How to fail the CFA level 2 Exam


Ahhh January, the wonderful month that you are. A month filled with ambitious New Year's resolutions and regret about consumption habits throughout December. It is also the month when the worrying realisation that you have probably exchanged your 89th and 90th years for guaranteed fun now, and the dull thuds caused by both the Chartered Financial Analyst (CFA) curriculum landing on your doorstep and the corpse of your social life landing next to it.

Worry not dear reader. You have made a commendable decision to continue your CFA journey and it is a decision you will love in hindsight. To help you out, here are some tips on improving your chances of passing. As Howard Marks said, "Most investors' results will be determined more by how many losers they have and how bad they are, than by the greatness of their winners."

So without further ado, how to fail the level 2 exam of the CFA program:

1 - By not respecting the new format

There are two parts to this, the lower question count, and the vignette format.
Level 1:

  • The first exam in the CFA program covers a lot of material.
  • 240 questions each separate from the last sounds daunting, but on the bright side, you are likely to get a reasonably even coverage of topics.
  • This is good, because if you have not quite mastered a section, you can just guess the answer and move on, without losing too much.

Level 2:

  • The second exam, however, is slightly different.
  • There are 120 questions organised into 20 six-question vignettes.
  • Each vignette covers a topic (sometimes two), so the coverage is much more concentrated, and you can end up with 6 questions (12 if you're unlucky) where you're left with educated guesswork and prayer as your only aids in answering.
  • At the risk of stating the obvious, this is a much bigger problem, because with 120 questions, each is worth twice what it was in the level 1 exam, and now there are 6 of them covering the same topic.

Level 2 Tip: With the vignette format, read the vignette quickly, but not so quickly you miss crucial information. The numbers aren't the only important information in there.

2 - By ignoring lower-weighted topics

300 Hours did an analysis of the level 2 results and found that one of the biggest differences between passing and failing candidates is not the performance in the big topics (FAA, equity, fixed income etc). The difference lies mainly in their performance on the smaller topics (econ, quant, alternatives etc).


Source: Schweser Level 2 FAQ
  • Don't ignore the small topics.
  • You can only get 100% correct in any topic and you'll get diminishing marginal returns per hour spent studying it.
  • If you're already getting 70-80% correct on the big topics, you'll probably benefit more from improving that 20% you keep scoring in econ, than pushing the 80% up to 87%.

3 - By doing too few practice exams & skipping the CFA Institute practice exam


Do a practice exam about 4 to 6 weeks before exam day. This will be a soul-destroying exercise because it is likely that you will score lower than you had hoped. Freak out if you must, but once that exercise in self-indulgence is done, break the exam down by topic and patterns are likely to emerge.

  • Bombed derivatives? Focus your study there for a few days.
  • Forgot a formula? Write it on a flash card and revise it on the train to work.
  • Then rinse and repeat.
  • The CFA Institute gives you a practice exam. This is probably the best resource you have to simulate the exam day, so make sure you do it at some point.

4 - By not planning properly

This last point is critical. I have definitely made heroic assumptions as to how much study material I would complete every day, only to be frustrated as I fell further and further behind. There are a few things I will point out:

  • Studying before work will be difficult but manageable and you're likely to have a higher capacity to learn in the morning.
  • Studying after work is unlikely to happen and probably will not be overly productive if it does, especially if you are finishing late.
  • Make sure you build some buffers or days off into your timetable so if you accidentally find yourself at a football game on a Friday night (which happens to the best of us), or become unwell, you will not fall behind or burn out.

If you have any tips of your own, questions or comments, please add them below. Good luck to everyone studying for the exams!

Mod Note (Andy): author's bio - James Crombie is a member of the 2016 Masters in Finance Class at London Business School. James started his career in Australia at Ernst & Young as an accountant, where he worked while completing his undergraduate degrees in finance and biomedical science. He then worked as an analyst at an Australian Asset Management firm covering Australian equities and derivatives and passed level 2 of the CFA exam before shipping off to London. He plans to work in asset management in London upon graduation. He's a keen marathon runner, rugby player, and PG Wodehouse enthusiast and sits on the executive committee of the Investment Management Club at LBS

Comments (13)

Jan 18, 2016

Agreed with all points above! (From someone who failed level 2 once, but is now recently Chartered). I will be sitting back this Memorial day, beer in my hand, should have a bonfire with my CFA books too... How amazing it will be.. Sorry tangent!

Planning was key, when reading through curriculum first time I wouldn't get hung up on a section if you haven't gotten a total grasp on it. I let that happen on Quant, a small portion of the exam and was playing catchup beyond that. I left myself probably two weeks less time for total review and practice tests which probably would have been what got me over the hump if I hadn't let myself get stuck on Quant and Economics.

