Tuesday, August 19, 2008
For any who are unfamiliar, I have been working to pass a series of exams to earn my CFA charter (Chartered Financial Analyst). This is a professional designation popular on Wall Street and highly regarded among institutional money managers and security analysts (and my superiors at work). There are three levels of exams you must pass in addition to having four years of work experience in the investment industry. The level I exam is offered twice a year and levels II and III are only offered once a year (in June). Each level's exam consists of two three-hour tests (morning and afternoon) and the CFA Institute recommended study time for each exam is "a minimum of 250 hours".
I put in around 200+ hours (a guess since I didn't actually track it) over 3-4 months studying for level I and passed in December 2005. I then studied about 210 hours for level II (I tracked my study time for level II) and was fortunate enough to pass it in June 2006. The pass rate for level I is usually the lowest and then goes up for levels II and III. Level I has usually been 40% or below and level III is usually at 60% or higher. The pass rate for level I when I took it was 34% (lowest ever). Level II was 48% (about average). I took level III the first time I could in June 2007, one year after taking level II. For one reason or another (like getting married in April 2007) I only put in about 120 hours studying for level III. I knew I was not prepared and was confident when I left the exam that I didn't pass. I didn't even have enough time to finish the written portion of the exam, which is in the morning (the afternoon is multiple choice). Unfortunately, they make you wait about two and half months to tell you whether you passed or not and my "fail" result was made official in mid August 2007. The pass rate happened to be the lowest ever for level III--50%.
To get the results you have to log into the CFA Institute website. A percentage score is not given. It says pass or fail and then for each of the topic areas covered on the exam it lists how many points were assigned to each topic and whether your score for the topic was 50% and under, 51-70%, or above 70%. So a bit vague in determining how you really did. Rumor has it that a passing score is generally in the low to mid 60% range. By approximating my score for the 2007 level III exam based on the indications of the ranges I figure I got around a 57%.
The curriculum changes a little from year to year, but generally the material at each level is similar from year to year. Since level II and III are only offered once a year, I had to wait until June 2008 to take the level III exam again. I started studying in February, but was really struggling to get focused and didn't have enough discipline to spend the time I knew I needed to spend to learn the material. I studied only 12 hours in February and only 6 hours in March. By the end of March I was busy with several other demands on my time and things going on in life (like Parker being born in April) and decided it was a lost cause and that 2009 was my year to pass level III. I knew I could not devote the time needed and any time I did spend studying would be a waste. I did not study at all during all of April and May. The exam is always the first Saturday in June. This year it just so happens that June 1st was a Sunday so there was a full week in June before the exam. Usually the exam is the first Saturday after memorial day, which makes for a pretty miserable memorial-day weekend, but not this year.
Even though I hadn't prepared, I took the exam largely out of a sense of duty since my work had paid for the exam registration, and I figured it would be good practice for 2009. I ended up spending 4 hours studying 1-2 days before the exam and on the day of the exam. I figured it may make it a bit less painful and frustrating if some of the top-level, outline-type material was somewhat fresh in my mind. I also reviewed some of the essay portion of the exam from last year, which they publish several months after the exam, and felt like that was time well spent. So I spent a grand total of a whopping 4 hours studying for the exam in the days leading up to the exam and an additional 18 hours in February and March. I don't put a lot of weight in the 120 or so hours of studying for the prior year's level III exam when it comes to adding to my preparation for this year, but it probably helped some.
Although I actually got through the entire essay portion of the exam this year and felt like the pass rate would be higher this year than last year, I still didn't think I passed. I gave myself about a 1 in 5 chance of passing after I was done taking the exam. Actually, that's probably higher than the chances I gave myself walking out last year. It could have been worse, and in a way it was disappointing that it wasn't worse because I felt there were points I could have gotten if I had spent just 10-20 more hours studying and memorizing formulas, which may have given me a bit better chance at passing. However, if I had spent that extra time it would have been nearly impossible to know where to focus my effort since there is no way I could have learned everything. In any event, I didn't deserve to pass with the minimal amount of time I studied.
So the results were made available on the CFA Institute website on Tuesday, 8/19. I wasn't really anxious about checking the results since I was confident I didn't pass. I logged on to the website about a half hour after I got to work. I nearly fell out of my chair when I read the result: "PASS". Unbelievable! I was in total disbelief; I think I stopped breathing for several seco
nds as my jaw dropped. I printed the page to be sure I had documentation after they reviewed the posted results and found that there was an error on my results. That is seriously the thought that went through my mind. The pass rate was higher this year as I expected, but not by much. It was 53%, which is the second lowest level III pass rate in history. Based on the broad indicators of what percentage range I scored in for each of the topic areas, my best educated guess of what I scored is about a 60.7%. Talk about a close margin! When I took the CPA exam several years ago people would talk about how much time you wasted studying by how far above the minimum pass rate your score was. Well, I don't think there was any wasted time here. Hard to waste time when you put in 22 hours studying for a test that recommends 250 hours of study time.
Well, I consider myself very fortunate to have passed and lucky that my pencil found enough of the right bubbles to mark on the multiple choice section. It certainly can't be attributed to my knowledge of the subject matter. I actually did much worse on the multiple choice section this year, but did much better on the essay portion. Enough, I figure, to add about 4.5% to my overall score between the two sections, which produced my little miracle.
I've taken a fair amount of tests in my life. When I am well prepared they are actually quite enjoyable. The feeling is very much like an athletic competition in which you dominate. The questions are the opponent. I had the sweet feeling of dominating on a few of the questions, but on the overall test it felt like I had come up far short. Nonetheless, an unexpected victory is a victory still the same and the feeling is still oh so sweet!
All that being said, about 200 hours have just been freed up in my schedule next Spring. Anybody want to go skiing?
