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What are the differences between the CFA Program Level 2 and Level 3 exams?

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The CFA, or Chartered Financial Analyst, qualification is the gold standard in finance credentials, designed for experienced finance professionals wanting to take their career to the next level.

This is by no means an exhaustive list, but here’s some of the key differences between Level 2 and Level 3.

Question types

With Level 2, you need to show you can learn, recall, and apply long deterministic processes through a set number of scenarios, followed by 4–6 multiple-choice questions.

Whereas with Level 3, it’s more a case of applying previously demonstrated skills, plus you’re expected to draw more on your judgement, and write.

The first half of the Level 3 CFA exam is made up of constructed response questions, and the second half is a series of scenarios, with multiple-choice questions.

The constructed response section of Level 3 is one of the biggest differences from Level 2. And for many this is the most difficult part.

We would highlight that it's about using knowledge learned in the CFA syllabus to answer specific scenario-based questions. Marks are awarded for answering the specific question asked rather than demonstrating knowledge of the syllabus.

This challenge is reflected in the lower scores of the morning section compared to the afternoon multiple-choice section. The morning section requires you to show an ability to answer open-ended questions.

It may seem subjective, but this skill can be learned with practice.

Combining Topics / Subjectivity

Level 3 has more examples of integrating numerous topics within a question than with Level 2.

Also, Level 3 is more subjective. For example:

  • The curriculum doesn’t state what an “average” rate of return is for an investor, yet the candidate must be able to calculate and interpret the required return with the investor’s level of risk tolerance.
  • The curriculum doesn’t state what asset class weights are considered “normal,” yet the candidate is expected to pick out the best portfolio from a group of portfolios.

Time management

Time management is paramount for all 3 CFA levels, when it comes to the exam. However, with Level 3 you have to hone this technique even further.

For the constructed-response section, you need to be extra mindful of how efficient you are being with your time. Make peace with the fact that you may have to move onto the next section if you are struggling.

This may sound counterintuitive to maximising scores, but it gives you a chance to tackle the ones you’re confident in first - leaving you time to revisit the ones you skipped later.

Give yourself a short amount of time (say, 30 seconds) to scan the question and decide if you know how to tackle it. If not entirely sure, move on and come back later.

It’s broader

Given that this is the final level, it’s understandable that candidates are required to incorporate everything they’ve learned in the previous levels.

This therefore means that you’re drawing on a much broader range of concepts and scenarios as you’re expected to display effective knowledge of the entire portfolio management process.

So there’s no surprise that the average candidate for the Level 2 exam reports spending an average of 325 hours of studying, whereas the Level 3 candidates reportedly spend 358 hours* preparing for the exam.

For more information about levels and exams, visit our CFA Program pages.