Why Is The CFA Pass Rate So Low, and the MPS High?

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Since the CBT exam format has gone live for the CFA exams, the pass rate has taken a plunge. Our minimum passing score (MPS) estimates have also indicated an uptick in the MPS. Naturally, candidates are not sure what to make of the changes.

Mainly, why is the CFA pass rate so low now? Is the exam actually harder or easier? Should candidates be studying harder?

Read on to find out what CFA Institute has said about the situation, and our advice on how best to prepare for your exam!

CFA Institute explains why is the CFA pass rate so low – deferred candidates aren’t performing well

CFA Institute has released a video attempting to explain the reason behind the low pass rates, featuring Chris Wiese, Senior Head of CFA Exam Development.

Chris’ first big point is something we’ve always reiterated to our readers: CFA Institute does not use a forced, relative curve, where a certain proportion of candidates pass the exam each year. Instead, they use a fixed bar, where a consistent level of competency will pass.

We have explained this before. Over and over again, so if you’re a 300Hours regular reader, hopefully this isn’t new to you. If a candidate does badly, they are not making the odds of passing better for everyone else. Everyone is judged independently.

Low CFA pass rates due to underperforming deferred candidates due to the COVID pandemic

Their second point is a new revelation – according to CFA Institute’s analysis deferred candidates (due to the pandemic) are consistently underperforming. Chris doesn’t speculate why, but I’m assuming the stress of the pandemic has something to do with it. 

Also, the material you learn…expires. If you are deferred, and don’t bother with consistently refreshing your knowledge as your new postponed exam draws near, you’re likely to fail. So perhaps there is a large cohort of deferred candidates that mistakenly assumed that the learning and revision they did for their original exam date would be enough.

why is the cfa pass rate so low

Since the pass rates plunged, there have been many candidates yelling “money grab!”. Shoutouts like these may get lots of upvotes, but I’m not sure if I see the reasoning behind that.

CFA Institute have no credible reason to really mess around with a formula that has worked for 50-odd years, with so much at stake, and so many changes going on at the same time. I believe that there is a lot going on that is disrupting the usual pattern of pass rates.

But do underperforming deferred candidates explain everything that we’ve observed happening so far?

Why did the CFA Level 1 MPS also increased?

CFA Level 1 MPS estimates since 2012

If you’ve followed our MPS analyses, you’ll know that our Level 1 MPS estimates have risen since the Feb 2021 exams – going above 70% for the first time since our analysis has been done in 2012, and staying above 70% for the May and July 2021 exams.

We believe these estimates are functionally accurate – but does it fit in with what CFA Institute are saying?

Yes, it can.

If you accept that it is not harder or easier to pass the CFA exams now, then a higher MPS means the exam itself is easier to score in. We believe this is indeed the case, at least until CFA Institute decides to calibrate the exam questions’ difficulties.

So are CFA exams harder to pass now? Should we be studying harder?

Are the CFA exams harder to pass now?

Based on our analysis and discussions, we believe:

  • We believe that CFA Institute has indeed done what they can to maintain the ‘passing competency threshold’, i.e. it should require about the same level of knowledge to pass the CFA exams now compared to previous exams.
  • The CBT-format CFA Level 1 exams, on average, are easier to score in compared to the previous paper format. However, this does not mean that it’s easier to pass. We believe that in order to maintain the same passing competency threshold, the MPS is now higher on average. We don’t have enough exam data to conclude either way for Levels 2 and 3.
  • Independently of pass rates, it should not be more or less difficult to pass the CFA exams. You should, for Level 1 at least, target a higher mock exam score to accommodate for the higher MPS, but the higher passing score requirement should be counteracted with a slightly easier exam.

In the end, does it really matter?

Does it matter?

In my opinion, the most important point to remember about all was also touched upon by Chris in his video. Ignore the noise. Ignore the speculation. 

You either believe that CFA Institute is keeping the quality of candidates consistent, or not. I believe it, because losing the prestige of the charter among employers and existing professionals is too high a price for any perceived gains. 

And if you believe it, then focus on improving yourself beyond the MPS. Don’t speculate and churn theories.

Work hard, pass, and move on. Ignore the noise.

Hope the above explains things and alleviates your concerns. Share your thoughts via a comment below!

