WHEN THE GOING GETS TOUGH…

CFA Level 1 Exam

CFA Institute on 27th July released its pass rate for CFA® Level 1 exams taken in May 2021. It was just 25%. Yes! You read it right. JUST 25%. To put this in context, the pass rate for the Level 1 exam had never previously fallen below 34% in the exams’ entire 58-year history, which was in 2005.

Let’s try to reason this out by listing out the probable causes:

Stop-start preparation:

The top reason given by the CFA institute is a poor preparation by candidates. Due to the worldwide pandemic situation the CFA institute had to cancel CFA Level 1 exams many times in the past 1.5 years. Candidates well prepared for the exam had to defer their attempt because of this. The institute didn’t even get a chance to conduct CFA Level 2 and Level 3 exams in 2020. This derailed the timeline of many aspirants, may be making them lose interest in the course. Such halfhearted preparation may have reflected in the results. But can this lead to a fall in pass rates from 44% in 2020 to 25% in 2021? Must be quite a disinterested lot!

Routing for the best:

Computer based testing has made CFA exam very accessible to many people. Increased frequency of the exam has also contributed to more inflow of CFA candidates. So is this the way of the institute to let only the better than the best move up the ladder? May be its their way of making the charter less crowded. The lack of transparency in the marking scheme by the CFA institute leave such questions unanswerable.

Changes in MPS:

When the first computer based CFA level 1 exam was conducted in February 2021, the institute raised the minimum pass rate (MPS) to 72%. The candidates were preparing for CFA level 1 exams since 1.5 years now, which forced the institute to increase MPS, which in turn reduced the number of CFA level 1 pass outs. Still the institute announced a 44% pass rate that year.

Now comes the May exam which put the CFA institute in a pickle! If they reduced the MPS then they would be unfair to the February candidates and if they didn’t, then the chances of the less prepared May batch get grim. Ultimately the institute went ahead keeping the MPS unchanged. A few people attribute this shocking result to this factor too.

Raising the bar:

By making the exams tough to clear, the institute may also be trying to make CFA a tough to fight for charter. If this is what they are aiming at, then the candidates preparing for the CFA level 2 and CFA level 3 exams this year, better buck up! The already tough examinations may just get tougher this year.

A few people are of the opinion that this is a money making gimmick of the CFA institute. By not letting many candidates pass, aspirants have to reenroll themselves, which means cash for the institute! But given the stature of the CFA institute, this reason may seem unlikely.

The only one who has the answers to all these questions is CFAI, but they choose to stay mum. That leaves us with disappointment, suspicion and a question mark about the future of the aspirants. A little more transparency by the institute can solve many problems.

To sum it up, a series of changes with respect to the CFA exams has proved to be a disadvantage to many aspirants, who have invested a lot of time, money and dreams on CFA course. Hope things stabilize soon and we done witness anymore such setbacks. In the meanwhile, take the obstacles in your stride and move steadily towards your target.

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