Chartered Financial Analyst (CFA) Definition and Exams

What Is a Chartered Financial Analyst (CFA)?

A chartered financial analyst (CFA) is a globally-recognized professional designation given by the CFA Institute, (formerly the AIMR (Association for Investment Management and Research)), that measures and certifies the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas, such as accounting, economics, ethics, money management, and security analysis.

From 1963 through November 2023, more than 3.7 million candidates have taken the CFA exam. The overall pass rate was 45%. During 2014 through 2023, the 10-year average pass rate was 43%.

The pass rate of the exam is below 50% in recent decades, making the CFA Charter one of the most difficult financial certifications to obtain. A minimum of 300 hours of study is recommended for each exam.

  • The CFA charter is one of the most respected designations in finance and is widely considered to be the gold standard in the field of investment analysis. 
  • To become a charter holder, candidates must pass three difficult exams, have a bachelors degree, and have at least 4,000 hours of relevant professional experience over a minimum of three years. Passing the CFA Program exams requires strong discipline and an extensive amount of studying. 
  • There are more than 200,000 CFA chartholders worldwide in 164 countries.
  • The designation is handed out by the CFA Institute, which has 11 offices worldwide and 160 local member societies.
Chartered Financial Analyst (CFA)

Investopedia / Julie Bang

The Basics of Becoming a Chartered Financial Analyst (CFA)

The CFA charter is one of the most respected designations in finance and is widely considered to be the gold standard in the field of investment analysis. The designation is handed out by the CFA Institute, which is a global nonprofit professional organization of more than 200,000 charter holders, portfolio managers, and other financial professionals in 160 societies. Its stated mission is to promote and develop a high level of educational, ethical, and professional standards in the investment industry.

Before becoming a CFA charter holder, a candidate must meet one of the following educational requirements. The candidate must have four years of professional work experience, a bachelor's degree or be in the final year of the bachelor's degree program, or have 4,000 hours work experience over a minimum of three years. For the undergraduate qualification, the bachelor's program must be completed before registering for the Level III exam. In addition to the educational requirement, the candidate must have an international passport, complete the assessment in English, meet the professional conduct admission criteria, and live in a participating country.

After meeting the enrollment requirements, the candidate must pass all three levels of the CFA program in sequential order. Professional reference letters are also required. The candidate must then become a member of the CFA Institute and pay annual dues. Finally, they must sign off annually that they are following the CFA Institute code of ethics and standards of professional conduct. Failure to adhere to the ethics and standards is grounds for possible lifetime revocation of the CFA charter.

Passing the CFA Program exams requires strong discipline and an extensive amount of studying. Level I exam can be taken four times a year in February, May, August, and November. Level II Exam can be taken three times a year in May, August, and November. Level III exam can be taken two times a year in February and August.

Although the exams can be taken as many times as needed, each exam typically requires candidates to study in excess of 300 hours. Given the considerable amount of time that must be spent studying, many candidates are deterred from continuing the CFA Program after failing one of the levels.

The exams are difficult. Only 45% passed the exams between 1963 and 2023. Having the right plan and the discipline to follow the plan are essential skills for passing all three exams. Notably, 2019 saw the most test takers of any year. Since, then numbers have not rebounded following a sharp decline during the pandemic. The CFA Institute has over 400 test centers worldwide. Recently, they have been adding testing locations in Asia due to increased demand in that region.

Level I Exam

The CFA Level I examination is administered four times per year in February, May, August, and November. It focuses on analysis using the tools of the 10 topic areas of the Candidate Body of Knowledge. These areas are ethical and professional standards, quantitative methods, economics, financial statement and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management. The exam format is 180 multiple choice questions to be completed within four and a half hours.

40%

The pass rate for the Level I exam during the 10-year period of 2014 through 2023 was 40%. The November 2023 Level I exam saw just 35% of test takers pass, allowing them to proceed to Level II.

CFA Level I Exam Topic Weights.