Meanwhile, you may find these related articles of interest:


6 thoughts on “Why Is The CFA Pass Rate So Low, and the MPS High?”

  1. It’s very easy for the CFAI to blame the low pass rate on deferred candidates without taking responsibility for the errors in their new system. “The degree of difficulty of the May Level I exam was consistent with previous Level I exam administrations, and this is the case whether we look back to paper-based testing or computer-based testing, which we introduced in February this year,” CFA Institute spokesman Matthew Hickerson said.

    If this statement by the CFA Institute holds true, then the MPS should not have been as high as it was, considering traditional MPS has been in the mid-sixties. This statement is literally contradictory. Additionally, I completely disagree with the THEORY that the test being shorter makes it easier. It depends on test taking ability and the amount of material that is covered. I know average is your average, but misses on easy questions such as definitions now count for more, and there is less opportunity to display knowledge in difficult areas where much time was spent (further clarification, this is solely based on me taking 240 question 2020 mocks in the old format, and comparing them to my online 180 question mock scores. My 240-question scores were higher on average btw).

    I understand the aforementioned has always been an issue, but with less questions and the amount of material staying the same, it becomes even more of an issue. It’s very frustrating to receive a question asking the definition of a minute detail, and not receive a single question on a difficult concept that seems more important to the core knowledge of the curriculum. This is a pure example, and definitely not a reflection of my test, but missing a question because of forgetting the difference between Keynesian and New Keynesian school of thought seems very minor, but will be considered an “easy” question by CFA Standards. Whereas, a candidate that might forget such a minute detail, could have a full understanding of the different measures of convexity and duration of a bond, and not receive a single question on this topic. This might be considered a “harder” concept by CFA, but candidates were unable to show their abilities in that area due to a smaller sample size. Again, I realize average is average, but if CFAI is subjectively determining what they feel to be an “easy” of “difficult” question/exam, the lack of transparency truly disadvantages new candidates. All new candidates should be held to the same standards as current charter holders, and shouldn’t have their exams scores SUBJECTIVELY determined by a group that clearly feels that it should be more difficult to obtain the charter than it was for them.

    Imagine taking a STANDARDIZED test that is SUBJECTIVELY graded. I’m not saying this is a money grab, but I think it is a direct conflict of interest to have Charter holders determining who is “just competent”. I truly can’t believe that the phrase “just competent” is the bar for passing this exam. What a joke.

    • Thanks for the well-thought out comment, Casey! I’ll try to respond to a few of your points the best I can:

      Degree of difficulty being the same across paper and CBT exams: It is our theory (through our MPS deductions) that the CBT exams are easier to score in. This does not necessarily mean that the exam is now easier to pass. We believe the increase in MPS is to maintain a consistent difficulty in passing. So in broad terms, candidates get higher average scores in CBT exams, but the MPS is higher so the overall difficulty in passing remains consistent.

      The theory that the test being shorter makes it easier: When launching CBT, CFA Institute stated that in their studies, going past 180 questions does not increase accuracy of determining the competency of the candidate. Using the analogy of a thermometer, exposing a thermometer long enough for the mercury to adjust is sufficient to obtain an accurate temperature reading. Keeping the thermometer exposed for longer does not lead to a superior measurement. More in our CBT exams guide.

      Subjective grading: Multiple-choice exam scores may be objectively graded, but a pass mark will always have a subjective element to it. If the MPS is fixed (say 70%), then the subjective element is the exam difficulty level from year to year. I recognize that this means there is an element of ‘taking CFA Institute’s word for it’, but I don’t see how we can ever avoid an element of that, when the test matter is knowledge. Universities, for example, employ similar systems (arguably in an even less standardized manner since it’s up to individual professors).

  2. I think it’s reasonable for deferred and especially twice+ deferred to get a significant discount on next attempt.

  3. How do we know that the computer-based test (CBT) exams are fair? Looking at the minimum passing score and the fact that they start to increase from the beginning of CBT approach. What if people get in the exams room and memorize the content then sell that out to candidates who take the exams at a later date? This is no joke or conspiracy, we cannot guarantee this is not happening. Unless the exams paper/questions changed (which is also not fair as people are not tested on the same areas), then there is always possibilities of cheating. Just never say never.


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