Man researching the difference between the Level 2 and Level 3 CFA exam

Posted by: Kurt Schuldes, CFA
Published: February 19, 2019

If you’re reading this, chances are you’ve successfully passed (or at least sat for) the Level II CFA® Program exam. Congratulations on making it this far! You’ve probably heard Level III is quite different from Levels I and II. This article will break down how Level III is different, and how you will need to modify your approach to be successful.

For starters, it’s important to acknowledge that each level of the CFA Program exam requires you to flex new muscles and use new skills. At Level I, you complete single multiple-choice questions to demonstrate a basic grasp on the pertinent content. At Level II, you need to demonstrate that you can learn, recall, and apply long deterministic processes through 20 vignettes, each followed by six multiple-choice questions. At Level III, you apply those previously demonstrated skills, plus the ability to apply judgement and write. The Level III CFA Program exam is composed of 50% constructed response questions in addition to 10 vignettes, each with six of their own multiple-choice questions.

The constructed response section of the Level III CFA Program exam is the biggest difference from Level II. And according to most candidates, it’s also the hardest part of the Level III exam. That feeling is reflected in the lower scores of the morning section compared to the afternoon multiple-choice section of the exam. The morning section requires a new skill of answering open-ended questions on a blank piece of paper without the multiple-choice answers to choose from. This is a skill that can be learned with practice.

Compared to Level II, Level III also has more integration of topics within a question. For example, a constructed response question or six-part item set question may combine the concepts from Study Session 4 Behavioral Finance and Study Sessions 5 and 6 on Private Wealth Management. Also, Level III is more subjective. For example:

  • The curriculum doesn’t state what an “average” rate of return is for an investor, yet the candidate must be able to calculate and interpret the required return with the investor’s level of risk tolerance.
  • The curriculum doesn’t state what asset class weights are considered “normal,” yet the candidate is expected to pick out the best portfolio from a group of portfolios.

Additional Key Differences between CFA® Program Level II and Level III

Pass Rates: Taking a look at the 5-year average, the Level II pass rate is 46% with the Level III 5-year average pass rate being 54%. At first glance, this seems reasonable until you factor in the Level III exam is easier and has a more qualified group of candidates. So why isn’t the pass rate even higher? Simply put, the constructed response morning section of the Level III exam makes it difficult to pass. You don’t get to Level III without having already passed the first two levels. But even for that more qualified candidate pool, there’s no guarantee of success. Nearly half still fail the Level III CFA Program exam.

Curriculum Breakdown Differences: The Level II curriculum is broken into 51 readings and 17 study sessions. The Level III curriculum is constructed of 37 readings and 19 study sessions.

Average Hours Spent Studying: The average candidate for the Level II exam reports spending an average of 325 hours of studying. Level III candidates report spending 358 hours preparing for the exam.

Topic Areas and Exam Weight: For Level II, there are 10 topic areas with the highest single-topic exam weight of 20%. Conversely, the Level III Program consists of 7 topic areas with 10 study sessions combined into the single topic area of Portfolio Management and Wealth Planning with an exam weight of 35% to 40%.