Two things should be obvious here: The list, as with the majority of posts, is subject to opinion and may vary across candidates. Besides working through the exams myself, I have spent a great deal of time talking with other candidates about the exams and their preparation. I like to think I know something about the process, but you always need to focus the study material from your own viewpoint. The list is composed of things that candidates do across all three levels that make it generally more difficult to pass.
Each level has its own idiosyncrasies and hurdles that may also make it difficult. The habits listed in this series are not level-specific. Which CFA exam level is the most difficult? While understanding why each level is difficult and how to approach each in your preparation is important, the type of question brings us to our first reason candidates fail.
1. Too much meta-studying for CFA exam
Candidates love to talk about the exams. They talk about which level is most difficult and why. They ponder the minimum passing score and trends in the pass rate. I have even seen forum posts on the best beverage to drink while studying. This is all meta-studying or [studying about studying]. Yes, you need to understand the topic weights on the exams. Yes, there are some great tips and tricks out there on how to approach the CFA exams. The problem is that candidates too easily use this meta-studying as an excuse to get out of actual studying. How many hours have you spent ‘researching’ how the tests are conducted, how to approach each topic area, the earliest one should start studying, or a myriad of other questions about the exams? I have to be careful here. Your meta-studying is what brought you to the blog and I want you to come back regularly to listen to my ramblings. But I also want you to pass the exams and I have seen too many candidates sabotage themselves by spending too much time on the forums and not enough time actually studying.
Everything in Moderation in CFA exam preparation
As with most habits, the first step is understanding the behavior and approach it with moderation. There is some great advice out there and it can make your life incredibly easier come the first Saturday of December/June. You need to know the general process involved and the idiosyncrasies within each exam, but you also need to know when to get off the forums and get to work studying. Give yourself an hour or two every week to answer questions about the exams. You might take a little more during the first couple of weeks to familiarize yourself with a new level and you might take less time toward the end after you’ve learned what you need. The important point is to understand how much time you are spending and to make sure it does not come at the expense of studying.
If you have a specific question about the exams, especially while studying the curriculum, do not stop studying. Write the question down and address it later, after studying. When looking for the answer to a specific question, try searching for the question using the forum’s search bar rather than making a new post. This will help answer the question quickly and will not bring you back to the post every time someone leaves a reply. Find a couple of good sites (I hope this blog will be one) that you visit once or twice a week to see if there are any updates. Finding a new site can be helpful but don’t spend too much time surfing the web for new places to visit. I used to know a First Sergeant in the Marine Corps, one of the hardest and most admired men I have ever known. First Sergeant had a saying for when someone failed or things didn’t quite work out, as if all failure came down to one motto, and it brings us to the second of five reasons why candidates fail the CFA exams.
2. Lack of planning and burnout
CFA Institute’s survey gives a hint | 300 hours
Candidates know that it takes an average of 300 hours studying to learn the curriculum and pass any given level. That’s not just some number I pulled out of the air. Every year, the CFA Institute surveys candidates and every year those passing the exam report that they spent about 300 hours studying. For the most part, candidates understand the time required and most plan to put in the necessary time to pass. They figure 300 hours divided by 3-4 months is about 20 hours per week studying and they plan on starting in late February for the June exam. But that is about as far as their planning goes.
Life and CFA Program
Then something happens I like to call, “LIFE.” Life is your little sister getting married and you have to fly to Albuquerque for the wedding. Life is first quarter reporting and you putting in 80 hours a week at the office to get client presentations done. Life is your son’s Little League Championship series that takes you to every baseball diamond in the state and out for pizza afterwards. Life is all the things that get in the way and cause you to deviate from your study plans. Besides the little things in life that come up to detour the best made plans, I always planned ahead for those cabin fever moments. These are when you have been hitting the books every day for a month, when you have locked yourself away studying for so long that you see the efficient frontier in your sleep. These are the moments you need to step back and take a day or two off of studying or face some serious burnout.
When to start studying for CFA Exam
A lot of candidates and charter holders cringe when I tell them I started studying for the CFA exams in November or earlier, more than seven months before the exam. When I say I started studying, they assume it was studying as they are used to doing when they start in February or March (studying every day for 15 hours a week until the exam). When I say I ‘started’ so early, I mean a relaxed schedule of 5-10 hours a week for the first couple of months. Just reading through the curriculum but not worrying too much about problems or the exam. After the first reading, I would start through it again using study guides and working practice problems. This all gave me enough time to work through the curriculum and not worry about setbacks from ‘LIFE’ or burnout. I could take a week off if I needed to and still get back on schedule without drastically increasing study time.
