CFA Level 1: Don't Waste Your Money

Unless you are a seriously motivated, experienced finance professional with tons of ambition to take you career to the next level, signing up for the CFA® exam is a complete waste of time.

Let me explain why.

First, earning the CFA® qualification is a long process which involves passing three extremely difficult exams over a four-year period. Secondly, you have to dedicate about a thousand hours of your life to studying and preparing for the exams. Thirdly, your chances are not good: each exam has a 30 – 40 percent pass rate, which means that for every 100 candidates who start out at Level 1, only 6 or 7 will become full CFA® charterholders (assuming a generous 40% pass rate for each level). Finally, it will cost you at least $2,500 in exam fees and about that same amount in books, courses and materials to pass.

Most people who start going for their CFA® certification will never make it.  Basically, there are two main obstacles to becoming a CFA®: motivation and preparedness.


If you sign up for the CFA® exams, but you don't make a solid effort to pass them, you are essentially throwing your money away.  Or more accurately, you are giving your money to the CFA Institute, the non-profit organization that runs the exams worldwide.

Let's do some quick math on the CFA® Level 1 exam.

According to the CFA Institute, about 42% of all candidates sign up for the Level 1 exam. There were 139,900 enrollments for the June 2010 exams, which means that there were about 59,200 Level 1 candidates.

Of those, 28% were no-shows, meaning that they registered for the exams, paid the fees (exam fee and CFA Institute membership fee) and then decided not to take the exam. They are not entitled to any kind of refund.  The CFA Institute deems those who bail out "not serious candidates."

If we know that the CFA Institute membership fee is $400 and that the exam fee is $750 on average (depending on when candidates sign up for the exam), then we can calculate that the CFA Institute is “gifted” almost $20 million from no-show candidates.

59,200 * 28% * ($400 + $750) = $19,062,400

Wow. So collectively, the 16,570 people who register and fail to take the CFA® Level 1 exam forfeit $20 million of earnings straight to the organization that runs the certification. And remember, the CFA® Level 1 exam is offered twice a year, so we can assume that the revenue from no-shows to the CFA Institute is basically double that, or about $38 million per year.

Not bad for the CFA Institute, but not such a good deal for potential CFA® charterholders.  No wonder they don't care if you're motivated or not.


If only 34% of candidates pass the Level 1 exam (the lowest level since 2005), you can be sure that this is a tough exam. Yet many candidates throw themselves at the CFA® without necessary preparation. Just because you worked at an investment bank, consulting firm or corporate finance job doesn't mean you can take it easy on the preparation. Regardless of your background, you've got to put in the time and energy to prepare.

No matter how smart you are, you are expected to master the entire Candidate Body of Knowledge (CBOK) which is the benchmark curriculum for the CFA®. And guess what? Reading a book before you go to sleep at night or attending a single seminar aren't going to help you.

Here's the impact of not being prepared. If you fail the CFA® Level 1 exam, you have to pay to re-take the test (minus a token $50 discount from the CFA Institute), so you're looking at about $1,150 for the first exam, plus $700 for the second exam = $1,850.  That's on top of whatever you spent on books, online courses, seminar and so on, and of course on top of the time you committed to studying.

Getting to CFA® Success

What's a better way to go about it?

  1. Be committed to the path. If you think you are ready to try to the CFA® exam, commit yourself to the time and energy it'll take to pass the exam. That means 250 to 300 hours of studying, which is about an hour a day for a year, or two hours a day for six months (assuming you're human and take a day off every week).
  2. Get yourself the best study materials out there to build your confidence. This means taking advantage of all the free resources that the CFA Institute provides, reading books, taking practice tests and forming a study group with your friends. This also means using online courses and resources to help you, and finding a course that offers a success guarantee.
  3. Prepare your body as well as your brain. Don't cram in the days before the exam. Do some light review, rest up, get some exercise. And make sure to be well rested, fed and hydrated for exam day. You won't improve your chances if you're exhausted after cramming all night.
  4. Show up on test day. Don't wimp out. Even if you don't feel totally prepared, go on in and take the exam – you'll have about the same chance of passing as everyone else. Plus, it's not like you get your money back for being a no-show.



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