CFA Level III: The Ultimate Guide to Passing the Exam

Learn from a CFA charterholder on how to pass the challenging Level III exam and obtain your CFA designation.

CFA Level III: The Ultimate Guide to Passing the Exam


The CFA Level III exam is the final step in the CFA program and is considered by many to be the most challenging of the three exams. It tests your ability to apply all the knowledge and skills you have acquired in the previous levels to real-life investment scenarios. Passing this exam not only demonstrates your expertise in investment analysis but also earns you the prestigious CFA designation. In this guide, I will share my personal experience and insights on how to successfully pass the CFA Level III exam. Whether you are a first-time candidate or a retaker, these tips will help you prepare effectively and increase your chances of passing.

The Format of the Exam

The CFA Level III exam consists of two parts: item set questions and essay-type questions.

The morning session contains 10-15 item set questions, each with 6 multiple-choice questions. The afternoon session consists of 8-12 essay-type questions that require written responses. The exam is divided into two sections with a break in between. Unlike the previous levels, where each question carries equal weightage, the Level III exam has a different weightage for each question. The item set questions account for approximately 50% of your total score while the essay-type questions account for the remaining 50%.

This means that you cannot afford to neglect either section if you want to pass.

The Difficulty of the Exam

The CFA Level III exam is known for its difficulty and low pass rate. According to recent statistics from the CFA Institute, the pass rate for the Level III exam has ranged from 52% to 56% over the past five years. This is significantly lower than the pass rates for the previous levels, which have been around 40-50%.The difficulty of the exam can be attributed to several factors. Firstly, the exam tests your ability to apply your knowledge rather than just memorize information.

This requires a deeper understanding of the concepts and a higher level of critical thinking. Secondly, the essay-type questions require you to write clear and concise responses, which can be challenging for some candidates.

Preparation Tips

Now that we have discussed the format and difficulty of the exam, let's dive into some tips on how to prepare effectively for the CFA Level III exam.

1.Start Early and Stick to a Study Plan

The CFA Level III exam covers a vast amount of material, and it is crucial to start your preparation early. Ideally, you should start studying at least six months before the exam date. This will give you enough time to cover all the material and revise it multiple times. It is also essential to create a study plan and stick to it.

This will help you stay organized and ensure that you cover all the topics in a timely manner. You can use study materials provided by the CFA Institute or third-party providers to create a study plan that works best for you.

2.Practice, Practice, Practice

Practice is key when it comes to passing the CFA Level III exam. Make sure to practice both item set questions and essay-type questions regularly. This will not only help you familiarize yourself with the format of the exam but also improve your time management skills. You can find practice questions in the CFA Institute's curriculum or through third-party providers.

It is also recommended to practice past exams to get a feel for the types of questions that may appear on the actual exam.

3.Understand the Exam Format and Weightage

As mentioned earlier, the CFA Level III exam has a different weightage for each question. It is crucial to understand this format and allocate your study time accordingly. For example, if you struggle with essay-type questions, you may need to spend more time practicing them compared to item set questions. It is also essential to understand how the exam is graded. The CFA Institute uses the Angoff method, which involves a panel of experts determining the minimum passing score for each question.

This means that even if you score well on a particular question, you may still fail if the minimum passing score is not met.

4.Dedicate Time for Essay Writing Practice

As mentioned earlier, the essay-type questions can be challenging for some candidates. It is crucial to dedicate time to practice writing clear and concise responses. You can use past exams or mock exams to practice your essay writing skills.

The Impact of the Pandemic

The COVID-19 pandemic has brought about significant changes in the way we live and work, and it has also affected the CFA exams. The CFA Institute has made some changes to the exam format and delivery in response to the pandemic. The Level III exam will now be administered in a computer-based format, similar to the Level I and II exams.

This means that candidates will no longer have to write their responses by hand, which can be a relief for some. However, it is essential to familiarize yourself with the new format and practice accordingly.

Final Thoughts

The CFA Level III exam is undoubtedly challenging, but it is not impossible to pass. With dedication, hard work, and effective preparation, you can increase your chances of success. Remember to start early, stick to a study plan, and practice regularly.

And most importantly, do not get discouraged if you do not pass on your first attempt. Many successful CFA charterholders have failed at least one level before obtaining their designation. So if you're ready to take on the challenge, go for it! The CFA designation is highly respected in the financial industry and can open doors for career growth and opportunities in private markets. Best of luck on your journey to becoming a CFA charterholder!.