There is a procedural component of your study planning as well, of which we’ll talk about tomorrow, but this time component is what trips up candidates the most. After all the time spent learning about the exams, after all the money spent on resources, it seems too simplistic that a lack of time is what causes candidates to fail but it’s true. Learn to plan ahead and plan to pass the exams. Thank you First Sergeant. Frequent readers of the blog will recognize this common hurdle that candidates face. It is a problem all students face. Worst of all, it is not something you can overcome once and not worry about it again. You have to continuously watch for it to keep yourself on course.
3. Difference between active and passive learning.
Passive learning is those activities where you do not participate but really just absorb the material through sensory perception. This includes reading, listening to a lecture or watching a video. Studies have shown that students remember only about 10% to 30% of the study material through passive study. Active learning, by contrast, is those activities where you engage the material in an interactive manner. This includes discussion, presentation and problem solving. Students are able to remember up to 90% of the material when they use active studying as part of their routine.
Just Reading the CFA Curriculum isn’t Going to Make It
Now that you know the difference, you are probably saying, “Oh crap, I am doing nothing but passive learning!” Don’t be too hard on yourself. Most school systems are built around passive learning (listening to lectures and reading textbooks) and students only grudgingly engage in active learning. For me, it was only with the realization that the CFA exams were nowhere near as easy as most of my college curriculum and that passive learning was not going to cut it that I made the commitment to active learning. Its not the easier route, but would you rather spend a hundred hours reading to remember 10 hours of material (people typically remember about 10% of what they read) or would you rather work practice problems for about 11 hours to remember the same 10 hours worth of material?
Practice, Practice and yet more Practice for CFA Program exam
Practice problems are the most obvious form of active learning. Make sure you do all the end-of-chapter questions and ‘blue-box’ examples in the CFA curriculum. These are going to be the most closely related to actual exam questions and are pretty close to the same level of difficulty. The FinQuiz test bank includes almost 10,000 questions created directly from the curriculum and more than 500 item sets. It is a great supplement to the textbook questions and will help avoid boredom from doing the same questions multiple times.
Study groups for the CFA Program Exam
Study groups are a good way to discuss and think about the material, but make sure you are efficiently spending your time on the curriculum and not talking about unrelated things that happened over the week. Flash cards are a good resource to use for study groups. You learn first by developing your own set of cards, then learn by working through other group member’s cards as well.
4. Should I use a third-party prep provider?
This section deals with the planning process, not finding the right time to study but finding the right resources. The big question on the forums is always, “Should I use a third-party prep provider or just stick with the curriculum?” The question goes deeper though to different products and ways to look at the material as well. Disclaimer: Obviously, we here at FinQuiz have a vested interest in the answer. Our study guides have been developed as a great complement to the curriculum and we’re proud of the feedback we receive every year. That said, this blog is here for all candidates and we want to see you pass the exams regardless. Check out our examples on the homepage or contact us and we can talk about helping you get the most for your time.
Variety is the Spice of Life
Beyond the specific test prep provider, candidates also need to look at a variety of different products. The CFA curriculum at each level is in excess of thousands of pages. I was always a fan of looking at it from as many different angles as possible. This helped to break-up the monotony and took advantage of the strengths within different media.
CFA Study Guides – two formats
Study guides come in two formats, those based on the specific Learning Outcome Statements and those that are curriculum-based. Some providers reason that structuring the guides on the specific LOS makes it easier to package the material in shorter pieces. FinQuiz has taken a different approach, developing curriculum-based guides as a complement to the curriculum instead of as a substitute. By following the curriculum, the guides are more condensed and focus on those areas that give candidates the most problems. Some candidates completely ignore the curriculum, opting instead to only read study guides. Granted, this cuts down on the time spent to get through the study material but you are sure to miss some points.As condensed notes, the study guides are not going to include 100% of the testable material in the curriculum. If the guide only hits 90% of the material and the candidate only retains 80% of the guide, then their score is already maxed out at 72%. This is why FinQuiz feels that a complement to the curriculum is more appropriate than a substitute.
Flash Cards for the CFA Exam
Flash Cards are the most appropriate for focusing in on those last remaining areas in which you are having trouble or keeping those important formulas and processes fresh in your mind. I also like flash cards for their portability and ease of use during short periods. We get (2) fifteen minute breaks during the day, not really enough to open up the books and start a new section but plenty of time to go through 10 cards. You can easily buy or borrow cards off the internet. Most providers sell sets for around $125-$175 or someone in your social network probably has some you could copy. The best way, though, is to make your own cards. It may take a little longer, but they will be customized for your learning and will provide the opportunity to write out the material.
