What Exactly are the CFA Exam and Charter?

Dec 12, 2022

min read

The CFA (Chartered Financial Analyst) charter is primarily a postgraduate professional qualification that verifies financial analysts' competence and ethics. According to the CFA Institute, which provides the charter, it is the world's most regarded and recognized investment management qualification. Earning the CFA charter will provide you with extensive expertise in financial analysis, asset management, and ethics.

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What Exactly is a CFA Charterholder?

The CFA Institute maintains a global network of approximately 167,000 investment professionals and societies worldwide. In at least 30 nations and territories, regulators, colleges, and certification programs recognize the CFA charter. By holding the charter and joining a CFA Society, you will obtain unrivaled career resources and relationships, as well as access to employment all around the world that demand a CFA charter or candidacy.

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Requirements for Becoming a CFA Charterholder

Achieve the required work and/or educational experience. Before registering for the CFA level I exam, you need to have completed a bachelor’s degree, have two years remaining in your undergraduate studies, or have 4,000 hours years of combined work experience and/or undergraduate education.
Take the exams. Although passing even just Level I of the CFA exam is an impressive addition to your resume, you need to pass all three to become a CFA charterholder.
Submit reference letters. Submit two to three professional reference letters (two if one is an active member of the local CFA society to which you’re applying, three if not). Have a valid international passport and live in a participating country.
Complete your application to become a CFA charterholder. The CFA charterholder application requires that you have qualifying work experience in addition to your professional references.

Recent CFA Program Eligibility Changes

What is the CFA Exam?

The CFA exam is made up of three levels, each designed to test your knowledge of different investment tools and skills. You should expect to spend approximately 300 hours studying for each level. Candidates typically take between 4 and 5 years to pass all three levels of the CFA exam.

CFA Exam Topics

The Learning Outcome Statements (LOS) and core concepts on the CFA exams are built from the Candidate Body of Knowledge™, which is developed by the CFA Institute. While the curriculum is updated every exam cycle, all three levels of the CFA exam focus on the same 10 topic areas. Exam weights vary by level and can change slightly from year-to-year. The following topic areas are covered:

Ethical and Professional Standards
Quantitative Methods
Economics
Financial Statement Analysis
Corporate Issuers
Equity Investments
Fixed Income
Derivatives
Alternative Investments
Portfolio Management and Wealth Planning

The CFA curriculum is comprehensive and challenging even for experienced financial professionals. For candidates just getting introduced to the skills required of financial professionals, financial modeling courses can help enhance excel skills and prepare individuals for a shift into a finance or investment-related career.

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Common Roles and Industries for CFA Charterholders

Many of the top financial firms employ CFA charterholders because they are seen as having attained the “gold standard” of the industry. Holding the CFA charter demonstrates mastery of a broad range of practical portfolio management and advanced investment analysis skills.

CFA charterholders guide businesses and individuals who are making investment decisions. Assessing the performance of stocks, bonds, and other types of investments, they work in banks, pension funds, insurance companies, and other businesses. Some of the most common roles for CFA charterholders include:

Portfolio managers are in charge of a fund or group of funds, working with analysts, researchers, and clients to stay current on the markets.
Research analysts review data and market movements to make future predictions.
Risk managers help their company anticipate changes and avoid potential financial pitfalls.
Financial advisors typically help clients with investments, tax laws, and insurance product selection decisions.

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The CFA Levels Explained

What is the CFA Level I Exam?

The CFA Level I exam is a computer-based, multiple-choice test that will take you approximately 4.5 hours to complete (broken into two 2.25-hour sections with an optional break in between). The CFA Level I exam is offered four times a year so find a CFA exam date that works for you.

The pass rates for the Level I exam are the lowest of the three levels and you must meet certain qualifications in order to take the CFA Level I exam.

CFA Level I Exam Format

Level I of the CFA exam tests knowledge and comprehension. The focus is on investment tools and ethical and professional standards. The Level I curriculum mainly focuses on recalling formulas and definitions from memory, and most of the material is a straightforward introduction to the concepts covered.

The Level I CFA exam covers 19 study sessions, 57 readings, and 10 topics.

What is the CFA Level II Exam?

The CFA Level II exam is a computer-based, 4.5-hour exam similar to Level I in administration method and timing, but the questions on the CFA Level II exam are vignette-based, not free-standing. In 2022, the CFA Level II exam will be offered three times. The pass rate for the Level II exam historically hovers between 45% and 46% depending on the timeframe.

That means that even though fewer candidates sat for the Level II exam than Level I and less than half of them passed. It is generally believed by CFA charterholders that Level II is the hardest level.

CFA Level II Exam Format

Level II of the CFA exam tests application and analysis with a focus on asset valuation. Unlike Level I, Level II focuses on how you apply standards to situations that analysts face.

What is the CFA Level III Exam?

The CFA Level III exam is a computer-based, 4.5-hour exam, but the format is significantly different from Levels I and II. The CFA Level III exam requires you to demonstrate the same skills as Level II, but you also have to show that you can make judgment calls and that you can write about them. The exam is also more subjective than Level II.

CFA Level III Exam Format

The constructed-response section of the Level III CFA exam is Level III’s biggest difference from Level II and Level I. You must answer open-ended questions on a blank piece of paper without any answers to choose from.

The CFA Level III exam has 16 study sessions and 38 readings, and the exam only covers seven topics. It excludes Financial Statement Analysis, Quantitative Methods, and Corporate Issuers.

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CFA Exam Pass Rates & Exam Results

Everyone who takes a CFA exam is provided with a “pass” or “did not pass” exam result and a summary of performance in each topic area. Level I and II results are released within 8-10 weeks of the exam date and Level III within 10 weeks.

To pass, a candidate needs to meet the minimum passing score (MPS), which is never given and varies year to year, which can make it difficult to interpret the results of your CFA exam. Candidates will receive an indicator of the score range for each topic area instead (<50%, 51–70%, >70%), along with their final result. Level III candidates are provided with only two topic area summaries: one reflecting the essay portion and one reflecting the item set portion.

Individuals who do not pass the exam are also given more information about their performance relative to all other candidates who did not pass. All candidates who did not pass are divided into 10 equal score bands, which shows how well an individual score compares with the overall scores of others who did not pass.

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