When you take the chartered financial analyst exams, the odds of passing are immediately stacked against you. According to candidate examination results compiled by the CFA Institute and averaged from 1963 to the first half of 2014, just 46 percent of individuals have passed all three exam levels. Accounting for just the past 10 years, that number falls to 42 percent.
The CFA exam is the test all CFA charterholders must complete to achieve the designation. It's considered the gold standard in the investment analysis industry, and one of the greatest distinctions a financial professional can attain. Needless to say, the CFA exam is one of the most daunting tests you may take.
Levels I, II and III are available to take on the first Saturday in June every year, but if you haven't started studying, don't mark your calendar just yet. Many professionals suggest studying for 18 months before taking the exam. In light of this advice, here are three reasons why getting your masters of finance degree may be the best way to pass the CFA.
Know-How to Work Until Completion
The CFA Institute noted that 46 percent of test takers pass all three exam levels, but this leaves out a crucial detail noted by Wall Street Mojo — not everyone is able to take all three portions of the exam. While progressing from section to section, the number of test-takers drops dramatically, as those that fail do not proceed to further test periods. In other words, roughly half of the amount of test takers may proceed from level I to level II and just half of that number may also pass the level III exam.
According to the statistics, there were 1,344,907 total CFA candidates from 2005 to the 2014A exam. Of those takers, only 195,815 managed to pass the level III exam to become a charterholder. That shows a completion rate of roughly 14.6 percent.
FinanceResume.net attributes this small window of passing test takers to the low prerequisite for entry. The only thing necessary to take the level I exam is a bachelor's degree. This encourages a wide variety of applicants with less experience and studying to take the test. However, after failing to complete level I, these applicants do not advance to the next levels and are then not included in further pass and fail statistics for other exams.
Applying for CFA examinations with only a bachelor's degree and little necessary study may be a poor investment. Graduate school courses, like those offered in the masters of finance degree program, can help you learn directly about material on the exam and increase your odds of completing all three levels.
"We have numerous students joining our program who are interested in CFA certification," Professor Claude Cicchetti of Bentley University, who is also incoming Program Director for Bentley's masters in finance degree, said. "It works out well for those students because our required courses track very closely to CFA topics, and we can direct them toward Finance electives like Equity Valuation, Derivatives, Fixed-Income and Advanced Portfolio Theory, which are very important in all three levels of the CFA exam."
Too often test takers get lost in creating big goals and forget to take baby steps. Passing the CFA exam is an admirable goal, but the work to achieve it takes extreme endurance and dedication. According to the CFA Institute, candidates report studying for 300 hours per level to prepare for each exam.
A Dedicated Study Program
To be sure, a great deal of studying is absolutely necessary for passing the exams. Wall Street Mojo suggested not applying or even withdrawing if you haven't dedicated at least 100 hours to studying, and even this is a risky move.
Such an extreme amount of studying means you can't just crack open a book and hope for the best. Designing an appropriate study and practice schedule is half the battle. Luckily, getting your masters of finance degree means regularly attending classes, working on projects and learning through a carefully designed lesson plan. The baby steps are all mapped out for you — you just need to follow them
Access to Learning Materials
Of course, before you put together a study regiment of your own, you'll have to find the appropriate study materials. The CFA Institute gives study tools to registered candidates, but this requires paying a fee to take a specific exams. That means you will be instantly racing against the clock to study independently over the course of just a few months.
On the other hand, taking masters of finance degree courses gives students full access to a campus library, online resources and relevant coursework without leaving you at the mercy of a clock ticking down to your inevitable exam time. Of course, you will have school courses and other exams to study for, but at the end of your journey — if you achieve passing grades — you will earn a masters in finance degree, making for a beneficial investment while you study for the CFA.
- Guidance from Professionals
Finally, no amount of independent research can make up for advice from accomplished professionals. Universities like Bentley actively work to put students in touch with people who are already CFA charterholders as well as financial professionals with a wealth of experience in the industry. Programs are hosted that cater specifically to aspiring portfolio managers, investment bankers, and more that bring students and pros together to both give advice about the CFA and help steer you in the right direction after attaining the distinction. Moreover, these events can be a valuable networking experience if you want to jumpstart your career after graduation.