Advice for Passing Level III - from a 3-time taker!
I have lurked on AF for a while and want to caputure some additional information for those who will be taking the Level III exam next June. I’ve looked at a lot of advice given about what to study and even how to study, and I think there is too much emphasis on tactics, such as which prep providers to use and th volume of studying required, but not enough about developing a comprehensive strategy.
For some personal history, it took me three tries to pass LIII. This level of the exam is different than L1 and L2. It’s one thing to say this, but to understand it fully took me a few tries. In 2010 and 2011 I failed with band 4 and band 3, respectively. This year I did fairly well and passed.
Here is my take on what it takes to pass.
You need to acheive complete mastery of a sufficient number of exam components to pass so that on exam date you can demonstrate a knowledge of the topics you will be tested on. Before I get into that, a couple of quick points:
– No one cares how MUCH you study. What ultimately matters is whether you can demonstrate an nderstanding the key topics that will be tested on the exam, which is a factor of HOW you study. This is a difficult premise for someone to accept when retaking the exam, because it requires the person to realize that a mistake has been made and a tremendous amount of time has been wasted.
– The CFA exam is what it is. The CFA is not on trial here, you are. Tens of thousands of individuals get their charters each year, so clearly it is possible to pass the exam. You just have to know how.
Note that none of the information below is taken from any particular exam, but is a general impression of the types of questions that are asked, which you can obtain from past AM sessions and mock exams. This same post could have been written by someone who has never taken LIII.
The most important piece of advice I’d like to impart is that you absolutely have to understand how the exam is structured in order to pass. Some call this “gaming” the exam. You can call it what you want, but the end result is the same: you need to demonstrate sufficient knowledge of a particular topic area to pass.
– CFAI will not randomly sample questions from each study session in the curriculum. Instead, the questions are carefully crafted to probe how well you understand the material. And this means that you can expect the questions on the exam to be MUCH harder than the average question for that particular study session in the curriculum. Here is an example from the Ethics section. You should not expect to be asked whether it is a violation to take someone else’s model, modify it slightly, and publish it as your own. 99% of the candidates would get this question right. Instead, you should expect to be asked whether it’s a violation for someone to discuss material non-public information in a setting when other employees might overhear him, and then whether announcing the information on an analyst call makes it public information. That is not an obvious answer and the only way to know it is to have thoroughly read the curriculum and internalized the knowledge.
– As an extension of the above, you could score 80%+ on various mock exams and EOC questions but still completely fail the Ethics section on the exam. Why? Because the 80% of the material that you do know cold is not where the exam questions will come from. This is why a lot of the Schweser and Qbank practice questions are either worthless or will give you a false hope of success.
– It is better to have complete mastery of 14 out of 18 study sessions and virtually no knowledge of the other four sessions, rather than have an okay/pretty good understanding of all 18 sessions. In the first case, you’ll ace the topic areas that you do know and bomb the ones you don’t, and will likely pass. In the second case, you’ll fail most of the topic areas and you won’t pass.
– 250 hours of studying is plenty for you to pass. You just need to be smart about how you do it and you need to make these hours count. You need to think about your time as a currency that you have to invest for maximum yield. Sure, we would all love to dedicate 750 hours to passing the exam and learn every minute detail of the curriculum. But that won’t happen because most of us have jobs, families, and hobbies, so you need to be judicious.
– Evaluate your own strengths and interests. I find the Ethics section fun and I like Equities, Individual Portfolio Management, and some aspects of Fixed Income analysis. I don’t care much for GIPS, commodities, and I never liked derivatives (the math is opaque and the minutiae of portfolio adjustments with options just seem really boring to me, but to each his own). So, right there, I already know where I’ll get the highest rate of return on my time. If I study the sections that interest me, I’ll be in a good mood, I’ll engage the curriculum, and it will take me less time to gain mastery of these areas. I will enjoy it as much as one can enjoy studying. I will also continue to think about these topics when not studying, and that will reinforce these concepts. On the other hand, the areas that I don’t like I will find to be a chore, will have to take frequent brakes, will get frustrated, and no matter how much I study I probably won’t ever be fully comfortable with them.
– Translate your strengths and interests into a study strategy. In addition to the areas that interest me, I would pick a few more areas that I felt I could master sufficiently to give myself a chance of passing. This past year, I gave up on GIPS and derivatives completely. I skimmed both of these sections on the off-chance that I’d find something easy to remember or interesting. But I knew that there was just way too much to learn in both sections and too much math in the derivatives section to be able to master it completely. My fear was that I would get killed studying for these sections and still not ace these sections. I accepted that if these topics showed up on the exam, I would be guessing and would most likely fail this portion. Instead, I focused on the other areas that weren’t my favorites but were still likely to be well-represented on the exam. I then studied hard to make sure I understood these areas as completely as possible.
– Spend most of your time reading and taking detailed notes of the CFAI books. Take your time with each chapter. Read each study session carefully and make sure you can describe what you just learned in your words by putting it into notes. Then, create a separate study question out of the material you just learned and record it on a separate sheet of paper. Example: have in your notes a description of what the Yardeni model is and then record a few questions that you might be asked about it. In the Ethics section, I studied from a 15-page document that was a collection of questions and answers about all the possible things that could be asked. If I came across an EOC question I didn’t know, I added the answer to the list.
– Leave the EOC questions for the end of each chapter, after you truly feel like you have mastered a particular reading. These are your out-of-sample data points, which will allow you to test how well you understand the reading and can apply the knowledge to situations you haven’t seen.
Be fair to yourself when doing these problems, don’t look back at your notes while doing them. Practice the problems you get wrong over and over until you know them.
– Speed is of the essence. The exam should be a sampling of concepts and questions you have seen before. You will not have time to think about a concept and reason it through on the exam. You’ll have to look at the material, reference what you have learned previously, and write it down or pick the right answer. If you are asked to list three characteristics of a suitable benchmark, you need to be able to list these out quickly.
I am sure there are other things that one could think of but this is all I have for now.
Good luck to everyone.