The Importance of Passing CFA® Level II

Would you like to say you “just got started” or that you are “almost done”? Would you rather be at the beginning, or near the end of accomplishing a significant goal in your life and career? This is the difference between failing and passing CFA Level II. Of course, there are many CFA charterholders who successfully completed all three levels at different paces, even after attempting Level II more than once. However, with each failed attempt, the chances of abandonment increase, and passing Level II plays a crucial psychological role in winning the battle for the CFA designation.

Absorbing the curriculum and body of knowledge is key to advancing in the CFA program and earning your charter. In addition, exam-taking technique is just as important: you must know how to navigate your way through the exam and how to maximize the chances of earning points within the limited time available for answering questions. In addition to these two core elements of success, it is also important to recognize the psychological impact of success or failure at every step of the way—particularly in passing Level II.

I know of at least a few folks who gave up on pursuing the CFA designation once they failed Level II. They felt overwhelmed. They felt like perhaps just passing Level I was a bit of a fluke, and perhaps the CFA program is too darn difficult after all. After all, there are two more exams to take after Level I, and at least two more years to completion. Mentally, it was too much—they felt like they had just embarked on the CFA journey, and that there was still so much more to go.

This tendency to drop out is backed by statistics: exam data from CFA Institute shows that over the past five decades, more than 1.3 million candidates have sat for the Level I exam, with just over 200,000 candidates ultimately going on to pass the Level III exam, representing a weighted average completion rate of 16%. In the last 10 years, the completion rate was even lower, at 13%. The dropout rate is the highest for candidates that fail to pass Level II, whereas the program success rate increases significantly once a candidate gets to Level III. After passing Level II, these successful candidates are also generally more prepared for Level III, since the Level III pass rate has consistently been much higher, and well above that of the pass rates for Levels I and II.

Indeed, if you picture the CFA exams as a set of three milestones, I would argue that the Level I just barely gets you started. You pass—great; you’re on the path, a third of the way there. You fail—you haven’t really started at all; you are still in the starting position.

Now here comes level II. You pass—congratulations, you are almost done. This is a big deal—you have just one more to go; it’s less than a year away and then once you pass that last one you’ll practically be a charterholder. But if you fail Level II, you’re still practically in the beginning, having barely started and only successfully completed a third of the journey, with at least two more years to go. Therefore, getting over that hump, the second third of the way, carries a lot of weight, tips the scale, and mentally will either propel you within sight of the finish line (one more to go!), or hold you back with still the bulk of the program dauntingly ahead of you.

The high dropout rate (nearly 9 out of 10) in the CFA program reminds me of my martial arts and jujitsu training, which I have been doing for a while. Most martial arts gyms are full of white belts and beginners, or quasi-beginners—folks who have been training for nine months or less. There are very few who make it to advanced belts such as brown or black. It takes many years of consistent hard work. Yet it’s important to remember that a black belt is a white belt who never quit. So stick with it and do your best to pass Level II. If you do, then you’re almost done; you’re 67% of the way there. It will do wonders for your psyche and attitude to know that you have just one more exam to go, and your chances of earning your CFA designation will increase significantly.

About the Author

Razvan Ionescu, CFA, currently serves as Director, Foreign Exchange at Citizens Bank Global Markets. He is responsible for foreign exchange sales, and structuring and negotiating customer transactions in spot and derivative currency markets. Previously with Chatham Financial and KPMG, Razvan holds a bachelor's degree in Applied Accounting from Oxford Brookes University and a master's degree in Finance from London Business School. In his spare time, he enjoys training in jujitsu, reading, and spending time with his three daughters. You can connect with Razvan on LinkedIn.

Razvan Ionescu