able to retain and recall, every important concept, formula and relationship.
  • Analyze and identify the areas having a higher probability of being tested as essay questions. Examples of such areas would include behavioral finance, individual IPS, institutional IPS, fixed income and equity.
  • Portfolio management is an area that carries the largest weight. Make sure you know this area inside out and can attempt questions presented from every angle and perspective.

Reading the material for CFA Level 3 Exam

While reading the material to prepare for such questions, use the following tips:

  • After understanding a concept, try to memorize all important points related to it. A helpful way of doing this would be to box the important details while reading. You can also number the points by underlining them and writing superscripts 1, 2, 3 and so on for every topic. This way it will be easier to learn and retain the points.
  • Reviewing the material as you progress is especially essential for essay questions. Have a proper review plan in place and follow it religiously.
  • Know how one topic relates with the other. Flowcharts and similar graphical depictions can help in understanding relationships and are effective means of retention. FinQuiz Smart Summaries are excellent source for this.

Practice for CFA Level 3 Exam

  • A great deal of practice will not only help familiarize you with the format of such questions, but will also illustrate how to approach them.
  • Remember to review each practice test carefully after attempting it and determine what information was required and how it is graded. Analyze your mistakes and weaknesses. You would notice that, sometimes, you missed out on writing needed information even though you knew it and instead, wrote something that was not required. As you practice further, you will get better at attempting such questions.
  • The only way to avoid leaving points during the final exam is to do practice essay questions under a time constraint over and over and over again.  There is no substitute for intense essay practice.

Attempting CFA Level 3 Exam

  • When attempting essay questions read the question first and then read the case. Try to keep in mind what is needed when you are going through the vignette.
  • Apply your time management skills for this exam. Go through the exam once and answer the questions that come easy to you first. This will prevent you from failing to answer all the questions.
  • Answer questions by focusing on key words in the vignette. If you don’t know the complete solution, answer with what you know since CFA Institute grants partial marks.
  • Don’t miss easy points by assuming that they must be something the examiner would know. Remember, every point is important.
  • Answer each sub-part using clear, precise and relevant statements. Remember, your answers are your only communication with the examiner—try to tell him/her that you know what you are talking about. Be as relevant as possible; writing unnecessary details will leave a bad impression on the examiner and will be a waste of your precious time.
  • An appropriate format of attempting essay questions is to use bullet points.
  • Space your words and sentences so that they are easy to read.
  • Do not write lengthy answers; try to be as concise and accurate as possible and explain the answer in just a few lines or so. Knowing how answers are graded will illustrate how objective you have to be when answering; writing long, unnecessary stories will give you no extra points.
  • When answering numerical questions, start by writing the data and the formula. Show your calculations and write the final answer prominently. Remember, there are marks for each important step of the calculation.
  • No matter how poorly you have done in the morning session, don’t lose hope. The afternoon session carries equal weightage and is as critical to passing the exam as is the morning session. Try to relax during the mid-break and focus on the item sets in the afternoon. For many candidates, the afternoon session scores have been central to passing the exam.

You should review yesterday’s post CFA Level 3 – How to Pass as well.

Last updated: August 3, 2016 at 3:48 am

CFA Level 3 – Essay Type Exam – How to Pass?

Arriving at CFA level 3 exam for the CFA charter is an accomplishment in itself. With a fail rate of around 50% at each level, you have made it where approximately 75% of candidates could not. While the final exam is not one to underestimate, there are some strategic decisions that will make it easier.

There are strategies that will get you through all three exams and those that you will need to change for each test. We will cover those strategies and advice specific to CFA Level 3 exam here and hold the broader suggestions for a future post. We will also look at two different schedules in the strategy post that could aid in planning.

CFA Level 3 Contents, Format and Basic Strategy:

CFA Level 3 exam can be the most intimidating for some because of the essay questions. Unlike the other two levels, you will be asked to take the concepts in the curriculum and develop your own recommendations and solutions. This can be tough for a lot of people and will almost certainly test your ability to manage time during the test. The good news is that the essay section does not have to be overly difficult, you just need to follow some basic preparation strategy. I was actually pretty surprised at how easy it seemed compared to what the monster I had built it up to be before exam day.

CFA Level 3 Exam – For those that can put everything together!

