Why did pass rates drop dramatically around 2003?

Beyond the obvious that the test got harder.

was it mostly due to a major increase in breadth of knowledge required? or did they include more difficult concepts within previously required subjects? anyone know any specifics?

I’m asking b/c pass rates were extremely high back in the day. I know a few older managing directors who received them and seem to not realize how much more difficult the exams have gotten. But it’s actually hard to find out exactly how they changed the exam circa 2002-2003.


Did they open the exams up to new geographic regions?

I’m not sure of the specifics other than 2003 being the first year L1 was offered in both Jun & Dec (I believe). This could explain lower pass rates to some degree (the opportunity cost of being unprepared and failing is lower than when the exam was offered only once per year).

Doesn’t really explain decreasing rates in L2 & L3, though.

New geographic regions wouldn’t make a difference as pass rates are similar for NA, EU, and Asia

Two words. Revenue management.

I think the idea of revenue management might be at least partially right. In 2006 or 2007 they also extended teh amount of work ex required, which means there has been a trend for some time of trying to make the charter harder to obtain. It’s in CFAI’s interest to have the pass rates stay high until the charter catches on, at which point they should try to maintain some exclusivity. If it’s true that we have crossed that threshold, it means that to some extent the charter has become a commodity – I don’t know if I would quite THAT far, but it’s probably closer to that than we would all like to believe.

Just to add to the conversation and speculate…

I think the work requirement definitely has something to do with it, but doesn’t explain all of it. No matter how smart you are, all levels would be tough to pass on the first shot if you’re working till midnight every night.

My guess is that < 1990s, capital markets were just not nearly as sophisticated, which may be why pass rates were often > 70%

In the 90s, pass rates dropped to around 50-65%. I’m guessing that increased breadth of material was mostly responsible.

In the 00s to present, pass rates are often < 40%. My guess is that it’s a combination of increased breadth of knowledge and a higher raw score requirement to keep pass rates around a competitive range.

I’m not sure when Ethics became a part of the exam (or if it’s always been), but I’m sure it was partially responsible for the decline in pass rates. I’m guessing they made it a requirement (or at least made that section much harder) around the Spitzer crusade, which is around the time pass rates declined.

@Bromion - I don’t believe it’s commoditized b/c the absolute number of people in this world with the charter is still very low relative to other advanced degrees.

I know 2 MDs from baby boomer generation who seem to think CFA was really easy. It probably actually was for them. So in terms of prestige, anyone from that generation would probably not be impressed by someone with the charter. But those who received it post 2002-2003, clearly knows how challenging it is. I think going forward as more post-2003 charterholders receive positions of power, receiving a charter will gain in influence and become a greater factor in increasing job prospects, promotion, compensation, etc…

The absolute number doesn’t matter. It’s the number relative to the number of good jobs that matters. I don’t have any data. But if there are 100,000 charterholders, I doubt there are more than 100,000 really good front office jobs in finance (which is what people want). A lot of those jobs are already filled with non-charterholders. So my point is, the charter already doesn’t give you a ticket as is, and the CFAI knows that, so they are trying to preserve value. It’s pretty close to a commodity.

No one really cares if you got it post-2003. I have never heard that mentioned. Sorry, but the old people who think it was easy are the kind of people making the decisions to hire you or not.

Also, it’s not like CFA is a really impressive thing nowadays either. It’s easy to get compared to other credentials, like job experience or MBA from good schools.

I believe it was right around 2003 that the number of candidates really exploded. More people means more dumb people. That, and revenue management.

100% i think that since 2003 cfa became more and more popular, and it attracted candidates even from other majors than finance. I don’t believe that it has anything to do with money mngmt.

All the people that I know who got the charter pre-2000 obtained it mid-career. In the past it was something that people got after they already had considerable experience.

I think this was a gradual progression over the past few decades, but it seems like it is harder than ever to break into finance these days so tons of people are reaching for qualifications. Today, the charter is something that people get so that they can break into finance, hence the lower pass rates.

Because the CFAI realized they could make a hell of a lot more money if they failed 65% of candidates at each level, knowing that we’ll just keep retaking than passing 65% each level. It’s really just a $$ issue and it’s that simple. Also agreed with above anyone who got a CFA before '00 should really be met with skepticism, as the test back then was a joke.

I know it’s a violation to say “I’m better than him because my CFA charter was obtained more recently” But I have seen the CFA textbooks from the past. The earliest curriculum was like 2 books, and equities ended at the dividend discount model lol

The only argument you can make in favor of the older guy is: well he’s got years of work experience. which is true, I don’t disagree there. But in terms of exam difficulty, it was a joke back then.

I would not be surprised AT ALL, if the CFAI’s goal was to let everyone and their pet dog pass L1, and then clamp down hard at L2 and L3. Why?

  • a lot more revenue since people will now take L2 thinking L1 was a cakewalk

  • raises huge brand awareness very quickly

  • still keeping the charter elite by making it hard at 2 and 3

Except L1 isn’t easy either. When I took it, it had a 34% pass rate…

By my reckoning it is all about preserving (and actually enhancing) the value of the charter. Think about it. The entire process is administered by CFA’s who have a vested interest in limiting the pool. I think that is far more important than the revenue question.

Personally I think the revenue stream is a much lesser consideration.

Actually I think many of the more complex topics / securities / concepts came on board by the end of the 80’s / early 90’s and, while of course, new topics have emerged since then I do not think that greater market topic breadth or complexity is really a factor - except the degree to which they test more complex matters.

To me whats really interesting is the low test scores on Level III. If you get through LI and especially LII you are not a pretender and there is no reason you can not master the LIII curriculum - in many respects the most intuitive and interesting of the entire program - but topics like behavioral finance and ethics and portfolio management and such have enough grey (as in nebulous) matter in them to make the correct answer elusive.

Of course a charterholder will tell you that the “real world” is grey and nebulous and I would not disagree. I do know that if this exam actually conferred a professional license they would not get away with some of the testing practices they do!

Having said that it is truly a great program and at this stage in my career my pursuit is less about attainment of the feather but about the remarkable learning experience it represents. To those just starting out with a long runway before them I certainly understand the incentive and so long as there are legions smart and energetic folks willing to undertake the challenge it will remain a very competitive and noble pursuit! Good luck folks.

You probably didn’t read my post. Because my theory allows CFAI to gain huge revenue AND prevent dilution of the charter. A huge double hit

And L1’s pass rate is very low because you get a lot of people who don’t take it seriously walking in, not because it is difficult