The headline numbers are inescapable, terrifying, unbelievable: the pass rate for CFA® Level I was 25% for the May 2021 exam and 22% for the July 2021 exam. Historically, the pass rate has been in the low 40% range, which already seemed daunting to the hundreds of thousands of candidates enrolling in the CFA program. Given these pass rates, can anyone possibly expect to get through this program? Yes, you can, and here’s why.
The exam isn’t getting harder. CFA Institute has always maintained that their method of setting the minimum passing score consistently sets a benchmark of allowing a “minimally qualified candidate” to pass the exam. The exact details are not disclosed, but there is no reason to believe their methodology produces anything other than exams of similar difficulty for each exam administration. A candidate entering the program today can expect roughly the same challenge in passing the exam as a candidate from five, 10, or 15 years ago. The institute recently confirmed this in a video addressing the issue of the recent low pass rates.
So why are recent pass rates so low? Many professional exams have been disrupted by COVID-19, delaying enrollees for a few months. However, unlike other professional exam enrollees, CFA candidates have been disrupted since March 2020 when CFA Institute announced the cancelation of the June 2020 exams. Some candidates moved their enrollment to December 2020 only to be postponed again. In fact, most of the CFA candidates who sat for the May and July 2021 exams have been waiting a year to nearly 18 months to sit for the exam, having been postponed in some cases as many as three times. Through no fault of their own, these candidates were forced to constantly adjust their study plans in an attempt to retain knowledge over an increasingly uncertain period of time. Maintaining focus under these circumstances is a difficult proposition, and it is possible that many candidates didn’t do well because their study environments were suboptimal. CFA Institute’s own statements about the exam results seem to indicate this very scenario, but also imply that pass rates will normalize in the future as the last set of postponed candidates is slated to take their exams in November 2021.
After the historic low pass rates of May and July exams, we have been analyzing our own internal data on how candidates are scoring on Kaplan Schweser mock exams. This data indicates that candidates that have had their access to Schweser products extended due to exam deferment are scoring on average lower on mock exams than new candidates entering the program, supporting the CFAI conclusion. This is unlikely to be explained by a lack of ability and far more likely to be due to study burnout. Despite our efforts to support candidates with free Masterclasses, it has proven difficult for some candidates to retain focus and momentum in their studies given the disruptions in their study plans over this period.
Success starts with a structured plan. Studying for the CFA exam is and always has been a test of endurance and organization. The curriculum is huge, but the concepts can be learned. The key is to allow enough time to properly study the curriculum, stay engaged with the material, incorporate high levels of practice, and include time to review just before the exam. Successful candidates generally spend more than the often-cited 300 hours of study time. Some spend 400 or more hours preparing. How do you know if you have put in enough effort? When you are consistently scoring high enough on QBank quizzes and mock exams to ensure a margin of safety on the actual exam, you have done enough. That means you must practice (a lot) with questions throughout your study program so you can remediate weaknesses before you get to the final review month before the exam. How do you translate that into hours? It’s difficult. The best advice is to start with a minimum of 300 hours over a five- to six-month period, knowing it will likely take more time. Follow a structured study plan, focus on understanding the material, and test your knowledge. Don’t just count the hours you have put in.
The secret is getting expert help. Guidance from experts comes in many forms. The most basic is a structured study plan developed by an expert, but left to the candidate to follow. Knowing what to do and when to do it is absolutely essential for every CFA candidate as it is the foundation for success on the exam. But expert help can go beyond just a study plan. Generally, candidates are not experts in every topic covered. Therefore, each candidate has several knowledge gaps that can be filled through self-study, but can be more quickly and efficiently filled by participating in a class, intensive review, or ideally both. Help can also include access to experts who will answer questions through email, forums, or other media. Getting your specific questions answered as you progress is an extremely valuable tool to quickly grasp difficult topics that are holding you back. Not every candidate can join a class or email an expert, but passing the exam on the first attempt is all about stacking the deck in your favor by taking advantage of all resources available to you.
What should unsuccessful candidates do now? The CFA charter remains the most recognized and valuable designation in the global investment industry. While an unsuccessful attempt is demoralizing, the truth is most CFA charterholders failed at least one exam before completing the program. Because the charter is so respected, unsuccessful May and July 2021 candidates should seriously consider taking the exam again. They should analyze how they have been studying, adjust their study methods based on help from successful candidates and experts, fill knowledge gaps through additional practice and remediation, and aim for scores of at least 75% on mock exams. They already know a large portion of the material and, with some additional planning and expert help, they can pass the exam and take the next step toward becoming a CFA charterholder.
Derek Burkett, CFA, FRM, CAIA, is VP of Advanced Designations at Kaplan Schweser, the leading global provider of financial education for hundreds of thousands of students and business professionals around the world. Kaplan’s comprehensive learning strategy, known as The Kaplan Way, utilizes learning science in the instructional design of its educational tools and courses.
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