CFA level 3 exam is more conceptual and practically-based than the other two exams, making it easier for those that can put everything together. The morning session of the CFA Level 3 exam has a maximum score of 180 points and will include 10-15 essay questions with as many as 7-8 separate questions within each. Some questions will require that you write on lines directly under the questions, other questions will be answered in a template box on another page. Do not answer the ‘template’ box questions directly under the question on the exam. It will not be graded! It can be confusing answering some questions directly below while others are answered on separate pages so you want to go through and draw a line under the ‘template’ box questions so you are not tempted to put your answers under the question.

CFA Level 3 and time management

Time is many CFA level 3 candidate’s worst nightmare, but it doesn’t have to be. Just because you have five lines or a three-inch by three-inch box in which to answer does not mean that you must use this entire space. Nor does it mean that you cannot use bullets! Graders are not looking for spelling or grammatical ability, only that you understand the curriculum and can put together a solution.

CFA Level 3 – Topic Weight Differences on the Exam

Comparing the topic weights for CFA level 2 and CFA level 3 exam provided by the CFA Institute, there are a couple of things you should note.

  • First, it is much harder to concentrate on ‘core’ topics because the Institute rolls up many of the topics into Portfolio Management. This means that, while the percentage weights for Investment Tools shows a zero weighting, these sections are still tested within the 45-55% of the exam under portfolio management.
  • The topic weight ranges in Asset Classes is fairly wide and difficult to draw conclusions as well. Fixed Income is given a slightly higher weighting, but only on average. You are guaranteed of seeing at least one essay or item set from each topic, but could get more. This, combined with the fact that no clues are given as to which subjects within each topic are more important, means that you must cover these topics fairly broadly as well.

CFA Level 3 Exam and last three years’ essay exams

Fortunately, CFA level 3 exam revolves around the essay questions and the Institute makes available the last three years’ essay exams for practice. While the Institute changes the questions each year, practicing these essay exams is a great start to building your confidence and understanding of the material.

CFA Level 3 – Which questions to be answered first?

As with CFA level 2 strategy for item set questions, you may want to answer those essay questions which you feel strong in the material. This will get you the points you know, will help you bank some time and help your confidence. What I mean by ‘banking’ some time is that you will be able to do those questions you know in less time than the allotment leaving you more time for the more difficult questions.

Do not spend too much time on relatively low-point questions within the essay section. Time is a problem for many candidates, so If a question is only worth a few points it doesn’t make any sense spending 15 minutes trying to get it right. Spend time on the higher-point items and the easy ones, then return to unanswered questions if you have time.

Another critical point on the essay section is to show your calculations when the question asks for it. The graders are allowed to assign partial credit for correct procedures or partial answers. If you do not show your calculations in the exam booklet, not only will you not get partial credit you may not even get credit for correct answers.

Ethical and Professional Standards is off less importance on the last exam but still two item sets in the afternoon. You should have a good understanding of the Standards, so spend some time understanding the new material and move on to other topic areas.

Economics is again fairly conceptual section other than a few growth and market valuation formulas. The topic is also secondary, so make sure you understand the key points and reasoning then spend your time on other areas.

The asset classes (Alternative Investments, Derivatives, Equity Investments, Fixed Income) are also much less quantitatively intensive at the third exam but still include quite a few formulas. The impetus on the third exam is how these asset classes fit together in a portfolio. A large section is devoted to risk management and how the asset classes each have different fundamentals. Be sure to understand return drivers and risk characteristics for each class.

Focus of CFA Level 3 exam

Portfolio and Wealth Management is the focus of CFA level 3 exam. Your first two essay questions in the morning will be individual and institutional wealth questions. While these specifics of these two questions vary from year to year, there are a limited number of topics that are tested. This makes it extremely important to practice the old essay questions to get a feeling for what and how questions are asked.

Key in this section is the Investor Policy Statement (IPS) and its components. Spend as much time as you need to master this section because it will be big points on the exam. Understand the differences in risk and return needs for the institutional investors as well as their differences in IPS constraints. The biggest aid here is again the past essay exams posted by the Institute. Besides the exams, also available are guideline answers. These are important to get a feel for what the graders are looking for within the questions. Study the answers in detail to see what information you need to write in your own answers.

happy studying
Joseph Hogue, CFA

Last updated: September 14, 2016 at 4:53 am

CFA Level 3