If you are contemplating on taking CFA exam, you might want to gauge the difficulty by looking at historical CFA pass rates. Here is the passing rate trend of the 3 levels, as well as my analysis on what we can learn from these statistics.
For those who prefer the text version, please find the same charts and information below.
Since the CFA exam was postponed 3 weeks to June 23, 2018, so the release of the pass rates were a bit delayed. I initially provided my estimate for the pass rates, and now that they’ve been released, you can see that I was quite close!
There are the latest CFA exam pass rates for the last 4 years. There are two data points for each Level 1 exam because CFA level 1 is held twice a year, while Level 2 and 3 are held once a year.
The trend has been very consistent:
|Level 1||44% / 44%||42% / 43%||43% / 43%||43% / 43%|
What’s the trend if we go back further?
Since 2003, the Level 1 exam has been offered twice a year. The CFA Level 1 pass rates shown below are average of the two exams within the same year.
The 10-year weighted average CFA pass rates for Level 1 is 40%. It’s certainly not an easy exam to pass, but good to see the upward trend.
The 10-year weighted average of CFA level 2 pass rate is 43%, quite a bit higher than that for Level 1.
The 10-year weighted average pass rate for Level 3 is the highest at 51%.
Since CFA exam is multiple-tier (i.e. you need to pass one level to move on to the next), it is useful also to look at the drop out rates to see how many candidates can complete the program at the end.
From 1963 to first half of 2016, 1,348,103 candidates have sat for the Level 1 exam, with 209,561 candidates ultimately going on to pass the Level 3 exam, representing a weighted average completion rate of 15.5%. In the last 10 years, the completion rate was slightly lower at 12.9%.
* Up to June 2016. Source: CFAI
Looking at a longer horizon (since inception in 1963), we see a declining trend in CFA exam pass rates in all 3 levels. At the same time, pass rates increase as candidates advance to another level. Here is my attempt to explain the trend.
As you can see from the chart, there has been an exponential increase in candidate numbers since mid-1990s, matched by an equally significant decline in pass rate during in the same period. The correlation is especially high in the Level 1 exam.
Here is my explanation. The only prerequisite for Level 1 is a bachelor degree. The low barrier of entry attracts many casual exam takers who just want to give it a try without properly studying for the exam. These people can never pass Level 1 and therefore you don’t see them advancing to Level 2, and even fewer in Level 3.
The CFA exam used to be the test for professionals already working in fund management and sell-side equity research. Nowadays, many candidates come from related but different fields such as accounting, investment banking, and even unrelated field such as IT, legal and support staff.
These candidates can be smart and capable; but their lack of previous educational and working experience in the investment field inevitably pulls down the passing rate.
At the same time, the candidate pool is increasingly diverse in terms of geography. Ever since the CFA exam welcomed non-US candidates by offering non-US exam sites, the application from Europe and Asia skyrocketed. China has experienced the fastest growth and became the exam sites with the most number of candidates.
These candidates can also be smart and capable but English may not be their first language. The fact that the CFA exam is offered only in English may affect the pass rate in non-English-speaking countries.
CFA Institute does not break down the statistics, but the CMA exam has one that split by geographic location. You will see that for non-English speaking region (Middle East, and to a lesser extent, Asia Pacific), the pass rate is much lower. This means the ability to understand and write using the English language is critical for passing these exams.
This has been a popular theory among aspiring CFAs. It is not easily measurable, but it’s fair to say that the investment product has become more complex and sophisticated in the past 1o years.
CFA focuses on traditional investment theories and thus is less affected than the CAIA exam, but I am sure some elements of alternative investments are introduced and tested in the current version of the exam.
Lastly, I’d like to throw in this conspiracy theory that has gotten quite popular: CFA Institute purposely manipulates the passing score. Why? They can increase the number of retakes and the amount of revenue from the exams.
While this is an interesting theory, an unreasonably low pass rate will have an opposite effect: it may increase the drop-out rate (people give up after Level 1) and decrease the total number of CFA charter holders, which could never be a good thing for a professional association.
Therefore, I tend not to agree with this theory but it’s worth pointing out for the sake of discussion.
Candidates need 6-12 months to prepare for each level. It is most important to try your best to pass this time! How to do that?
The best way to achieve this goal is to pick a review course that suits your background, schedule and learning style:Pick the best CFA review course!
If you just got the news of failing the exam, don’t be despair. See, CFA pass rates have always been low. There are actionable steps that you can take to greatly increase the odds of passing.Strategy to retake the exam
Here is everything you need to know on the CFA exam results, insights on score bands, the fail bands (the “Band 10”), minimum passing score, borderline cases, and more.Learn about the CFA grading system