In the past few years, the CFA Program has undergone some pretty big changes. From a radical change in exam schedules to a shift to computer-based testing (CBT), the CFA Program has evolved a lot.
And on 20th March 2023, CFA Institute announced more changes to bring this evolution to the next stage.
The six changes are:
More details below, including exclusive Q&As from CFA Institute!
CFA Institute has extended CFA Program candidate eligibility by one year to include university students with two years remaining in their undergraduate studies.
This is already in effect.
The expanded eligibility rules apply to CFA Level 1 candidates only. For CFA Level 2, you must have received your undergraduate degree before your Level 2 exam date.
Aspiring CFA candidates can now try their hand at CFA Level 1 sooner compared to the previous eligibility rules. But does it dilute the CFA charter?
We believe the expanded eligibility will enable a greater pool of CFA Level 1 candidates, but not necessarily increase the pool of charterholders, as candidates will still have to pass the same three exams to obtain the charter. If anything, this might lower the pass rate for CFA Level 1 as a greater, greener and more generalized candidate pool attempt the exams.
CFA Institute will be investing in an “improved recognition strategy”, including updated digital badging. This will acknowledge candidates’ achievements at Levels 1 and 2.
This is announced as happening “in 2023”, which means there will likely be more announcements when this is implemented.
All candidates and charterholders will have their digital badges changed as part of this, although I’m guessing candidates at Level 1 and Level 2 may get a bigger upgrade to what they have currently.
We were a little confused with this one, since there are already digital badges available for CFA Levels 1 and 2 (see here for instructions on how to get them). Here are how they currently look:
We asked CFA Institute for more clarity on this, and got more details:
To quote philosophers Linkin Park, but in the end, does it matter? Do employers value whether an interviewee passed CFA Level 2, and if they do, do they care if it’s in the form of a shiny badge?
CFA Institute seemingly hopes so. With their investment in marketing, the signal of “passed CFA Level X” may increase in visibility and value in the coming months and years – at least that’s what CFA Institute is aiming to achieve.
So candidates may be able to reap career benefits at CFA Levels 1 and 2 and not wait for the charter – although our salary data shows that they likely already do.
The CFA Program has been expanded to include Practical Skills Modules (PSMs) that reflect practical, relevant skills training to provide candidates with on-the-job application of what they are learning in the curriculum.
A PSM consists of a combination of videos, multiple-choice questions, guided practice, and case studies to develop candidates’ practical skills.
All CFA levels will eventually get PSMs. Here’s the launch timeline:
Over time, the idea is for PSMs to also be available to charterholders and candidates to take in their own time, as part of their professional learning.
Adding a practical aspect to the CFA Program has been something that has been desired for a while now. Practical skills like financial modelling and coding are key to modern financial careers, and by adding these PSMs, CFA Institute are attempting to ensure that the CFA Program supports candidates as best it can.
Some candidates’ reactions to PSMs have been along the lines of “well, this isn’t in-depth enough / will teach poor practices / doesn’t make you good at modelling or coding”. I think that may be missing the point. Having an introductory course in this will familiarize candidates to the concepts, allowing them to understand whether this is a skill they want to dive into further, and allow them to have better context when they encounter this in their career.
The PSMs look well-designed for their intention – that is to introduce candidates to some practical concepts. If you want to thoroughly learn a coding skill, then a coding course would be more useful, rather than expecting the CFA Program to fully teach you Python.
CFA Institute are taking an approach to the CFA curriculum with an emphasis on “streamlining” and “focus”. As part of that, for CFA Level 1, they are taking some introductory financial concepts from Level 1 and reclassifying them as prerequisite material. This means they won’t be directly tested anymore, but will still be needed to understand the remaining tested topics in CFA Level 1.
All candidates who sit for exams in from 2024 will be tested on the updated Level 1 curriculum. More information on what has changed by level can be found on the CFA Institute website when registration opens in May.
For now the most changes have been at CFA Level 1. Level 2 curriculum has changed slightly to reflect this new focused approach, whereas CFA Level 3 has not changed yet.
We believe this will have a strong impact on candidates that have no prior knowledge or experience in finance, economics or statistics.
The reason is that a lot of the foundational and introductory content – such as time-value of money, basic statistics, microeconomics and introduction to company accounts – will be moved out of official tested material, to make way for more advanced material while keeping to the estimated 300 hours’ worth of study time.
While the phased-out introductory content are still available for candidates to access and study free of charge, this effectively means that candidates with no prior knowledge will have to study the introductory material AND the main curriculum to prepare for the Level 1 exam.
