Posted by: Dr. B.J. Tolia, CFA
Updated: February 12, 2019

Now that you’ve passed Level I, it’s time to start preparing for Level II of the CFA® exam. Join Dr. B.J. Tolia, CFA as he discusses the CFA Level II curriculum, the key differences between Level I and II, and study strategies that have been proven to work.


Video Transcription

Hello, and welcome to this presentation of “How to Pass the Level II CFA Exam.” My name is B.J. Tolia. I’m the Vice President of CFA Program education and a Level II Professor at Kaplan Schweser.

All right. So, first of all, congratulations. I’m assuming you passed your Level I, otherwise, why are you here? Anyway, let’s look at what we’re going to talk about, what is the outline of our presentation. The first thing we’re going to talk about is very briefly, what is the Level II curriculum? Then we’ll talk about what the format of the exam is at Level II. We’ll also look at the historical pass rates, that’s the bad news. And then we’ll talk about what is the difference between Levels I and II, so you are aware as to what you are dealing with.

We’ll also talk about learning science and myths that science has come up with. The science has said these are things that really don’t work and these are the things that work. Then we’ll get to the bottom of it, which is simply to get into how to efficiently prepare for this specific exam for the Level II exam. We are also going to obviously talk about how we can help you in your preparation process, and then we’ll summarize the presentation in the last point, in which is the steps in the preparation process.

CFA® Exam Level II Curriculum

All right. Let’s look at the curriculum itself. Level II curriculum has 17 study sessions. What you will see is the study sessions for the topic areas that have more study session generally how more weight on the exam. And speaking of weight, let’s look at the exam weight at Level II. What you will see is the exam weight at Level II is variable. This is one of the differences between Levels I and II. We will see that in just a little bit.

Now, what you will also see when you look at the exam weighting, the topic weightings here. What you will see is that the big weights at Level II is equity valuation and financial reporting and analysis. So those are the two big dogs at Level II. Make sure you are on top of, make sure you’re really good at those two areas. Without that, it becomes very, very, very difficult, if not impossible, to pass this exam.

Not only that, but you also should be recognizing that Level II is the valuation level in the curriculum. Remember, Level I was the investment tools level. That’s where you were introduced to different tools of investments. Level II is where we get into valuations. So therefore, you will see a lot of valuation perspective, and that’s why you see a lot of asset classes being covered at Level II.

CFA® Exam Level II Question Format

So keeping that in mind, let’s look at the question format at Level II. At Level II, the exam is going to be organized in the form of item sets. Each item set is simply a set of six related questions. And these six related questions are preceded by a short story vignette, or an essay. So this short story, or a vignette, is about a page, page and a half, that gives you information that you need to answer the six questions that follow.

Now, each item set is always going to be six questions. And each item set is going to be from a different topic area. Usually, they are standalone topic areas. So one item set from ethics and it’s all ethics in that entire item set, for example. Each item set also corresponds to 5% of the exam weight. There are going to be 10 items sets in the morning session of the exam and 10 items set in the afternoon session of the exam. Now, the item set, you need to make sure you are very familiar with the item set format of the exam right off the bat so that you are understanding of your difference in approach to preparing for this exam.

Pass Rates for Level II of the CFA® Exam

Now, the bad news is that the pass rates for Level II is about mid-40s. Okay? So the pass rate seems to be not that bad especially when you are looking at the pass rates at Level I. However, keep in mind this is for a pre-screened pool of candidates. These are all the candidates that have passed Level I. Nobody is allowed to sit for Level II without having first cleared Level I, without having passed the mustard, if you will. So from a pre-screen pool of candidates, the pass rates are still not that good. So I’m not trying to discourage you, but I want you to be mentally prepared to see the challenge that you are facing.

Differences Between CFA® Level I and Level II Exams

Now, let’s look at the five differences that Level II has as compared to Level I. We’ll kind of go down the list. So let’s look at that difference number five. The difference is that the topic study session weightings are variable. We already saw that when we looked at the exam weights. So, for example, at Level I, you had a fixed allocation of weight, exact amount weight that is specified for quantitative method. Not so at Level II. At Level II, quantitative methods can be one item set or two item sets. So that gives you some mystery, if you will, in what you can face on the actual exam. You know, you can’t just start gaming the topic areas.

The fourth difference is the item set format. So questions are no longer individual questions, rather than they are all based on a single vignette. That allows the exam writer to give you a lot of red herring, a lot of extraneous information so that they can look at your analytical skill, so that you are able to parse through irrelevant information or not.

The third difference is more integration of different topics. So for example, again, that is related to your item set format. You have a question from equity valuation for example, and you could have within that same item set, that you could have some question that deals with dividend discount models, some question that deals with price multiples, or it can even have some question that the deals with the cost of capital. So more integration of different topics makes it a little different nuance and usually more challenging for candidates.

