Five things NOT to do if you want to pass the CFA exam
Suffice to say, considering the relatively low pass rate, getting through the rigours of all three exams to become a CFA charterholder is not an easy task. But there are many ways you can shoot yourself in the foot.
Aside from not putting in the study time - recommended at around 300 hours per level - there are surprisingly common mistakes or assumptions people sitting the exam make, which often make the different between a pass and a fail.
1. Assume there are clues in the structure of the multiple choice questions
The 'item sets' in CFA level I and II are essentially multiple choice, which means it's tempting to roll out that classic pub quiz technique - if you don't know the answer, choose 'B'. Other popular assumptions include thinking either the shortest or longest sentence is the correct one or answers with the word 'never' or 'always' are a warning sign. This is bunk - there's no pattern.
"There is no way to discover a secret formula to answering multiple choice questions," says Tom Robinson, CFA, managing director of education at CFA Institute.
"The questions written in as open language as possible, and the multiple choice answers can be very similar. So, if it's a written answer you need to understand the subject thoroughly, or if it's a calculation they will make two of the three options answers you could have easily landed at if you made simple error," adds Richard Fernand, global head of CFA training for 7city Learning.
2. Skimp over certain modules (particularly ethics)
It's tempting to assume that getting more points on more numerical elements of the exam like, say, financial statement analysis, will make up for glaring weaknesses or a lack of preparation in the softer elements such as standards, ethics and regulations. Sadly not.
"Some elements of the course will help with others - financial statement analysis will help you understand equity investments, for instance, or quantitative methods will increase your understanding of fixed income," says Fernand. "But all syllabus points could be tested, so paying less attention to some could be the difference between a pass and a fail."
"For candidates at the margin of the minimum passing score, performance on the ethics portion of the exam is important," says Robinson.
3. Be overly reliant on study guides
It wasn't so long ago that the recommended number of study hours per CFA level exam was 250 - it's now been upped to 300. Suffice to say, cutting corners isn't wise and, as helpful as they are, relying more or less solely a study guide is just that.
"Historically, people simply used materials by companies like Schweser and Stalla to guide them through the exams," says Fernand. "I wouldn't recommend using them exclusively - you need to also closely study the syllabus."
"CFA Institute does not consult with or provide planned exam content information to prep course providers at any point during the exam development process," warns Robinson.
4. Assume the written parts of level three mean composing a novel
For most of us, writing vast pontificating essays is something last done at university when it was perfectly acceptable to get your point across in 2,000 words. The level III exam is indeed the only one with a written element, but you're not Charles Dickens.
"It's not an essay, and don't assume that flowery language will score you extra points," says Fernand. "Think of it as writing a memo to your boss - they want to see the facts and their implications in clear, concise language."
5. Apply the same study techniques to each exam level
"Surprisingly, some people - particularly those with a finance-based degree - breeze through level I, because many of the concepts are familiar to them," says Fernand. "They apply the same (often less rigorous) study techniques to level II - possibly because they're more senior and have less time - and then they come a cropper."
This is clearly reflected in the CFA's stats - 22% of level I, 58% of level II and 49% of level III candidates found the questions to be more difficult than expected, Robinson tells us.
There are, of course, more potential stumbling blocks - why not share them below?