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The Differences Between Level II and Level III of the CFA® Exam

By: Kurt Schuldes, CFA
January 11, 2021
Man researching the difference between the Level 2 and Level 3 CFA exam

If you’re reading this, chances are you’ve successfully passed (or at least sat for) Level II of the CFA® 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.

Multiple Choice vs. Constructed Response

At Level II, you need to demonstrate that you can learn, recall, and apply long deterministic processes through a set number of vignettes, each followed by 4–6 multiple-choice questions. At Level III, you apply those previously demonstrated skills, plus the ability to apply judgement and write. The first half of the Level III CFA exam is composed of constructed response questions, and the second half is a series of vignettes, each with a set of their own multiple-choice questions.

The constructed response section of the Level III CFA 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 without the multiple-choice answers to choose from. This is a skill that can be learned with practice.

Connected Topics

Compared to Level II, Level III also has more integration of topics in a question. For example, a constructed response question or 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® Exam 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 exam.

Curriculum Breakdown Differences: The 2022 Level II curriculum is broken into 47 readings and 17 study sessions. The 2022 Level III curriculum is constructed of 35 readings and 16 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 range of 10–15%. Level III consists of 7 topic areas with 7 study sessions combined into the single topic area of Portfolio Management with an exam weight of 35–40%.

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