The next difference, the second difference is higher expectation of analytical skills. So here, you are not going to be successful if you are relying simply on memorization, if you are relying simply on plug-and-chug. You are seldom going to see questions that are going to be simple plug-and-chug at Level II. You see some but not many. The expectation here is, are you really understanding what you are doing? The expectation is you are going to be an analyst. Are you demonstrating that by your ability to answer questions that are written appropriately?

And then the last difference or number one difference between Level I is way more material. We say that if Level I is a mile wide and a mile deep, Level II is 20 miles wide and 20 miles deep. So way too much material. Not only will you have more material in terms of quantity of readings, quantity of words that you need to look through, but on top of it, the depth of understanding that is expected of a Level II, again, it is even more. So that is the challenge. That is the requirement. And therefore, you need to take this exam seriously. You need to give it the respect it deserves. You need to allocate an appropriate amount of time for it.

How to Prepare for Level II of the CFA® Exam

Now, how do you efficiently prepare for this exam? Given the fact is challenging, there are specific things you can do to make your task manageable, doable. We need to have a very rigorous well-planned study effort. So 300 hours plus is probably the minimum, okay? So it, again, varies. I have a question mark there specifically. Why? Because it varies from person to person based on their background.

I don’t see many people with non-finance backgrounds being able to get away with 300 hours or less of work. So if your background does not give you the luxury of knowing a lot of the topics that are covered in the Level II curriculum, you need to have a very disciplined approach, and it requires time to master the material that is covered in Level II. Starting late as well as not devoting the time is a recipe for failure. You know, I’m sure your competition would love for you to do that. The other candidates in the candidate pool would love for you to do that. Keep in mind, you don’t want to fail this exam which is only once a year.

Focus on the LOS. This is what CFA Institute expects you to do. This is what they are expecting you to be accountable for. So make sure that your understanding of the material is consistent, consistent, consistent with the LOS that underlies the material. So when it comes to preparing for the exam, when it comes to learning and testing what really works and what doesn’t, well, let’s look at things that don’t work. Underlining and highlighting.

Generally, scientists that study learning have realized that this process of underlining and highlighting may be seeming to help us, but it really doesn’t do a whole lot. It’s a low utility exercise. It really doesn’t help a whole lot. Is memory a muscle? Can rote learning help you remember things? No. Sorry. No way. And does it help to have a specific study space so you kind of have a regimen in place, you have a very precise location in time that you are studying? Well, it’s not necessarily very user-friendly or not very good in retention.

So studying in multiple conditions results in better scores or better retention recall of the underlying material. It also reduces monotony. So you may want to have multiple studying conditions and multiple studying locations. So what are the things that…more techniques that have limited or no evidence of effectiveness in learning? So rereading the underlying material. Well, if you didn’t understand the first time, by reading it second time it’s not going to help. It’s more short shorter memorization, long-term forgetting.

Use of imagery for text-based learning or use of keywords mnemonics, all of these are, again, variations of memorization—really not very effective in learning. It may be effective in memorization, but not very effectively learning. Again, remember Level II, you’re looking for analytical skills, you are looking to learn and understand the material. So what does work?

Well, elaborately interrogation; questions like, “Why does this make sense?” We are doing valuation of a stock using a specific model. While you ask yourself why does this make sense? If you are able to answer those kinds of questions, it really increases the staying power of the underlying material that you’re learning.

Self-explanations. So you’re going through and teaching yourself. Think about you being the teacher and teaching yourself the underlying logic behind the theory that you’re learning that has, again, very good staying power.

Other things you can do is interleaved learning. So rather than practice large groups at a time, break it up into smaller so that your marginal disutility of additional question is not so severe that you don’t really learn much from that. So the point is, rather than having large blocks of problems, do interleaved learning, meaning take frequent breaks. So again, if you are doing it over a long period of time, which I would highly recommend, then your days are going to be broken up by life. In general, you are going to be studying some portion of the day, working some portion of the day, doing some other exercising some portion of the day, and so forth. So that is interleaved learning.

Distributed practice, spreading learning over time, very, very, very effective method. So rather than crunching it towards the last three weeks of the exam, that is not very effective. Cramming has very short-term benefits. So, yeah, cramming in the last three days of the exam may be okay, that is great for memorizing your formula. That is great power for going over your ethics material, but that’s not a long term solution to preparing for the exam.

Now, the test effect is a key, very, very important, very powerful. And taking quizzes, it aids learning very, very, very much. Very effective. So taking quizzes, doing problems, is extremely effective. What we say…putting pencil to paper. In fact, you learn more by making a mistake than by getting your answers correct. When you make a mistake, your brain, for whatever reason, flares up and recognizes that this is the kind of mistake that can be made, and therefore, kind of trains you to ensure that you don’t repeat that mistake. So quizzing is very powerful. In fact, when we talk about the QBank, it is specifically designed for giving you this test effect, giving you the staying power of the underlying learning. One of the things you can do.

