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Unfortunately, I am not writing this from the perspective of someone who passed the level 2 CFA exam on their first attempt. Recently, I got news that I failed level 2 (June 2009) and have decided to write down some tips for those who are considering attempting the level 2 CFA exam.

To explain how I approached the exam, I really begun studying with about 5 weeks to go and put in a solid 10-15 hours a week (my friends still recall missing me) until the last week when I put in around 35 hours. I watched each of the Schweser videos and made my own personal notes of most of the areas of the course (at least the parts that didn’t totally bore me to death - we’ll get to those later). I did not read the CFAI material or the Schweser notes. In total, I did all the CFAI practice exam questions and a few other select questions for a total of around 200 questions. Whilst I knew this was less than recommended, I was focusing on learning the information myself and hoping an understanding of it (rather than a drummed in repetition effect) would get me through.

This amounted to far less than the CFAI recommended 300+ hours but I thought I stood a somewhat decent chance of passing the exam with this amount of study regardless. This belief was based on my performance in level 1 with a similar amount of work. Additionally, I was learning the information because I was interested in it and found some sections of derivatives, portfolio management and alternative investments particularly hard to find the motivation to study - as they don’t particularly interest me. Though I did find the ICAPM model particularly humourous.

Obviously I was proven wrong; though narrowly. I performed well in the areas I was most interested in (equity valuation, financial statement analysis, and economics; average in ethics (a dart may have assisted me here) corporate finance and alternative investments; and poorly in derivatives, portfolio management and bonds. Of particular interest, my punt not to learn swaps particularly backfired on me with 3 of the 20 sections of the exam dedicated entirely to derivates. Bad punt.

The exam itself was difficult for me for two reasons. Firstly, I felt they left out alot of what I see to be the more useful ‘big’ parts of each different section (except those I mentioned that I didn’t focus on). Instead of these areas, they focused on minute detail from the depths of the CFAI curriculum (this, I was obviously underprepared for).

Secondly, to an even greater extent than in level 1, the questions were particularly well written to confuse the living hell out of you. I have no issue with testing in this way as it obviously awards attention to detail. When thinking about several questions after the exam and comparing my response to those being discussed on analyst forum, I realised that i in fact had the correct answer figured out but was misled by the wording in the question to record a different answer. E.g. “Which of the following is not likely to be greater than the ROE of company A?” - here I would miss the “not” or do something stupid like that.

Overall, I feel very happy that I completed the level 2 CFA exam and learned alot from it. In particular, I enjoyed the debt vs equity financing material, the competitive forces material, the aggressive vs conservative accounting material (save the pension accounting), all the equity valuation material, the balance of payments, import / export and the foreign exchange material.

I may have another go at the exam but I feel I have got most of what I want out of the level 2 CFA material. Completing it would just allow me to do level 3 which I have heard is 50% portfolio management (not something i’m sure I could handle). As stated from the beginning of my CFA quest, the plan was to learn the information I wanted to and give myself a deadline, not lock myself in the portfolio delusion, i mean management, gaol. So we’ll see what happens next June.

In terms of tips for those completing the level 2 CFA exam:

• The minute details matter, nothing is sacred. They are more than content to not test massive sections of equity valuation and accounting and instead quiz you on the common name for a random bond that you’ll never have any contact with. This method may in fact weed out the people like me from those who put in the real work (please don’t take my sarcasm as contempt).
• A very solid understand of every section is required - don’t take punts by leaving out sections if you want to be sure to pass.
• I imagine that lots of practice would have improved my chances (rather than just learning).
• Do practice questions that involve word and syntax tricks under exam conditions.
• Practice darts for the ethics sections.

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