The Chartered Financial Analyst or in short the CFA designation is one of the most prestigious investment credentials in the world. It is awarded by the CFA Institute and was first introduced in the year 1963. It is a graduate level program and a candidate is required to pass three 6-hour exams. The three exams are commonly referred to as CFA Level I, II, and III. The candidate is awarded the CFA designation, once he has passed all the three exams and has completed other professional requirements. Due to the 48 month approved work experience requirement, it takes a minimum of four years to be in position to receive the charterholder designation. It is not uncommon for a CFA charterholder to have failed one exam along the way, so candidates need to stay persistent.
Enrollment
To enroll in the CFA program, the prospective candidate must have a bachelor's degree or should be in the final year of the bachelor's degree program. Alternatively a prospective candidate could have a minimum of 4 years' related work experience, or a combination of studies and work experience that equals 4 years.
The CFA Curriculum
For each of the levels, the CFA curriculum tests the students' knowledge on 10 key areas, namely:
Ethics and Professional Standards
Quantitative Methods
Economics
Financial Reporting and Analysis
Corporate Finance
Equity Valuation
Fixed Income
Alternative Assets
Derivatives
Portfolio Management
Even though the topics are same, the focus shifts from theory to application, as we move up the level.
Level I Exam
The Level I CFA exam consists of 240 multiple choice questions to be completed in a six-hour time frame (one three-hour morning session and one three-hour afternoon session).
The Level I education program and exam heavily tests financial accounting concepts. Even though all the 10 topics listed above are tested, the importance is given to financial reporting and asset valuation. The Level I exam commonly has the lowest pass rate among all the three exams.
Level II Exam
The Level II CFA exam consists of 20 item sets. The exam is conducted in two sessions, morning and afternoon, with 10 item sets in each session. In Level II exam, the same topics as Level I are covered.
Level III Exam
The Level III CFA exam contains essay type questions and item sets. The essay format is in the morning session and item sets, ten sets consisting of six questions each, are in the afternoon session. The Level III exam has a strong focus on Portfolio Management. Concepts learned earlier in the program are applied in a portfolio setting.
Registering and Taking the Exams
CFA exams are conducted in major cities around the world. The Level I exam is conducted in June and December, while the Level II and Level III exams are conducted only in June. You can take the exam multiple times if you fail. The fees for enrolling in the program and taking the exams are substantial.
Preparing for the Exam
Once you register for the exam you receive the curriculum books from the CFA institute. Each exam question is developed exclusively from the curriculum, so it is important for you to master the contents of the syllabus. You can prepare for the exam using the official study books from CFA Institute or you can buy third-party study notes. Finance Train provides a CFA Level II Study Supplement. The study supplement is made up of 21 weekly modules that help you encapsulate the most critical elements of the exam that candidates cannot afford to miss. It can be studied in tandem with CFAI's official curriculum, practice problems, and practice examinations, and will help candidates reinforce concepts and formulas to obtain a passing score.
Getting the Designation
After you have passed the exams and have verified 48 months of financial analysis work experience in a decision-making capacity with CFAI, you will become eligible to receive the designation.
You can read more about the CFA Level II Study Supplement at Finance Train.
Sam is an expert in finance with over 10 years of experience. He has completed his CFA Charter and is now helping others pass the CFA exams. He currently works as a Financial Analyst with a multinational firm.
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