"The CFA Charter is turning from a rare Porsche 911 to a Boxster"

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In the spirit of “never let a good crisis go to waste”, we feel that the CFA® Institute (CFAI) was quick to leverage the global health pandemic brought about from COVID-19 to justify wide-sweeping exam changes that we feel directly threaten the prestige of the CFA charter and increase expected revenue for the Institute. In the past, passing CFA exams, becoming a CFA charterholder and joining the CFA community was coveted for its historical rarity and for the notoriously difficult process that required huge sacrifices of time, money, and nerves to complete.

Reviewing the host of recent program changes, it seems to us that the CFA charter is transforming from a rare Porsche 911 into an entry-level Porsche Boxster with a vinyl interior. 

On all fronts, we argue that these program changes directly reduce the difficulty of the CFA exam process. CFA Institute has gone to great lengths to publish what we consider to be propaganda in favor of its changes, and to downplay the that it stands to benefit from an expected increase in registration fee revenues. Below we analyze each program change presented, CFA Institute’s reasoning, and why we think the reasoning does not hold water:

  1. Increasing testing frequency: Level 2 and Level 3 exams to take place twice a year
    CFA Institute's Reasoning: ‘Employers are frustrated by one sitting per year because they lost large amounts of their staff at the same time’ – Stephen Horan, Managing Director, Americas Region CFA Institute

    Actual impact: Increased testing frequency has the potential to de-motivate candidates because any doubt of failing is assuaged by the ability to retake the exam on the same curriculum just six months later. The prior policy of one sitting per year for Level 2 and Level 3 exams required immense vigilance, stamina, and dedication to the cause—pillars of CFA Charterholders.  We feel that the new system favors memory retention and acts as a cushion for ill-preparedness. At the same time, we feel the CFA Institute will benefit greatly from any lackadaisical candidate preparation by offering the opportunity to re-take an exam over the same curriculum in just 6 months. [Editor's Note: The CFA Institute said previously that it will not allow candidates to sit exams 'back to back' and that if a candidate passes level II in February, they will not be able to sit Level III in May.]


  1. Reducing the number of questions for all exams (from 240 to 180 multiple choice questions for Level 1 & 2

The CFA Institute's Defense: The CFA Institute wrote that it paid for “psychometric research which clearly showed that a shorter exam would not affect our ability to reliably determine who has demonstrated the required competency to pass the exam”

Actual impact: In our opinion, the CFA Institute just made luck a more important part of the exams. A frustrating part of the CFA exam program is the sheer volume of information candidates are required to master contrasted by the narrower subset of knowledge that is actually tested on the exams. This means there's an element of luck to the examinations. - If a candidate didn't study a section because he or she ran out of time or it was too confusing, the chance of said section appearing on a 180-question exam versus a 240-question exam is decreased. Reducing the number of questions by 25% therefore significantly increases the role of luck in the examination process. We don’t remember seeing luck as a learning outcome statement.

  1. Shortening the testing time from 6 hours to 4.5 hours (total appointment time from 8 to 5.5 hours)
    The CFA Institute's Defense: The CFA Institute wrote that it paid for “psychometric research which clearly showed that a shorter exam would not affect our ability to reliably determine who has demonstrated the required competency to pass the exam”

    Actual impact: The required level of endurance has been reduced. Part of the prestige of the charter holder is applying knowledge under pressure and when you're exhausted. This mimics the real world, and it tests stamina. Put simply, you do not want the surgeon who “can do” a 6-hour surgery because they performed well in a 4.5 hour surgery. You want the surgeon who has performed well in a 6 hour surgery that was not a hypothetical extrapolation.

Candidates are familiar with the resounding emphasis CFA Institute places on denouncing paid-for credit ratings, blaming them for their involvement in the 2009 Financial Crisis. We have doubts about the study CFA Institute invested in to validate their decision on exam changes. To our knowledge, CFA Institute did not publish who conducted the study, how it was performed, detailed results, or any qualifying information. If the ‘study’ results had not been favorable to the change CFA Institute wished to implement, we probably would not have seen them. What is that called again? Confirmation bias. 

  1. Minimum wait time for failing Level 2 & Level 3 has been reduced from 12 months to 6 months

CFA Institute's Defense: CFA Institute hasn't addressed this directly (to our knowledge), but Paul Smith, former CFA Insitute President & CEO ’15-‘19m said it “will have looked at that and assessed its impact on the overall quality of the designation. Remember its [sic] not meant to be a memory test!.” 