Level II Exam

The Level II exam is offered three times per year, in May, August, and November. It focuses on the valuation of various assets and emphasizes the application of investment tools and concepts in contextual situations. Exam questions referring to Financial Reporting and Analysis are typically based on International Financing Reporting Standards (IFRS). The exam format is 22 item sets (mini case studies) with 88 multiple choice questions (110 questions total).

45%

The 10-year (2014-2023) weighted average of CFA Level II pass rates is 45%. In November 2023, 44% of Level II test takers passed, allowing them to proceed to Level III.

CFA Level II Exam Topic Weights.

Level III Exam

The Level 3 exam is offered twice per year in February and August. It focuses on effective wealth planning and portfolio management by requiring the candidate to synthesize all the concepts and analytical methods in the entire curriculum. The exam format is multi-part with 11 item sets and 11 essay questions to be completed within four hours and 24 minutes. The handwritten answers are graded by hand.

52%

The 10-year (2014-2023) weighted average pass rate for Level III is the highest at 52%.

CFA Level III Exam Topic Weights.

Limitations of the CFA Charter

The CFA charter is widely respected, globally-recognized, and a difficult undertaking to accomplish. However, it is not a guaranteed path to riches and glory. Before taking the plunge, carefully consider several drawbacks to earning one. The CFA is not a quick-fix for an ailing career. If you're enrolling in the program to jump-start a stalling career, you may want to look at other reasons your career is not moving forward first. Perhaps before investing inordinate amounts of time and a substantial amount of money into building your pedigree, you might choose to improve your soft skills, such as work ethic and communication skills.

Becoming a CFA charterholder is a huge investment in time—a recommended minimum of 300 hours of studying per exam for three exams. If you don't pass an exam the first time, you'll have to study even more. You will likely sacrifice time with family and friends and the pursuit of hobbies you enjoy. And after committing all that time, there is no guarantee that you will earn the charter.

While the cost factor may not be a major consideration, it is worth pondering. A Level I candidate will pay a one-time program enrollment fee plus an exam registration fee. Level II and III candidates will pay a registration fee as well. There is also the cost of the books and study programs you'll have to buy. Altogether, you should expect to spend several thousand dollars each time you attempt the exams.

How Long Does It Take to Pass the CFA Exams?

The CFA exams are difficult and have a high failure rate. Each exam requires at least 300 hours of study, on average. Successful candidates take an average of four years to earn the designation.

How Much Do the CFA Exams Cost?

Each of the three levels of the CFA exam cost $1,250 (which is reduced to $940 if you register early). In addition, there is a one-time enrollment fee of $350. With early enrollment, you would end up paying a total of $3,170. With regular enrollment the total cost is $4,100.

Are the CFA Exams Multiple Choice?

The CFA Level I exam is entirely multiple-choice, with 180 questions. The Level II exam consists of 22 item set questions and 88 multiple-choice questions. Level III consists of 11 constructed response (essay) questions and 11 item set questions. Constructed response items typically have several parts related to a case study that describes one or a series of investment challenges.

Are CFA Charterholders Paid More?

Industry reports indicate that CFA charterholders are paid more than those who have not completed the program. According to test prep provider 300 Hours, a CFA charterholder earns, on average, 57% more than a Level I candidate when controlling for years of work experience.

Article Sources
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  1. CFA Institute. "1963-2023 Candidate Examination Results."

  2. CFA Institute. "Level I CFA Exam Structure."

  3. CFA Institute. "Annual Report Fiscal Year 2022." Page 6.

  4. CFA Institute. "How to Become a CFA Charterholder."

  5. CFA Institute. "CFA Program Exam Schedule."

  6. CFA Institute. "Exam Information, Dates and Fees."

  7. CFA Institute. "Candidate Examination Results."

  8. CFA Institute. "CFA Program Test Center Locations."

  9. CFA Institute. "Level I CFA Exam Structure."

  10. CFA Institute. "CFA Level II Questions & Exam Format."

  11. CFA Institute. "Level III CFA Exam Structure."

  12. CFA Institute. "CFA Charter."

  13. 300 Hours. "CFA Salary: How Much Does a CFA Charter Increase Your Pay By?"

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