CFA Institute has stated that according to their analysis, 9 out of 10 candidates would not necessarily need to review these introductory content. Even if true, this new focused approach would likely mean that the odd 1 out of the 10 would have to put in significantly more effort to keep up with the rest.
According to CFA Institute, they believe 9 out of 10 candidates already know this introductory content, so by making this prerequisite, they are able to advance the content of the curriculum while keeping the same study time estimates as before.
We believe it does make life harder for them, yes. We directly asked CFA Institute and they reiterated that they do still make the material available to study, albeit untested.
We believe the changes clearly means that there is more material to master in the Level 1 curriculum. Whether or not Level 1 would be harder to pass would also depend on the MPS and exam difficulty, which can be subjectively adjusted by CFA Institute.
CFA Institute are now offering a Level 1 Practice Pack. It includes 1,000 more practice questions and six additional mock exams to go with the default study materials. This will cost an extra US$ 299.
The CFA Level 1 Practice Pack will be available for purchase in May 2023 for candidates registering for the February 2024 exams.
For now, only Level 1 candidates will be offered the Practice Pack. There are plans and considerations for CFA Levels 2 and 3, but nothing has been confirmed yet.
Having more practice material is something that’s always helpful, and we always recommend to make the most of the included CFA Institute practice questions. More CFA Institute practice questions, albeit at an additional cost, can only be a good thing for candidates’ pass chances.
But what about the extra cost? We quizzed CFA Institute about this, and whether they considered making the Practice Pack available to all, at the cost of a slight increase in exam fees.
Their response does have its merits:
CFA Institute’s Practice Pack offers something no other provider can:
Even so, it may not be a straightforward argument whether it’s worth the purchase. There is a diminishing marginal return even on practice questions – that’s why we have an optimum number of mock exams that we recommend to our readers.
Your Level 1 exam registration already includes 2,000 practice questions and 2 mock exams at no additional charge. That is a healthy chunk of practice material. CFA Institute themselves have stated that practicing 1,000 exam questions is a key tipping point to passing the CFA exam, giving candidates a 2x chance at passing compared to candidates who did no practice.
US$ 299 for 6 mock exams and 1,000 more practice questions by CFA Institute is invariably good value, and if you can afford the extra cost I would definitely go for it. But should you prioritize it? Before more practice questions, you may want to consider if attending classes, or having summarized notes, or indeed practice questions from other providers would be better for your pass chances and development.
Everyone studies differently, so we suspect everyone would have differing preferences on this.
Personally, I don’t think I would be able to get through all of that additional practice material – six mock exams are no joke! I found third-party notes really helpful, so I would likely get those first, and get CFA Institute practice questions if I’ve finished everything, and still had time and motivation left for even more practice.
Level 3 is getting three variations, called Specialized Pathways. Two new versions of Level 3 will be called Private Wealth and Private Markets. The ‘original’ content will form the Portfolio Management path.
This will be introduced at Level 3 for the 2025 exams. There are no current plans to introduce Specialized Pathways for Levels 1 and 2.
Approximately 30% of Level 3 content will differ between the three pathway options, with approximately 70% being identical ‘common core’ material.
You choose your Pathway at exam registration. You can change this, but you’ll have to ring up CFA Institute to do this.
You can only choose one Pathway for your Level 3 exam. But eventually CFA Institute wants to make the Pathways available for charterholders and members to access as part of their Professional Learning material, allowing you to go back and add another Pathway to your skill set if you want.
Approximately 30% of Level 3 content will differ between the three pathway options, with approximately 70% being identical ‘common core’ material.
The CFA charter itself will not change, nor indicate your Specialized Pathway. However, CFA Institute are looking at differentiating their digital badges by Pathways.
CFA Institute has stated that Pathways won’t mean variations in Level 3 exam difficulty. However, since candidates will all have topical strength and weaknesses, it’s likely that you’ll find one Pathway more accessible than another!
Candidates have had polarizing opinions on these changes. Some news, like the Practice Packs, have been generally welcomed, but others such as Specialized Pathways and PSMs have had detractors.
What do you think? Let us know in the comments below!
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This is great, thank you for elaborating on the upcoming changes! Along with all the other articles, you guys do a great job at demystifying one of the most challenging exams/topics, much appreciated!
Do you have an idea what type of content would be under 'private markets'?
I think it'll be things like investment banking transactions such as equity and debt capital markets, project finance, etc.