On Saturday, thousands of people around the world will take the CFA exams. In late July, they’ll find out their results. History suggests they won’t do well: in June 2014 the average pass rate across all three levels was 46% and the average pass rate for level I was just 42%.
So, what does it take to pass the notoriously difficult CFA Level I exam? The CFA Institute, which runs the entire process, is notoriously coy when it comes to explaining what constitutes a pass and what doesn’t. In order to pass, candidates need to meet the minimum ‘net passing score’ across all topic areas. But the minimum net passing score is never given and varies year-on-year according to how hard the paper was and how well everyone does. All that we know for sure is that the Institute uses something known as the ‘Angoff Standard Setting Method’ (explained here) to determine the pass rate. This has something to do with a set of CFA Charterholders sitting down and working out how difficult the questions really are and how easy it ought to be to pass.
To confuse matters further, because the marks allocated to different topics vary, the Institute says that strong performance in one topic won’t necessarily compensate for weak performance in another.
As a result, the 50%+ of people who regularly fail the CFA Level I exam are usually confused as to why. All they can do is to sit the exam all over again and hope it works out better next time.
Being inclined to control-freakery, the CFA Institute doesn’t much like people discussing their CFA score. However, this doesn’t dissuade them from doing so. Online CFA discussion boards like Analyst Forum contain various scores from people whose results have surprised them.
December 2014’s CFA Level I exam was said to by candidates to be unusually easy. This might be why – despite the CFA Institute’s efforts to adjust passing scores for the exam’s difficulty – a record 44% of people passed. To see a selection of December 2014 CFA I passes by subject area and score, click HERE. Estimates suggest the overall passing score for December 2014 was just 68.4%.
By comparison, this is what the people who passed in June 2014 said they scored:
1. More than 70% in all categories.
2. More than 70% in everything except alternative investments and fixed income.
3. More than 70% in everything except economics and quantitative methods.
4. More than 70% in everything except fixed income, economics and quantitative methods (where scored 51-70%).
5. Seven sections at more than 70%, but alternative investments and ethics at 50% to 70%, and portfolio management at less than 50%.
6. More than 70% in alternative investments, corporate finance, ethics, professional standards, and portfolio management. 51%-70% in economics, equity investments, financial reporting and analysis and fixed income investments. Less than 50% in derivatives and quantitative methods.
7. More than 70% in alternative investments, portfolio management, derivatives, corporate finance, financial reporting and quantitative methods. 51-70% in fixed income and ethics. Less than 50% in economics.
8. More than 70% in equity investments, alternative investments, corporate finance. 51%-70% in everything else.
9. 50% to 70% in everything, except portfolio management, alternative investments and ethics, where scored in excess of 70%.
10. More than 70% on everything, except financial reporting and analysis and economics (51%-70%).
11. More than 70% in everything except ethics, quantitative methods, alternative investments and derivatives (51%-70%).
12. More than 70% in everything except derivatives and portfolio management (51% to 70%).
And…
13. More than 70% in alternative investments, corporate finance, equity investments and portfolio management. 51% to 70% in economics and ethics. And less than 50% in derivatives, financial reporting analysis, fixed income and quantitative methods.
Number 13 is clearly the most interesting. It implies that you can get through the CFA even if you’ve scored less than 50% in four key subject areas. This is a revelation. It’s even been suggested you can pass with an average score of around 64%-65%. If you have any marks to share, please go ahead and share them in the comments box below…