About the CFA Exam

When it comes to investment banking, CFA certification is highly demanded and is deemed to be one of the high value courses. Chartered Financial Analyst (CFA) offered by CFA Institute, has a reputation of being an exhaustive course. It tests a candidate’s ability in the areas of portfolio management, asset valuation, and investment tools. This course is designed to give you a taste of real-world skills in investment analysis. After doing this certification, you are opened to opportunities in asset valuation, financial analysis, portfolio and investment management. 

In order to become a CFA, you are required to pass 3 levels of written exam and provide a work experience of 4000 hours in minimum 36 months. In this article we will cover everything in detail about these levels, including exam structure, fees and pattern. 

Quick Summary:

Source: CFA Institute

Note: All the candidates must have a valid International Passport.

What CFA entails?

CFA certification covers an exhaustive range of topics and subjects including: 

1. Ethics and Professional Standards 

2. Quantitative Methods

3. Economics

4. Financial Statements Analysis

5. Corporate Issuers

6. Portfolio Management

7. Fixed Income

8. Derivatives

9. Alternative Investments

10. Equity Investments

All three levels cover these topics and each level builds the foundation for the next one. Although you don’t specifically require any previous knowledge, basic ideas of topics like time-value of money, accounting, microeconomics and statistics will help you in the preparation. 

Student Consensus Regarding CFA in India

According to a survey performed by the CFA Institute in India among candidates and charterholders in key cities like Mumbai and Delhi, the designation has resulted in higher pay and more employment options. Here are some insights from the survey:

• Average annual income saw an increase of 192% from Level I candidates to the new charterholders.

• Fresh CFA charterholders with approximately 6 years of work experience have had a salary hike to almost Rs. 28.6 lakhs and average annual salary for new Level I candidates ranges between Rs. 9.8 lakhs to Rs. 44 lakhs. 

• 66% of the survey participants believe that CFA had a high impact on their career growth and 78% of them experienced the impact to be highest with passing Level I.

• 78% of the respondents report compensation increments between 5% to 15% within a period of 12 months.

How much time does it take to complete the CFA certification?

It makes sense to at least keep 6 months of gaps between each level to assess your readiness,  with 300-500 hours of preparation. However, it takes a minimum of 3-4 years for the candidates to complete the full program. 

CFA Level I Exam Structure

The Level I exam lasts for a total of 4 hours 30 minutes consisting of 180 multiple choice questions which is split into two sessions. There is no negative marking for incorrect answers. You would likely encounter two basic questions: sentence completion or question based on concepts. CFA Level I curriculum is usually covered by most of the universities which makes it easier for candidates. 

Weights of individual topics:

CFA Level II Exam Structure

CFA level II is designed of  22 vignettes and 88 multiple choice questions split in two sessions. The topics will be randomly placed in both the sessions. Each session is of 2 hours and 12 minutes, a total duration of 4 hours and 24 minutes with optional break in between. There is no penalty for incorrect answers.

Expected weights of individual topics: 

Level III consists of 11 essay questions and 11 item sets for 12 points each.Each session is of 2 hours and 12 minutes, a total duration of 4 hours and 24 minutes with optional break in between. Unlike earlier, constructed response type questions or essay questions will be mixed into both sessions. There are 3 ways to answer constructed response questions: essay, numerical entry and multiple-choice. Topics will be placed randomly on the exam and all topics may be covered in the first, second or both sessions.

Expected weights of the topics:

*Major chunk of the syllabus is covered in the Portfolio and Wealth Management section. The subtopics cover Behavioural Finance, Private Wealth and Institutional (15-25%) and Asset Allocation, Trading, Performance Evaluation (10-20%).

Cost of becoming a CFA

Before sitting for CFA exams, it is important to know the overall cost of the program. The total cost ranges anywhere between USD 2400 to USD 4000 assuming you clear all the levels in the first attempt. This amount does not include other expenses like cost of CFA preparation providers. Here is a quick breakdown:

• One-time enrollment fee = $350

• Early registration fee = $900

• Standard registration fee = $1200

• Rescheduling fee = $250

CFA Institute also provides aids and scholarship to the candidates who fall under these categories:

Upcoming Dates of the CFA Exam

CFA examinations are usually held in the months of February, May, August and November. You can refer to the following exam window to plan your preparation. 

Ending notes and tips

Now that you know everything about CFA, here are my final thoughts and tips for the preparation:

• Get familiar with the learning objectives. CFA Institute has a list of Learning Objectives which give an idea about the topics. 

• Take help of the study planner. You can either create your own study plan or take help from the one provided by the WallStreet School. I would personally recommend the latter. 

• Concepts are important to understand. Reading the materials repetitively and engaging in discussion with your mentor and peers will help in this. Rote-learning is not an option!

• Get comfortable with your calculator: Financial calculators can be tricky to use. My personal recommendation would be Texas BA II Plus financial calculator. Practise as many varieties of numericals as possible which will help you get acquainted with the calculator. 

• Focus on topic weightage as these give you an idea of the importance of subjects. This will help you plan studies easily.

• CFA examinations are challenging and exhausting in nature which require a lot of patience and determination.