Helpful Tools for Preparing for Level II of the CFA® Exam

How can we help with your preparation process preparing with Schweser? We have a product called Study Calendar included with most of our products. So that is an interactive online product that you can use to spread your study out. Remember we said, interleaved learning is very, very effective. So you plan your studies, and you stay on your plan. Having a good calendar in place ensures that you don’t rely on cramming, which is not very useful. It also keeps you on schedule on task.

Also, our flagship product, which is the SchweserNotes, I make sure when I write that product that it satisfies a specific requirement. The requirement is, it is comprehensive. It covers every single LOS. In fact, it is organized by LOS. So it is comprehensive, it needs to be clear, not obtuse. You take the words that may be not very easily understandable and put it in user-friendly language. So very clear, and then, finally, the concise, saving time. So we realize that your time is valuable to you. You can easily spend lots of hours preparing for this exam. So we want to not waste any of your time that we can save, and therefore, the material is a lot more concise than the underlying curriculum.

There are five volumes in this SchweserNotes, volumes one through five. They are organized, again, as I said, by LOS. You have the list of LOS, as well as each LOS being covered within the readings themselves. All LOS are covered and indexed, as well as there are examples within each LOS. Also, at the end of each chapter, each reading, there are end-of-reading questions, which kind of have that quizzing effect that we talked about, also at the end of each topic area.

So, for example, at the end of ethics, at the end of quant, at the end of econ, we have self-test questions. These self-tests are in item set format to get you familiar with the item set way, and you get more interrelated materials. So all of the things being tested all at once to see whether you really understood the material or not, and kind of gauge for yourself what your level of understanding is.

At the end of each book, there is a list of formulas that are covered within that book. We also have a QuickSheet which has a list of formulas as well. Now, this SchweserPro QBank, this is an online QBank, and this really focuses on the quiz effect. Remember the quiz effect is very powerful learning technique. It increases the staying power, increases the retention. So you do a chapter, you do a specific area of the curriculum, and then go to the QBank, and do the questions on it to ensure that there is the staying power for what you’ve learned. It is organized by LOS as well.

In addition to the SchweserNotes, we have the Practice Exams. There are two volumes of practice exams, one and two. Each volume has three full-length exams, so three AM and three PM portions of the exam. Remember, these are all items sets, so each exam is 10 vignettes. Each section is 10 vignettes, or 20 vignettes, or 20 items set for each exam. So you have three exams in Volume 1, three exams in the Volume 2.

And each exam, we allow you to put online Performance Tracker. So Performance Tracker gives you an idea as to where you stand relative to your peers. So you can benchmark yourself relative to everybody else and get a good idea as to what other things you need to work on before the D-Day.

Schweser Study Packages for Level II of the CFA® Exam

So what we have done is we have created some packages based on the popularity of different products that people want. So our base model of a very, very basic package is the Essential Self-Study Package. As the name suggests, it is self-study. There is no instructional component, no tutorial component to this package. This package includes our notes as well as the QBank. It also includes Practice Exams, Volumes 1 and 2. And there is office hours which are pre-assigned, pre-determined, and assigned to the calendar. Now, so that is for self-study, those who don’t need instructional support.

For those of you who need instructional support, those of you who would like to have tutorial support, then we have a live classroom, in-person classroom in Boston, Chicago, New York, Toronto, Washington, DC, and many, many more places. We also have our sister concerns all over the world that offer live instruction. We also have online class. There are three alternatives for you, four alternatives now.

There is an early start component which starts sometime in October. There is an Eastern Time, again, this is the East as in New York time that starts sometime in January. The London Time class also starts in January, and then the Asia Time class. So all of these are live online classes that you can take from the comfort of your home or office or wherever you like to study. All of these live classroom, as well as live online, include on-demand video.

So what we have created is a comprehensive set of videos which complement our live instruction. So in the live instruction, we have limited time. We really get down and dirty into more difficult areas of the curriculum, and more lists like a definition portions of the curriculum. We lean the ondemand, so we have comprehensive coverage of the underlying material.

The Premium Instruction Package combines the Essential Package with some instructional component. So in this case, we’d start with the Essential Package, and then we add either the online or the in-person weekly class. Live online or live weekly classes. Again, depends on where you live. You may not have access to the live weekly class, then you can choose the online class. It has Ask Your Instructor, which is simply email support that you can send in for clarification on anything in the curriculum. And it includes, again, all the instruction including ondemand videos, as well as the candidate resource library.