CFA Exam Videos
Videos are a good way to look at the study material from a different format. The majority of your studying is going to be through reading a section and answering problems so it is nice to take a break every once in a while and have someone explain the curriculum to you. This is especially useful for some of the more complicated sections where a live example might help. While FinQuiz does not yet offer videos, there are many available on YouTube and can be found through a simple search.
CFA Exam Question banks
Test banks include thousands of problems to work through and are a great complement to those in the official curriculum. Working practice problems are really where you need to be focusing your time because the retention is so much better using this active learning method than simply reading the material. Candidates need to work through all the end-of-chapter questions and ‘blue-box’ examples within the curriculum. This is going to be the closest to the style and difficulty that you’ll see in the exams. The few hundred problems included in the curriculum really isn’t enough to prepare for the exams, making test banks absolutely necessary. When working through a set of questions, don’t just score your results at the end of a study session. Go back through the questions. Figure out why you missed those incorrect answers and make sure the correct answers were from an understanding of the material and not simply a lucky guess.
Practice Exams for CFA
Mock Exams need to be a part of your study program so you are not surprised by the six-hour testing marathon in June. Many candidates handle their studying exclusively in short, one-hour chunks then do poorly on the exam because they are not prepared for the level of mental fatigue. Further, mock exams force you to answer problems across the curriculum instead of only looking at specific sections. Facing a test of the entire curriculum is much different than looking at each section immediately after reading over the topic area, make sure you are prepared. Too many candidates rely solely on the official CFA curriculum without taking advantage of other available media and resources. Besides offering different approaches and advantages specific to each media, using different resources are about the best way possible of avoiding burnout while studying for the CFA exams. Look through the free examples that many third-party providers offer or ask other candidates which provider they used. The incremental costs to using a few products are well worth the expense to avoid having to retake the exam.
5. Not all topics are created equal
This hurdle could just as easily have been titled, “I’m an ethical person, so why study ethics?” While the material on Ethics and Professional Standards is not the only one neglected by candidates, it is probably the most avoided. Sure, you need to have a good understanding of the entire curriculum but a look at the topic weights provided by the Institute makes it clear that some topics are a source of some major points.
CFA exam Ethics, the easiest and most difficult topic on the exams
Candidates have a big opportunity with the ethics section though it still presents a problem for most. The topic area is tested at each level and is worth at least 10% of your exam points. The opportunity comes in the fact that the topic is the only one that really does not change much as you progress. You’ll see a couple of additional sections but these are relatively secondary against the core Code and Standards, which do not change. For candidates that give the topic its due at level I, the next two levels are that much easier. The problem with the ethics material is twofold. Some candidates consider themselves to be fairly ethical people and so think that the answers on the exam will be intuitive.
They neglect the topic and end up failing on the exam. Other candidates read the material, to the point of memorizing the Code and Standards, but neglect to do practice problems. There are two types of ethics questions on the exam, those with no answer and those that seem to have two correct answers. You absolutely must practice the ethics problems provided by the Institute at the end of the chapters. You’ll be surprised by the level of ambiguity in some of the problems and how minute details can make the difference between one answer versus another. Don’t let the first time you are surprised by this be at the exam.
You need to know Financial Reporting & Analysis for the CFA designation??? Who Knew?
If not of equal importance to the ethics material, I would put FRA a close second. Unfortunately, a lot of candidates avoid this section as well. The material, much of it focused on accounting issues, may not be as interesting for some. It can also get extremely complicated and detailed on the level II exam. Anyone that works in the industry, whether a charter holder or not, will tell you that understanding the financial statements is of the highest priority. As an analyst, you will need to develop models and an expert knowledge of how the company is reporting its business and how it all flows together. Spending extra time on the material will not only help you pass the exams, it will make your life so much simpler further down the road.
Equity and Fixed Income: The fun parts that aren’t so much fun anymore
Many candidates start the path to the charter because the love analyzing investments, whether in the equity or fixed income market. When they realize that it is a little more than just calculating the price-earnings ratio for the stock everyone is talking about… it becomes less fun. The two topics can get extremely formula-intensive and most candidates only have experience in one of them. Avoid the temptation of only studying the topic in which you currently work or in which you think you want to work. First, you’ll need the points from each section to pass the exam. Also important though is the fact that you never know how your career will unfold or when you might want to work in another asset class. Each level has its own idiosyncrasies and no one topic area will get you through every exam. The four topic areas above are extremely important but you still shouldn’t neglect the other five topics.
Other posts on the blog talk about specific strategies for each level and can help you further focus your study plans. Are there any hurdles to passing the exams that I forgot? What tripped you up the most? Let me know if you have any questions about the last five posts.
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