A Brief Introduction to the CFA Exam

As pension programs shift from traditional company-sponsored plans to consumer-driven programs, more people than ever are interested in solid investment opportunities.  Therefore, it has become necessary to ensure that advisors in this field are qualified to give out this type of information.  As a result, the Chartered Financial Analyst (CFA) exam is designed to test everything from the application of economics principles to advanced statistical methods.   

Overview of Education, Experience, and Fees

CFA exams are broken down into three levels.  Typically, you'll take one exam each year.  During these intervals, you'll either need to pursue additional course work or gain hands on experience helping individuals manage their investment portfolios.  In addition, you'll need to pay a test administration fee for each exam.  As of 2008, the cost of the different segments of the CFA exam range from $600-930 for each exam.

CFA Level 1 Exam

The first portion of the CFA exam is all multiple choice questions focusing on ethics and professional standards, investment tools and asset classes.  The exam is given twice a year, and is still administered on paper.  Typically, you'll be able to take this exam in June and December.  Even though Level 1 is the easiest of the three exams, almost 50% of test takers fail it. 

CFA Level 2 Exam

In the second exam of the series, you'll be given a number of case studies to read, relating to financial reporting and analysis, equity investments and other topics.  From there, you'll need to answer a battery of questions that rely on this information.  Just like with Level 1, this exam is given all in one day, and is administered on paper.  However, this section is only administered during the month of June and is even more difficult that Level 1.  In past years, as many as 60% of test takers have failed to pass the exam. 

CFA Level 3 Exam

The third portion of the CFA exam is the most difficult, as it focuses almost exclusively on the different asset classes available.  As with the CFA Level 2 exam, it is only administered in June.  This section of the exam is broken down into two parts.  First, you'll need to provide short answers to a variety of questions.  You may also be given a series of multiple choice questions in the second portion of the exam.  As with the first two levels of the exam, only 50% of test takers pass this section.

Even though the CFA exams are extremely difficult to pass, they are graded on something of a curve, meaning that the percentage of questions that must be answered correctly in order to pass is only determined after the exam has been taken.  While the examiners try to maintain this level at approximately 70%, you may find that it fluctuates from year to year, depending on how challenging the questions are.  

With this in mind, you should make every effort to study hard and do your best on the exams.  As you might expect, once you've gained these credentials, you may be able to command a much higher salary, as well as work with in a more prestigious setting.  In addition, as this field becomes more popular, it may become mandatory to pass this exam – so consider signing up for the exam immediately if you plan to enter this field.