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Exam Differences: CFA® Level II vs Level III

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

Differences Between CFA's Level II and Level III Exams:

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.

If you are still preparing for the CFA Level II Exam, you should also read about the top 10 differences between Level I and Level II.

TABLE OF CONTENTS:

  1. CFA Level II vs III: Multiple-Choice Section Differences
  2. CFA Level II vs III: Constructed Response Section
  3. CFA Level II vs III: Exam Curriculum
  4. CFA Level II vs III: The Number of Reading and Study Sessions
  5. CFA Level II vs III: Pass Rates
  6. CFA Level II vs III: Topic Weights
  7. CFA Level II vs III: Hours of Studying

CFA Level III Exam's Multiple Choice Question Section is More Difficult than Level II

For the Level II CFA exam, you’ll 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. For the Level III CFA exam, you’ll need to apply the skills you learned from the Level II exam, plus the ability to apply judgment skills and writing skills.

CFA Level III Exam's Constructed Response Question Section

The constructed-response section of the Level III CFA exam is the biggest difference from the Level II CFA exam. These response questions are open-ended, which require constructed answers without multiple choices to pick from.

According to most candidates, it’s also the hardest part of the Level III exam. That feeling is reflected in the lower scores of this section compared to the multiple-choice section of the exam. The constructed-response section requires new skills, which can be learned with practice in a Kaplan Schweser essay review workshop.

The CFA Level III Exam Curriculum can be More Difficult

Level III of the CFA exam has more integration of topics in a single question. For example, a constructed response question or item set question may combine the concepts from Study Session 2 on Economics with Study Sessions 7 and 8 on Equity Investments.

The curriculum on the CFA Level III exam can also be more subjective than the Level II exam. 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.

 

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More Readings and Study Sessions Required for CFA Level II than Level III

The curriculum for the 2022 Level II CFA exam curriculum is broken into 47 readings and 17 study sessions. The 2022 Level III CFA exam curriculum is broken into 35 readings and 16 study sessions.

Differing Pass Rates Between CFA Level II and Level III Exams

The 5-year average pass rate for the Level II CFA exam is 46%. The 5-year average pass rate for the Level III CFA exam is 54%. At first glance, this seems reasonable until you factor in that 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.

Differing Exam Topic Weights Between CFA Level II and CFA Level III

The CFA exam topics are weighted differently between Level II and Level III exams because in Level II you are tested on 10 topics whereas in Level III you are tested on 7 topics. 

CFA Exam Topics
CFA Level II Exam Topic Weight Ranges
CFA Level III Exam Topic Weight Ranges
Ethical & Professional Standards10-15%10-15%
Quantitative Methods5-10% -
Economics5-10%5-10%
Financial Statement Analysis10-15% -
Corporate Issuers5-10% -
Equity Investments10-15%10-15%
Fixed Income10-15%15-20%
Derivatives5-10%5-10%
Alternative Investments5-10%5-10%
Portfolio Management & Wealth Planning10-15%35-40%

 

Is the CFA Level III Exam Harder than Level II?

Yes, the Level III exam is harder than the Level II exam because the Level III exam contains a constructed response section, and your knowledge in Portfolio Management and Wealth Planning makes up 35-40% of your score.

CFA Level III Exam Requires More Studying & Prep than Level II

The average candidate for the Level II exam reports spending an average of 328 hours of studying. The average Level III candidate reports spending 344 hours preparing for the exam, which means you should expect to study on average an extra 16 hours for the Level III CFA exam.

Next Steps for Level II & Level III Candidates

As you get ready for your next CFA exam, consider making a Kaplan Schweser exam prep package—complete with classes, practice exams, and mock exams—the centerpiece of your mission to earn a passing grade.

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