Level III CFA Program 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 Exam Level 3 was my favorite
The final CFA exam and curriculum can actually be enjoyable (as enjoyable as a 6-hour exam can be). The curriculum does not seem as detailed as the level 2 and is not nearly as long. The level 3 is much more conceptual and practically-based, giving you an idea of what you can actually do when you put everything together. This, combined with the fact that you can finally see the light at the end of the tunnel, made the final CFA exam my favorite.
CFA Level III weights of topic areas
The Institute shows the topic area weights for the CFA level 3 exam at: CFA Exam Information . It is harder to ‘game’ the topic weights in CFA level 3 because everything is mixed together. For example, economics says 0% topic weight but it will be integrated in with another topic so you will get questions. The only thing you do know is that CFA level 3 is about Individual and Institutional Portfolio Management! Study these two topics religiously!
Level III CFA Program Format
The morning session of 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.
Template box questions
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. I didn’t do this and had to go back to re-answer some questions in the appropriate space.
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! Use Bullets Graders are not looking for spelling or grammatical ability, only that you understand the curriculum and can put together a solution. Working through some old essay questions (we’ll do this in future posts) and looking at the guideline answers will help you see where bullets can be used effectively.
Format: Afternoon Session
The afternoon section of the exam will be similar to the CFA level 2 exam with ten item set questions, each with six questions. The unique part about the CFA level 3 exam is that the item set questions may cover several study session topics. Where in level 2 you had an entire item set on just ethics, in level 3 an item set may ask about ethics and portfolio construction, or a combo of any of the study sessions.
Read through my “Level II CFA Exam and Overall Strategy” for suggestions on how to work through the item set questions if you didn’t establish a good system during your second exam. Some will suggest reading through the questions first, which is a good strategy for most candidates. I prefer to skim the item set scenario first.
Basic Strategy for the Essay Portion of Level III CFA Program
Each essay question will have a number of minutes associated in parenthesis, example: Question One has three parts (A,B, C) (18 minutes)
Two suggestions are critical here. One, answer the easy questions first. 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.
Secondly, DO NOT spend too much time on relatively low-point questions. 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 come back to unanswered questions if you have time. DO NOT forget to methodically go through and hit all questions. There’s nothing worse than remembering after the exam that you forgot to go back and finish a question.
Some questions will say ‘Show your calculation” on the exam, this means SHOW YOUR CALCULATIONS! Every step, do not simply do it on your calculator and write down answer—there is PARTIAL CREDIT if you can show that you had some portions of the answer correct. If you have several steps (written down) correctly but the final answer is wrong, you can still get some credit.
Expect to be caught off guard on a question or two, morning or afternoon session. The curriculum is huge and you will probably not remember every idea within every topic. Don’t freak out if something looks completely unknown. If it is in the afternoon fill in one of the answers, if it is in the morning give it your best one minute guess and save the time for something you do know. This is why study notes like FinQuiz are so important because they give you a condensed version of the important topics to go over multiple times.
Which do you think you will remember, going over the entire curriculum one time or going over the condensed notes three times? Studies show that our brains need repetition to fully incorporate something to long-term memory. If you haven’t checked out the free sample of FinQuiz’s study notes, click here. The Premium Package also includes a test bank of almost 5,000 questions and topic summaries to review the most critical information in your lead-up to the exam.
Some study providers place a lot of emphasis on LOS ‘command’ words to understand what you are expected to learn. Each LOS has a command word like: discuss, formulate, classify, etc. and understanding the definition of the command word is supposed to help you know how to study the topic. I think this is a waste of time! Besides learning the curriculum, now I have to study the dictionary as well???
The CFA level III exam is a concept-driven exam. You need to learn the material to be able to draw everything together and synthesize a response. ‘Command’ words is what happens when you have an LOS-based study provider instead of curriculum-based like the notes provided by FinQuiz.
As with item set questions, many suggest reading the questions first to get an idea of what data or information you need when reading the scenario. While I do not use this strategy for item set questions, I do skim the essay questions quickly before reading the essay scenario. The essay scenarios tend to be a little longer than item sets so here it pays to have an idea of what information you need.
Practice is really the key with the essay questions. Working through old exams, you get a sense of how the Institute frames scenarios and questions. The old exams released by the Institute also have the guideline answer (max points) so you get an idea of what the graders want. Being able to practice how you are going to BRIEFLY get your answer across is a huge help. I worked through seven years of old exams and had no trouble with the morning section.
Practicing old exams will also help you get in the habit of writing again. If you haven’t hand-written anything in a while, you do not want to wait for the 3-hour exam to see how much your hand starts hurting!!
That’s all for now. More suggestions for preparing for the exams in general and specific ideas for CFA level 3 to come.
Good Luck. Looking forward to your questions and comments.
Joe Hogue, CFA