With barely a week to go, candidates appearing for the tough Chartered Financial Analyst (CFA) exam are likely to be jittery. Pass rate statistics for the three level exams are grim — 38 per cent, 42 per cent and 52 per cent for levels one, two and three, respectively, for the June 2012 exam. This is in spite of the fact that most exam takers have prior finance education and work experience.
“CFA is a very rigorous course”, says Anand Krishnakumar CFA, MBA ACA, Co-founder and Principal at ArkCap Financial Advisors LLP, “It tests you right from the basic fundamentals to the practical everyday complexities.”
So what does it take to ace the exam? As someone who passed the three levels in a span of two-and-a-half years, I can highlight three key aspects.
Master the material
It may seem redundant to advise that the candidates must learn the study material. But this obvious requirement is often overlooked by many. Skimming through condensed material from friends or test preparation providers may work well for a select few, especially at level one and sometimes at level two. It may come to haunt you at level three where mastery of fundamentals boosts one’s confidence and chances of clearing the exam.
I recommend studying the long, detailed, well-selected and thoughtfully presented material from the CFA Institute. Creating one’s own cheat sheet with formulae and important concepts also helps to reinforce learning.
Do practice tests
Along with knowing the topics, the exam requires the ability to apply the concepts to situations in the item set. Doing a lot of problems from question banks, sample exams and attempting questions at the end of the chapter reinforces concepts in the testable topics. Repeated practice also increases thinking and answering skills and speed, as it familiarises you with the exam format.
For level three, doing written essay exams help immensely, as most of us may have lost touch with pen and paper writing. Being able to write the salient points concisely requires thought and doing it quickly needs repeated practise.
Test-taking focus
Even while putting effort into studying the financial concepts and practising, many candidates under-prepare for the ethics portion. One may consider it too easy to put any effort or too subjective to master. By putting your heart into appreciating the principles of ethics covered, you can reap the rewards not just in the three levels of exams, but also in your life-long career.
Time management
You also need to focus on planning your time. The exam has a mix of math and qualitative questions. The numerical questions are typically straight forward and one can arrive at the right answer without ambiguity. The theory questions tend to be conceptual and mistakes are more likely as the wrong option tends to look correct. At level one, you can consider doing the math problems first to ensure a base score before attempting theory questions.
Running out of time happens a lot at levels two and three, as the item sets are long. Underlining important data while reading the passage saves times when one returns to answer the questions. For the essay portion of level three, spending too much time on any one question is a ‘no-no’ and setting time limits is a must.
Prior planning
Before the exam, check the test centre and know the route to get there. Keep your ID ready, ensure your calculator has new batteries and that you have pencil, pen and erasures. On the night before the exam, get a good night’s sleep.
Successful charter holders
Worldwide, the number of charters awarded annually has more than doubled in the last five years, from 4,618 in 2008 to 10,903 in 2012. This should cheer every one of the approximately 20,000 candidates from India, who are possibly working full time and putting in long hours for the exam.
“CFA is about investing in yourself, your career and your integrity,” says Biharilal Deora CFA, FCA, CIPM, a senior investment professional, “It's about committing to uphold the highest ethical standards for your life.”
