Obtaining the Chartered Financial Analyst (CFA) designation is no small feat…

Yahoo Finance ranks it as Wall Street’s toughest test.

The few candidates that pass the rigorous test show a deep understanding of financial markets.

That’s why the world’s top financial firms seek out CFA members.

The CFA Institute also holds candidates and members to high ethical standards. They’re obligated to protect the integrity of capital markets.

After completing the first two levels, I have great respect for CFA chartholders. I hope to join their ranks after taking the third exam next year.

Update 2020: Last year I passed the final CFA exam. And when studying I shared some of my notes. To get an idea of what’s on the exam, you can check out my CFA level 3 notes.

And here’s the core study material for all three exams…

It’s a challenging path but I recommend it…

CFA Exams and Pass Rates

There are three exams and the CFA Institute offers them in June…

Candidates must wait a year between taking them, with the exception of level one. The first exam is available in both June and December.

It’s a long waiting game and the pass rates aren’t great…

Over 150,000 candidates took the exams in June 2017. Here are the average pass rates on each exam…

• Level 1: 43% pass rate
• Level 2: 47% pass rate
• Level 3: 54% pass rate

Based on these 2017 pass rates, the chance of passing all three levels on the first attempt is below 11%. Although, you can boost your chances of passing with the right study plan.

Update 2020: The number of CFA candidates has climbed. In 2018, just over 227,000 people registered. Then in 2019, more than 250,000 people registered. And for the pass rates, they haven’t changed much.

Topics and Studying

The exam for each level on test day is six hours. There’s a morning and afternoon session with a lunch break in between.

The first two exams are all multiple choice questions. There are 240 questions on level one and 120 questions on level two. Although, level two is vignette style. The third exam is a little different. The morning section has essay questions and multiple choice in the afternoon.

Each exam has different weights but some of the major topics include:

• Alternative Investments
• Derivatives
• Economics
• Equities
• Ethics and Professional Standards
• Financial Reporting and Analysis
• Fixed Income
• Portfolio Management and Wealth Planning
• Quantitative Methods

It’s a huge amount of material and a six hour exam only covers a fraction of it. Each level has over 2,000 pages of core study material. The tough part is knowing what to focus on.

Study Tip: If you’re short on study time, avoid the lower weighted conceptually challenging topics (like economics).

If you’re going to take the exams, start studying sooner than later. Start chipping away at a few pages each day.

Working through 10 new pages some days took over an hour. Some of the material is dense.

It’s hard to stay motivated so I also recommend finding a study group or partner. I found a friend at Morgan Stanley to study with on level two. We both passed and ended up studying for level three together.

Update 2020: My friend also passed the exam and has since left Morgan Stanley to work for a smaller investment bank.

Final CFA Notes

A few online articles rank the CFA exam as one of the top 10 hardest in the world.

That’s a bit steep in my mind… but it’s no walk in the park either. The exam requires relentless dedication and persistence to pass.

If you’re interested in learning more, comment below.

Good luck to fellow and future candidates!

Brian Kehm

P.S. Psychology is another underlying part of the exams. Here’s some unique fake smile psychology. Learning how our bodies work can improve our lives in many ways.