Agreed don't ignore smaller weighted sections. Further that, don't ignore the 2-3 page readings of larger topics since they are just as likely to have questions on them as any other area. I would make the effort to at least read everything once, so even if you haven't mastered a quick hit concept, you can potentially make an educated guess. Good luck in your pursuits!

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Jan 18, 2016

Agree with the post and above poster. I'll hopefully be having my last experience with the CFA exams in the form of level 3 this June.

Anyways, one thing that I would add to this is that I would heavily emphasize the need to UNDERSTAND the material. Trust me, with level 2 you will be doing more than your fair share of memorizing, no matter how you cut it. But you absolutely MUST develop an understanding of both the small and large areas of the topics. Know what is going on, understand the concepts (large and small) and be able to apply those concepts in potentially abstract ways. As if the sheer quantity of material isn't already challenging, the CFA Institute isn't going to be nice enough to throw you easy questions that are right out of the material. They will certainly ask you the usual kinds of questions that will test your understanding of the application of the major concepts, but they can also ask you questions about seemingly small details regarding a topic. Don't think you can skip over the shorter pieces of the larger sections, as the above poster mentioned.

In my opinion, I think the people that are going to pass the first time are going to have a good working knowledge and understanding of the topics being tested and are flexible enough to think through in a timely fashion questions covering areas of the material that may not have seemed that important while you were studying it.

"Successful investing is anticipating the anticipation of others". - John Maynard Keynes

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Jan 18, 2016

Subscribed. Level 1 guy here.

Jan 18, 2016

You should add "Not taking a live mock exam" to the list. Schweser (not sure about the other providers) partners with a bunch of local chapters to put on the mock exams 3-4 weeks before the exam. It's a great litmus test of what you actually know and don't know. If you can score in the upper 50's (%) on that, then study what you didn't know for 3 weeks you'll be fine.

Jan 19, 2016

Can I get a series of how to fail level 1 and 3?

Jan 19, 2016

It'd be the same as above.

Jan 19, 2016

I know lol was sarcasm

Jan 26, 2016

Not really. I'd say advice for all 3 would be to get through the reading as soon as possible so you can work on practice problems, but for level 1 I'd veer more towards flashcard/rote memorization, whereas for level 3 practicing essays & learning the format is really important.

Jan 19, 2016

Completely agree with the above. I would also say keep a study hour log in Excel and try to hit 320 as a minimum.

Also, don't freak the week of. I know several people that were more intelligent/prepared than me but failed while I passed because they were complete wrecks leading up to the exam.

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Best Response
Jan 19, 2016

General tips from someone who passed Level II last June:

  1. Plan out your studying, stick to it, and pace yourself. Don't start really studying in March because you'll be behind on pace and it'll ruin your life outside of work. Passing CFA exams does not come down to how smart you are. It comes down to how disciplined you are.
  2. Try to study a little every day. It'll help you retain information better. Even 30 minutes of flash cards before going to bed helps. It's also no fun to study 25 hours on the weekend because you didn't study at all during the week.
  3. Study more than 300 hours. The average candidate studies 300 hours, but the average candidate also fails. It is better to study for 350 hours once and pass it than have to study 250 hours twice because you failed it. Also track your "real" hours studying. Take out any minutes you spend on your phone or watching TV in the background.
  4. Read all the Schweser books. They are condensed versions of the CFA Institute materials and will save you time. Don't skip anything. Do all the questions.
  5. Complete all the CFA Institute material End-of-Chapter questions. Don't skip these as they are critical.
  6. Create flash cards and review them daily, if you can. Level I is all about memorizing mundane formulas and concepts. This still helps with Level II concepts.
  7. Aim to finish reviewing the books once, or twice, at least 45 days before the exam so you can starting really reviewing. This gives you time to work on your weak spots and refresh on stuff you read earlier in the study program.
  8. Use the Schweser Q-bank to do literally 1,000+ questions. Hammering away at practice questions is the key to success for at least Level I and II.
  9. Aim to take 5+ practice exams. Practice exams set the tone for the real thing. Target scores > 75% in your last few attempts.
  10. Read ethics first AND last. The ethics portion of the exam is sneaky. If you don't know all the little quirks of the CFAI, they can wreck your exam score. If you know these like the back or your hand, it's like a 15% free bonus on your exam. Plus, if you are a borderline passing candidate, the CFAI looks at your Ethics score to see if they should pass or fail you.
  11. Don't hyperventilate or cry during the exam. I've seen both happen.
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Jan 21, 2016

Another note of advice. ensure your passport info is correct NOW. Not the week of the exam. Luckily they changed it but it added unneeded stress of Exam day. IF you got into level I last year your should be fine. I registered with passport the last year they still accepted your drivers license and just gave benefit of the doubt it would be fine. I guess I failed that year anyways so it doesn't matter!

Jan 23, 2016

Never stop doing practice questions - was the only way I passed the first time.

Jan 25, 2016
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