Willing wheels

CFA is really hard to get.
What makes me laugh is to read on forum how easy it is to get prepared for it (2 months look like being overtime to many people). Well in the end, people writing these posts might be very smart, but only around 30% manage to pass level I and merely 50% for level II and III (knowing that these people have already successfully passed level I, ie. they do know it’s not a piece of cake at all => population is not the same => 50% pass-rate cannot be compared directly to 35% passrate of level I).

These pass rates are already quite low, keep in mind that CFA Institute does not take into account no-show people when computing it. => It’s really 35% of people who did sit down at the exam day (and not 35% of people registered to take the exam, ie. passrate would be lower than that!). More over, on average it requires 5 years for candidates to pass all three exams…

What’s the conclusion of all of the above? Passing CFA exams is not a piece of cake, but it’s not unachievable either.
You just need to be organized and dedicated.

Basis for my schedule

My  own experience.
I’ve successfully passed level I, and right now I am ending 5th book of level II, about to start the 6th (and last book) to hopefully pass the june 2010 level II exam.

Basically, content for level II (6 books) is as enormous as content for level I (6 books too) => I expect it to be the same for level III.

My schedule is also loosely based on CFA study recommendations:

• not less than one week per “study session” (there are currently 18 of them in both level I and II)
• keep 4 weeks prior to exam date to be able to assess your weaknesses (using mock exams) and focus on these areas

I personnaly agree with above two recommendations (less than one week per session is hard to achieve and makes forget data quicker).

Objectivity

Keep in mind the following aspects:

• slow reader: yes, I am a slow reader (I was born like this) so you might be able to read quicker than me
• tendancy to overprepare: I always overprepare exams, in the end rating closer to 90% than the required 70% sthg pass rate. Reasons for this are first that I don’t like being wrong | not knowing an answer, second is that I find it more interesting to study to increase my knowledge than rather pass the exam (=> I don’t target the minimum pass rate) and third (there’s always a third point), I cannot ignore the content of a single page (=> I don’t read only summaries, but almost all pages from all the six books of cbok – except for the index )
• background: my own personal experience is that I needed far much hours of work than recommended by CFA Institute (this might depend on your background – financial in my case – and your profession/experience)
• strategy: mine is that it’s better to work very hard and get the exam the same year rather than work less harder and have the possibility to fail => then you will need to work hard one more year (and waiting one year is quite long!) to be able to give it another try. So play safe, try to nail it on your first attempt, it will be more profitable in the end.

My recommended schedule

These schedules are indicative only, you should adapt them to your own case and not follow the religiously.

I identify two different scenarios:

[You can study full time]

If you’re in this case, ie. you can study CFA full time, then my advice is to :

• register as soon as possible (to get the best discount!)
• start your study 3 months plus two weeks before exam date
• review content at average speed of 1 book every half month (=> 2 books per month * 3 months = 6 books + 2 weeks for reviewing content)
  it’s true that some books are far bigger than others, but it’s just an average. It might be better to follow your schedule per study session (90 days (= 3 months) / 18 sessions = 5 days per study session) I don’t recommend going lower than 5 days per study session
• within last two weeks:
  1. review all summaries from all books
  2. redo all exercices from all books
  3. perform mock-exams
  4. review your areas of weaknesses (identified with mock-exams and redone exercices)
  5. perform sample exams
  6. review all summaries from all books
  7. you’re ready!

[You're working and cannot study full time]

• first of all, avoid the ‘bully’ strategy (ie. studying a lot, incl. taking holidays, right before the exam, and not long before) instead prefer studying constantly a couple hours every days (wake up one hour earlier and sleep one hour later) and more intensively the week end, during a longer period (learned content will go to long-term memory rather than short-term memory)
• register as soon as possible (ie. september) to get the best discount!
• start studying 31 weeks prior to exam date
• try to learn 2 study sessions every 3 weeks (ie. 1.5 week per study session), ie. 18 * 3 / 2 = 27 weeks. For some sessions, one week will be enough, for others two weeks might be necessary (esp. if you’re under hard time at work)
  hint: try to go a little bit faster than 1.5 week per study session since you might need the equivalent of 4 standalone weeks to review already finished books each time you finish a new book
• use the last 4 weeks to:
  1. review all summaries from all books
  2. redo all exercices from all books
  3. perform mock-exams
  4. review your areas of weaknesses (identified with mock-exams and redone exercices)
  5. perform sample exams
  6. review all summaries from all books
  7. you’re ready!

Whatever your profile is (full time|part time), you should try your best to avoid ‘learn & forget’ effect.
Do the following:

• study regularly (every days – even if it’s just to review already learned content)
• prior to starting your new readings, review the (summary of) last 3 readings (ie. a moving average)
• each time you finish a book, review all readings within all previously finished books (recently finished one included)
• redo all the exercises from the entire book finished right before recently finished book

Do your best not to be late on your schedule, otherwise it will hard to catch up.
Well, that being said, good luck.

As you might now, I am undergoing the CFA examination.
CFA gives you an incredible indepth transversal knowledge of the finance area and I am grateful for that. In the mean time, I’m quite a techie guy => looking for advanced quantitative stuff as well. I strongly believe an advanced quantitative education is a strong complement to CFA designation.

Being interested by growing area of risk management, I had a look at possible credible designation available on the market.
Naturally I stumbled upon FRM for Financial Risk Manager (http://www.garp.com/frmexam/ from GARP). After digging a little bit, I found that another designation existed with advanced quantitative content and quite recognized in the investment community too : PRM for Professional Risk Manager (http://www.prmia.org).