The PremiumPlus Package starts with a Premium Package, which has all the things in the Premium Package. On top of it, we include the Secret Sauce. This is a late season truncated review, so it’s kind of like a concise of all the SchweserNotes and really focusing on must-know topics for the exam. So it includes that product, the Secret Sauce. It also includes a review option, a late season review option in either a three-day or a five-day or a seven-day workshop. So the baseline PremiumPlus includes the three-day. And the three-day is offered in multiple cities, so it is live in multiple cities. Or you can take online as well, and you have an option to upgrade if you want a five-day or seven-day Windsor Week Package.

The late season review that we just talked about, the five-day, three-day, or seven-day at Windsor, that component, again as I said, includes the Secret Sauce and then the review workshops, which is in several locations, three days either online or in-person. And then the five-day review occurs in New York as well as Dallas–Fort Worth area. And then you have the seven-day that occurs in Windsor, Ontario, Canada.

Apart from that, we have a late-season product known as the Schweser Mock. We offer this in conjunction with partnership with many, many societies, a hundred or more societies around the world who administer our mock, and for those of you who don’t have access to that in-person mock, you can do that online as well. And the nice thing about the mock exam is, again, you can benchmark yourself against your peers, but also you have a tutorial, an online interactive tutorial of videos that go over every single question in that mock.


So to summarize, one of the steps in the preparation process, one of the steps in a successful preparation process, if you will, number one, start early, don’t delay. It is really a tough exam. The sooner you start, the more thankful you will be. Come April, May when the stress level starts ratcheting up. Step two, read SchweserNotes so as to get a clear and concise understanding of the underlying material. Step three, is supplement the SchweserNotes with videos. So when you are reading it, you can use a different media, a different modus, different mechanics to, again, understand the material. And it gives you variety, and therefore, increases the staying power as we talked about earlier. Step four, do practice. Put pencil to paper, do end of reading chapters, do end of reading chapters in the official curriculum books. This will give you an idea as to what the things are you really understood. These are the things I need to revisit, for example.

Do questions from the QBank. So, you do one reading. Do some questions at the end of the reading in SchweserNotes, as well as the curriculum. And you do five readings, and that is the end of the study session. Now, you go to the QBank and see whether you really remember those readings or not. Do the next reading in this study session and so forth. Remember, the QBank is not a substitute for the Practice Exam. The questions in the QBank are not necessarily all in item set. There are some item set questions, but a lot of them are stand-alone, because the purpose of the QBank is primarily to help you retain what you are learning. Do the self-test at each of the topic areas, meaning if you are done with equity, make sure you go to the self-test where equity is to get an idea as to what your retention is.

Next step is to attend the late season review workshop. In a three-day or a five-day or workshop, what do you do? In a seven-day more so, but a three-day or a five-day workshop, what you do is you learn the material one more time in a very broad overview. So you use mind maps that show you have learned this material, but you still have some holes in your learning. You have forgotten some of those things, you have gaps.

So we give you a broad overview so as to refresh your memory, and then we work actual item sets to give you a hands-on practice before the exam itself. So you not only are able to do some items sets, but also you are given expert tips on what are the best ways to approach that item set, so that you are ready for it when you see it on the exam.

Take the Practice Exam in our Practice Exam, Volume 1 and 2. The more you do, the better it is because each practice exam covers a set of LOSs. What we are trying to do is do it with the six practice exams, we covered almost all LOS. And it is, yeah, it is going to be more geared toward more heavily tested areas, but nonetheless, you get a comprehensive understanding of where your gaps in learning are. Plus, you get to benchmark yourself so others…so you know whether you are in good shape or not. And if you’re not, what can you do before the actual exam? So use the Performance Tracker to identify your weak areas to address.

Take the live Schweser Mock Exam. Again, if you are able to actually go to your physical location and take it, that really experience some exam-like conditions. It’s never going to be the same stress level as the actual exam, but it gives you a dry run of what you can kind of expect come exam day.

And for those questions that you did not do correctly, even for the questions you did correctly, use the tutorial. That will be a nice change of pace anyway, and you can get good pointers there as well. The last thing is, remember, ethics is special. It is the material CFA Institute loves to put a little extra weight on. But still reread the ethics one more day, one more time on a Friday, prior to the exam.

So what do CFA charterholders say? Now, I realize my opinion is going to be very biased, right? However, what I want you to do is to ask your peers, somebody who has actually passed the Level II exam, not somebody who has failed. So ask people that have actually passed the Level II exam what they did. I’m pretty sure you will see, overwhelmingly, people describing Schweser. You’ll be glad you did.


Looking for more tips on how to pass the Level II exam? Enroll in one of our CFA Exam Level II PremiumPlus™ or Premium study packages to receive expert instruction and study materials that provide a solid framework for preparing, practicing, and performing on the CFA exam.

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