Actual impact: Bring your calculator, pencils, and memory. Regardless of what the CFA exam is ‘meant’ to be, with over 8,000 pages of dense material in the candidate curriculum books, memory is a massive part of the examination process. We feel that the shorter waiting period is to candidates' advantage, particularly if candidates retake exams within the same curriculum year. Reducing the required wait time for failing a level by 50% effectively makes the exam easier, and significantly reduces the pressure of opportunity cost for candidates should they not perform on gameday (which now you get to pick – more on this in point 6. below).

  1. Not having to adjust for curriculum changes if you fail the year’s first exam & retake it in 6 months

CFAI Defense: No readily available / public defense was found by our team

Actual impact:  What seems to be a static curriculum contrasts with the dynamic nature of the industry and appeals to the lazy candidate. Beyond the previous pain of failing a Level of the CFA exam Program and knowing you had to wait 12 months for your next shot (for Level 2 & 3), you also had to account for the year- over-year curriculum & hence exam changes. While old notes may still be somewhat relevant, the order may be completely different, parts removed or changed, and new sections added. The new CFA Institute policy provides candidates retaking an exam six months later in the same year an unprecedented opportunity to not have to make any of these adjustments as the second administered exam uses the same curriculum.

  1. Moving from a globally aligned exam date to a 10-day ‘testing window’

CFA Institute Defense: “This shift in how we deliver the exam also supports our commitment to sustainability efforts and to providing candidates with a safer testing environment….Providing multi-day exam windows to eliminate the practice of all candidates sitting in a single day”

Actual impact: It seems to us that the ability to cheat has become much easier. The day 10 test taker has a significant advantage over the overly eager day one test taker by likely being clued-in on which topics to concentrate on over the next 9 days as well as what not to waste time on. Will the questions be the same for the day 10 vs day one test takers? There are no details as of yet, or at least not that we've seen. While we certainly hope not, in the context of the detrimental changes covered here it certainly would not surprise us if CFA Institute had “invested” in “independent” studies that “clearly show” using the same questions for each exam across the 10 day testing window does not make it easier for the day 10 test taker who benefits from information leakage (despite this being a breach of the Code of Conduct – it will happen).

  1. Effectively reducing the work requirement for the CFA charter from 4 years to 36 months (3 years)

CFA Institute's Defense: “These modifications will better align our requirements in the changing workforce – namely an increase in time spent earning advanced education, part-time professionals, flexible schedules, and remote work arrangements.”

Actual impact: This change allows CFA Institute to collect membership dues earlier. Sometimes you get away with saying a lot of words without any clear argument. This is not one of those times. The Institute simply went ahead and effectively shaved off a year of the work experience requirement, further lowering yet another barrier to earning the CFA charter that tens of thousands of previous candidates had to overcome. 

  1. “Pre-Testing”

CFA Institute's Defense: “CBT examinations will now include a few trial questions on each examination that will not contribute to a candidate’s score. These will appear randomly during the exam and candidates will have no way of knowing which questions are scored and which are trial questions, which neither help nor hurt a candidate’s result. ...This is an extremely common practice among testing organizations and is often called pretesting.” --CFAI

Actual impact: This change effectively reduces the number of scorable questions further and increases the luck component. Most candidates assumed this was happening previously, but now rumor has become fact, and the only pencils that have been sharpened are those of the exam writers. Not to mention, everyone loves a “well he/she is doing it, so I can too” argument. (This could be included in the reduced questions category.)

CFA exam candidates are already parabolically out of Control

The chart below highlights the extent to which number of CFA exam candidates is already increasing at an exponential rate.

The newly minted CFA Institute changes will result in the candidate counts to parabolically increase. At the same time, the fact that the exams are easier to pass (we think) will result in a flood of new charterholders.

All this will mean a handsome payday for people at the Institute, but a dilution of the accreditations held by existing CFA Charterholders.  We implore CFA Institute to explain how the aggressive increase in expected CFA Charterholders does not reduce the reputation and integrity of the charter. And we're asking fellow Charterholders to help us in making our voices heard. If you feel similarly, please email CFA Institute CEO, at margaret.franklin@cfainstitute.org and request the recent CFA exam changes to be placed to a charterholder vote.

Photo by Eugene Chystiakov on Unsplash

This article is the opinion of four CFA Charterholders. CFA Institute disputes its facts and has published this rebuttal. 

CFA Institute does not endorse, promote or warrant the accuracy or quality of eFinancialCareers. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

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