As you progress through the levels of the CFA Exams, there is a certain evolution in the testing methodology.
At the first level, you know exactly how many multiple choice questions from each subject that will be asked. These questions all stand alone; there is zero relation from one question to the next. This is nice because the curriculum is so vast, that it is impossible to know everything. If you are weak on credit default swaps, you are unlikely to be severely punished for your shortcomings. Worst case scenario is that you may see only a few questions on credit default swaps. You may even see zero questions on credit default swaps. Derivatives only make up 5% of the CFA Level 1 Exam, which is exactly twelve questions in total. The test format of the CFA Level 1 Exam is actually very familiar to anyone who has ever sat for any type of standardized testing.
At the second level, the questions are still multiple choice, but the item set concept is introduced. Each item set consists of a vignette, a short narrative which may also contain charts, tables or other pertinent information, followed by six multiple choice questions. Additionally, you are no longer certain on the exact number of item sets from each subject. You are now given a range. For example, equity will have at least three item sets, and no more than five. If you are still weak on credit default swaps, you are at greater risk now than you were at level 1. If an item set shows up concerning credit default swaps, you will now have six questions focused on your Achilles heel. In a sense, you are now playing Russian roulette with any weaknesses on any subjects you may have. This is probably why it is common to hear that the CFA Level 2 Exam is the most difficult of the CFA Exams.
At the third and final level, things morph yet again. At all three levels, there is a morning and an afternoon segment of the exam. The afternoon portion of the CFA Level 3 exam uses the item set format just like the CFA Level 2 Exam, so I will skip the details here. The morning segment however, is not multiple choice. The two most common names given to the morning segment are essay or structured response. Yes, you have to write out your answer. You must write them out with an ink pen, no less! They don’t even afford you the courtesy of changing your mind later. Gone is the familiar handrail of the multiple choice format, where you could at least guess and take your chances. Better still, with multiple choice, you could read the answers and have your memory jarred or even eliminate the incorrect choices. Now, you are face-to-face with a blank page or an empty template. I have not taken the CFA Level 3 Exam yet, but it is not difficult to imagine that this may require a much deeper understanding of the curriculum. In fact, it appears that the CFA Level 3 Exam is so difficult that the CFA Institute does something that it does not do at any other exam level. They provide registered candidates with the previous three years worth of morning session exams, including answers. I printed my copies out yesterday, all 360 pages. Yes, 360 pages (see the photo above).
So, how am I going to tackle the CFA Level 3 Exam?
- I have already been through approximately 80% of the curriculum by recently finishing Creighton University’s Master of Investment Management program(MIMFA). I now have a solid base of knowledge and I have at least been introduced to the majority of the concepts in the curriculum. The MIMFA has served me well for CFA Level 1 Exam and CFA Level 2 Exam, and I am certain it will serve me well on the CFA Level 3 Exam too.
- Irfanullah Financial Training (IFT). I feel like this is one of the best keep secrets out there. IFT videos are a great compliment to the curriculum. He actually follows the curriculum and you can pause, read the material he just covered and have a much deeper understanding than just using one or the other. I used to read the material first and then watch the videos, but I found that I actually understand the curriculum much quicker if I watch the video first then read. I can watch his videos over and over again, which is great for reviewing material. I use a free app called DicePlayer, and watch at 1.7x normal speed for quick reviews. I can even watch them on the go. It is not uncommon for me to have ten or more of his videos loaded onto my phone so I can study whenever an opportunity arises. This is much more convenient than lugging the curriculum around.
- Schweser Q-bank. Nothing cements your understanding of a subject better than answering tons of questions about it. Schweser’s Q-bank provides thousands of questions for this purpose. Additionally, Q-bank gives you instant feedback, keeps a record of your scores, and can help you identify subjects you need more work on. I am a big fan of Schweser’s Q-bank, and it was a vital tool for my success in passing the CFA Level 2 Exam. I have not purchased this yet, but I will do so soon.
- Attend a CFA Level 3 Bootcamp. This is a large departure from my previous two years’ strategies. I have never attended a CFA Bootcamp before. Why the Change? Because, the structure response element to the CFA Level 3 Exam is different. I would prefer to go to Marc Lefebrve’s, LevelUp Bootcamp in Zurich, Switzerland. It’s close to where I currently live, and apparently the man is legendary. Here are some of his disciples raving about him on Analyst Forum. It’s expensive at $1,999 for 4 days of instruction, plus I will need to get there and back, eat at restaurants, and I will need a place to sleep for five nights. The penalty for failing the CFA Level 3 Exam is one year in purgatory while waiting to retake the exam the following year. I would hate to think, “if only I had gone to Marc’s Bootcamp, perhaps I would have passed”. Marc is supposed to come to Zurich in mid-April. If the Army allows me, I plan on meeting him there. An added bonus is that I will be in close proximity to and interacting with other CFA Level 3 candidates. As someone looking to break into a career in financial analysis, being locked in a room for four days with other Level 3 candidates might just be a good thing.
- The curriculum. If it wasn’t already apparent, the curriculum will form the cornerstone of my studying. I used Schweser Notes last year, but I really like the way the curriculum reads at level 3. I will miss the convenient formula sheets that Schweser provides in their Notes, but I could make my own and would likely be better off because of it. I will consider the structured response morning session exams discussed above as part of the curriculum here since it came directly from the CFA Institute. These past exams will help supplement the end of reading questions.
The list above will be my tools of the trade for the next 157 days. I will continue to refine my plan in terms of a timeline and I will post an update soon. Until then, it is time to get back to work.