One of the questions we hear most frequently from our CFA candidates is, ‘Which CFA Exam Level is the most difficult?” Each level presents its challenges, so determining which is the most difficult is somewhat subjective. While the CFA Level 1 and 2 Exam topics are the same, Level 1 covers a broader range of subjects but at the fundamental level, whereas Level 2 covers a narrower range of subjects but more in-depth.
Since every candidate is different, each CFA Exam experience will be unique for each candidate. CFA Institute emphasizes various areas tested in each exam, so the difficulty level (to some extent) depends on the particular test a candidate takes. For instance, Level 2 for Year ‘X’ may objectively be a more difficult exam than Level 1 for the same year simply based on how the test is administered. The situation may be different in the following year.
We have put together some generalized information about each CFA Exam level below to help candidates decide which exam they might find to be most challenging to them.
The Level 1 CFA Exam features questions over memorized definitions and formulas. This exam is really about information recall. While everyone has their strengths and weaknesses, this exam statistically has the lowest pass rate at around 41% or 42%. Technically, one could argue that this level is the hardest CFA Exam, especially if a candidate does not have a solid background or any work experience in finance or a related field. However, it is also the exam that has the highest number of candidates sitting for it. The good news is that the concepts found in Level 1 tend not to be covered in as much detail, so they can be easier to learn.
After Level 1, the exams move away from straightforward memorization questions and into the application of information. Those candidates who make it past the Level 1 CFA Exam usually have a strong command of the exam material. So, just because it has the lowest pass rate does not necessarily mean it is the most challenging exam.
Once candidates have completed the Level 1 Exam, they move onto the Level 2 CFA Exam. There is quite an information spread between Level 1 and Level 2 CFA Exams. The main difference between Level 1 and Level 2 CFA Exams are the difficulty of concepts for each. While Level 1 requires knowledge of basic concepts, Level 2 concepts are covered more rigorously.
The Level 2 exam assesses one’s ability to apply Level 1 knowledge to real-world situations, presenting 20 different item sets based on vignettes, scenarios illustrated with data, tables, financial statements, and textual descriptions. Each item set will contain between four and six multiple-choice questions relating to the information presented. At this point, memorization is no longer enough to pass the exam. Instead, a deep understanding of the principles is necessary to pass this level successfully. It would be safe to generalize that most CFA charterholders would call Level 2 the hardest of the CFA Exams. However, with patience, dedication, and practice, candidates can conquer the Level 2 Exam.
The Level 3 CFA Exam contains two types of questions: the morning session consists of eight to eleven “constructed response” short-answer, open-ended questions based on a fact pattern. In the afternoon session, candidates face 10 item sets with multiple-choice questions constructed and presented similarly to those in Level 2. The constructed response questions test candidates’ understanding of the topics and ability to explain the reasoning.
It is a good idea to thoroughly understand the theories and topics associated with the Level 3 CFA Exam to help implement problem-solving skills when studying for the exam. Something else to note is that the exam assesses portfolio management skills and a candidate’s ability to solve problems that might arise in real-world applications. Many CFA charterholders consider the Level 3 CFA Exam the most difficult because of the time and thought needed to answer the constructed responses successfully.
While the typical Level 3 CFA Exam pass rates are the highest of the CFA Exams, only around 56% of CFA candidates pass the exam. Candidates should not take passing the Level 2 Exam to mean that the Level 3 Exam will be easier. For many, the Level 3 CFA Exam may be the most difficult because of the constructed response section’s open-ended structure.
The Key to Passing the Hardest CFA Exam Level
No matter which CFA Level Exam you are taking, the key to successfully passing the exam is preparing with an effective study plan. Passing any CFA Exam level requires a structured study plan to balance career, school, and/or personal life. Regardless of a candidate’s particular situation, remaining diligent in accounting for any extra time to study is critical.
Many candidates make the mistake of thinking they can study after work or during the weekend without first sitting down and making a list of all their activities from the moment they wake up until the time they go to sleep. Without seeing and adhering to a tangible schedule, it is difficult to hold oneself accountable for the hours needed to pass the CFA Exam.
So, how does one get started? Start by writing down a daily schedule of activities. List each activity that you accomplish on a typical day, including weekends. Once you have captured an entire week of priorities and obligations, it is easier to integrate CFA Exam study sessions. Planning out study sessions also helps with sticking to a schedule.
Once you have created a schedule or plan, consider how many weeks or months you should study for each CFA Exam level. Because every CFA candidate’s schedule is different, it is impossible to say how long an individual needs to study and adequately prepare for the exam. CFA Institute states:
On average, a typical candidate takes 4–5 years to pass all three exams. Successful candidates report spending about 300 hours studying for each level, ranging from 303 hours for the CFA Level I exam to 328 for the CFA Level II exam and to 344 for the CFA Level III exam.
However, do not let these numbers discourage you from working towards your CFA goals. It is crucial to keep in mind that all CFA Candidates are different, and, depending on your experience, existing knowledge base, and educational history, you may need more or less time on each or all sections. That is normal, and it is much better to be realistic about your own unique needs instead of relying on what your colleagues or fellow candidates have accomplished with their own CFA Exam studies.
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