To Ace CFA Exams, Put In the Hours

The CFA Institute recently released results for two levels of the June Chartered Financial Analyst (CFA) exams. If you're already in or thinking about signing up for the CFA program, what do the recent and historical pass rates for those exams say about your prospects of making it through the program?

Really, not much. During the past five years, roughly 40 percent of candidates who took the CFA Level I and Level II exams passed and about 50 passed Level III. However, a candidate's degree of familiarity with the material - whether attained through study or professional experience or a combination of both - will determine whether you'll pass or fail.

Even if you're a seasoned pro, expect to devote serious time to studying. Candidates spend an average of about 300 hours preparation time for each of the three CFA exams, the CFA Institute says. Earning the charter takes an average of four years. Besides passing all three exams, you'll also need at least four years of work experience in the investment profession to qualify for a charter.

The exams aren't graded on a curve, says Tom Robinson, head of education for CFA Institute, based in Charlottesville, Va. Instead, the institute crafts each year's exam questions and "calibrates" grading through separate processes aimed at aligning the degree of difficulty with what's currently needed to practice in the investment industry. As a result, fluctuating pass rates - both year-to-year and over the longer term - mainly reflect changes in the candidate pool on each exam date and over time.

While smaller proportions of candidates passed the CFA Level I and II exams last month than a year ago, Robinson says both numbers fall within the range of recent years. Forty-two percent of Level I candidates passed, and 39 percent of Level II candidates did. That compares with unweighted averages for the past decade of 39 percent passing Level I and 44 percent passing Level II. Results for Level III will be released in August.

"There has been a downward trend over time" in pass rates for all three exams, Robinson notes. When the CFA program originated in the 1960s, all who took the exam were long-practicing industry veterans. Today, many candidates are college or graduate students with little or no work experience in finance. Others aim to switch into finance from other careers, and view a CFA certification as an entry ticket. With the candidate pool now skewed toward individuals who are learning the curriculum material for the first time, it's natural to see fewer passing scores. At the same time, the amount of knowledge required to practice in the investment industry continues to rise.

A total of 139,900 candidates from 160 countries were enrolled for one of this year's June exams (Level I is also given in December each year, while Levels II and III are given in June only). More candidates come from the Asia Pacific region than anywhere else - 40 percent of the total, compared with 37 percent from the Americas.