PRM vs. FRM

How to make a choice? Well that was the hard part! (for the name, I prefer FRM since it accounts for ‘financial’ focus of risk management in its name)

My first approach was quite straightforward. I went to a financial-jobs internet website (http://www.efinancialcareers.com) and I searched for jobs with first ‘frm’ as keyword and then ‘prm’ as keyword. Result of this test was cristal clear: 22 answers for FRM vs. 3 for PRM. => my choice went to FRM.
Full of doubts and uncertainties, I decided to give it another go on two other financial-jobs websites and here results were more mixed. FRM still had the hedge, but in fact lots of job offers contained FRM as an acronym for their own business units and not for the FRM certification. In fact, when clear reference to FRM certification was made, PRM was quoted too (almost always). => back to the beginning: which one to choose…?

Below are misc elements that helped me take a decision:
pro PRM:

• supposedly a bit more quantitative than FRM (I’m looking for this quantitative aspect)
• less costly (exam prices are lower, no annual membership fee – for now)
• clearer self-study line (single handbook covering all exams vs. a handbook + core-readings for FRM with visibly only core-readings as important (=> why having a dedicated handbook if it does not exactly cover the exam content) & having an accumulated list of different readings (what core-readings consist of) does not look like a smooth & effective way to learn for me)
• greater flexibility: 4 exams that you can pass in any order at any business day (with restriction though to pass them within 2 years) vs. 2 exams that you can pass only twice a year in specific locations
• backed by top-tier one universities: Columbia University, Duke University, Bocconi School, HEC, Hong-Kong University, National University of Singapore, Trinity College… (full list: http://prmia.org/index.php?page=aboutus&option=universitypartners)

pro FRM:

• still the hedge in job offer (though only slightly in the end)
• work experience required (I find it important, you hardly can be a professional without relevant work experience)
• older than PRM (1997 vs. 2002) => more recognized
• 17k graduates to date (I did not manage to find the number of PRM graduates, I only found the number of members which is not representative) => huge pool of potential colleagues, who do know about the PRM program
• article on wallstreetjournal, stating a huge increase in the number of applicants (+80% in 2009 with 23k candidates!!!!) (article: http://online.wsj.com/article/SB10001424052748703278604574624513398904666.html)

conclusion: the wsj article definitely identified FRM as the train to take for me. Its pool of participants is increasing at high speed leaving out competition (unfortunately I did not find similar stats for PRM, it’s too bad) => I wanted to go for FRM (despite all these advantages that PRM has! incl. free-membership)

not-for-profit

I was about to register for FRM exam when I read an article on the GARP scandal (http://www.riskglossary.com/link/garp_scandal.htm and http://www.riskglossary.com/papers/garp_letter.htm). Basically the short story is that at first, only GARP (and its FRM certification) existed. But at some point they started to make real-money out of it. So they decided to change the status of the company from a not-for-profit organization to a regular for-profit organization. Some people working at GARP felt betrayed and decided to create a real not-for-profit organization managing risk-management profesionnals: PRMIA and its PRM certification.

Well, it might look stupid, but this was decisive in making my choice. I mean cfa is a not-for-profit organization, all universities/high-schools I know are not-for-profit organization. Why? At some point, when you’re in the knowledge business, I find it not appropriate to have as goal profit-maximization. It is not the way it’s done in the other places => why should it be the case here? To me this is not ethically appropriate and GARP has not the best focus in mind.
It’s a bit the same awkwardness that existed when auditing firms where consulting firms to the same clients as well. At some point you have a conflict of interest. The thing is that I was upset with FRM getting that expensive: now it is made of two exams (=> twice the price!), you have expensive curriculums + additional expensive handbook and I’ve noticed that annual fees have been rising up quite sharply and steadily. It really made me feel that they wanted to skim the milk out of me. Now that I know they are simply a ‘profit-driven’ organization, I understand it and I’m simply not interested.

So my choice is to undertake PRM:

• recognized to be as demanding as FRM by experts in the field
• more quantitative that FRM
• backed by top-tier universities (really important for me)
• less expensive
• more flexible
• ethically grounded

Right now it might be a bit less reknowned than FRM outside the risk-management domain, but I do hope they will gain exposure (it looks like, they recently opened new offices in Asia) and I will try to support them and expand recognition of its program. I find that being more ethically sound make the whole affair less risky on the long-term, and guess what: it’s about risk-management!

I hope you will choose PRM too.

sources

• http://www.prmia.org
• http://www.garp.com/frmexam/
• http://www.riskglossary.com/link/garp_scandal.htm
• http://www.riskglossary.com/papers/garp_letter.htm
• http://prmia.org/index.php?page=aboutus&option=universitypartners
• http://online.wsj.com/article/SB10001424052748703278604574624513398904666.html
• http://www.efinancialcareers.com

I am preparing CFA level I, and I must admit I’m pretty impressed by the amount of required knowledge.

It’s indepth knowledge on almost all key fields in finance (corporate finance, market finance, economics, statistics/econometrics… including ethics!), well you’re not asked to have a phd in those domains, but indepth mastering is still required (surface knowledge won’t do it given the amount of data in each domain).

By preparing just level one, you’re sure to get enough background to speak with specialist on each domain. For this, a big thank you to CFA (personnaly what I share most, is the idea of “lifelong learning”).

As a whole, all books are well-written and interesting. If I had one critic to give it’s on a few chapters where unfortunately authors wrote conclusions instead of summaries as stated, therefore leaving on yourself the responsibility to write your own summary.

Besides this conclusion versus summary thing, books are great. I highly recommend any guy wanting to have a career in Finance to enroll in the CFA program. Today more than ever, it’s code of ethics becomes a necessity in financial profession.