The Chartered Financial Analyst (CFA) exam is one of the most intensive in the financial investment field, and serves as a gateway to many highly coveted investment management and financial analysis roles. To get a sense of how difficult it is, the share of candidates passing all three levels of the exam is less than 15%. If you’ve made it past level 2 though, what is the CFA level 3 pass rate, and what are your chances to pass the final CFA exam?
Thankfully, the overall pass rate for the CFA level 3 exam is a much higher 55%. Does that mean it’s easy though? Of course not. It takes a monumental effort to even reach level 3, so the fact that 1 out of 2 candidates still fail level 3 may seem daunting.
Despite boasting the highest pass rate, level 3 of the CFA exam is challenging for many reasons. One is the format of the exam itself. While Level 1 is based on isolated multiple-choice questions and Level 2 uses vignette-style questions, the Level 3 exam also incorporates a lengthier essay format. This generally requires a more comprehensive understanding of the material than the first two exams, and reduces the ability to make educated guesses on questions.
To understand more about how difficult level 3 is, let’s take a deeper dive into the CFA level 3 pass rates.
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CFA Exam Level 3 Pass Rate, by Year
Pass rates are often used as a barometer to how difficult a particular exam is. They’re an imperfect measure though, as many contest that while the pass rates for CFA level three is higher than levels 1 & 2, the level 3 exam format requires a comprehensive understanding of the material.
As the final hurdle to earning the CFA charter, pretty much everyone sitting for the level 3 exam is generally pretty smart and disciplined enough to make it this far (although I’m sure there are some exceptions to this!). From that perspective, one could argue that the level 3 pass rates should be fairly high. Yet, they still hover around 50%.
Here are the historical CFA level 3 pass rates since 2015:
Since 2015, the CFA Level 3 pass rate ranges between 42% to 56%, with an average of 52%. For reference, comparable rates for the Level 1 and 2 exams over this time period are 40% and 45%, respectively.
Let’s take a deeper dive and analyze the pass rates from each of the past 3 years.
Level 3 Pass Rates 2022
The pass rates for Level 3 exams in 2022 were 49% and 48% for May and August, respectively. Based on these results, it appears that the Covid-19 pass rate dip appears to be leveling out and returning to the pre-pandemic norms.
Level 3 Pass Rates 2021
The CFA level III pass rate for 2021 for May, August and November was 42%, 42%, and 43% respectively. Fairly consistent, but noticeably lower than the historical average.
The 2021 dip in CFA pass rates was seen at all levels. Being a full year into the COVID-19 pandemic plus several changes to the exam, including the increased testing schedule, appear to have had some initial short-term effects on the pass rates.
Level 3 Pass Rates 2020
In 2020, the CFA level three pass rate was near the highest level in the prior 12 years. The only level 3 exam in this year took place in December, with 56% passing the exam. While the COVID-19 pandemic brought a spike in pass rates for the Level 1 and Level 2 exams, the Level 3 exam results stayed fairly consistent.
Most candidates sitting for the level 3 exam in 2020 had likely passed levels 1 and 2 pre-pandemic, so it’s likely that this cohort simply stayed the course with their study routines that got them to this point.
CFA Level 3 Candidate Volumes
Here is how the CFA Level 3 candidate volumes have trended since 2015. Similar trends have been found across all levels of the CFA exams in the same period.
As you can see, the Level 3 pass rate CFA saw a steep drop in 2020, when just over 11,000 candidates sat for the exam. The volume of candidates appeared to return to normal in 2021, but it appears to have taken a steep downward turn in 2022 and is on pace to stay fairly low in 2023.
How is the Level 3 Exam Graded?
The CFA exam Level 3 pass rate is largely determined by two factors: 1) the knowledge and quality of candidates taking the exam, and 2) the Minimum Passing Score (MPS), which is the metric used to grade the exam.
The MPS is the minimum score that a candidate must get to earn a passing grade on CFA Level 3 exam. This score is not published by the CFA Institute. The MPS should not be confused with the CFA Level 3 pass rate declared annually and is lower than the MPS since it is the percentage of candidates that passed the exam.
Originally, the MPS was a simple formula – 70% of what the highest-scoring candidate achieved. Thus, if the highest raw score was 90%, the MPS would be set at 63%.
Today’s MPS calculation is more complex and is determined by a series of workshops the CFA Institute conducts, and is based on the Angoff model. Here is how it works:
- A large diverse group of CFA charter holders assesses the entire exam question by question and makes a determination on how a competent candidate would perform. This means that they evaluate whether a candidate who is good enough to pass the overall exam will get this question right.
- Once these estimations are completed, the charter holders again look at the actual performance of a candidate.
- All the information gathered from this exercise is then put before the CFA Institute Board of Governors along with the recommendations of the Angoff workshop. The last input is the most critical one. After considering all these factors, a final decision is taken on the MPS.
Hence, to pass, a candidate must better the score of what the CFI Institute determines to be that of a “just-competent” candidate.
Historical Statistical Comparison of Pass Rates for CFA Level 3
Before going into a statistical evaluation of the CFA Level 3 pass rate highest in 12 years, let us start with the latest CFA pass rates. As on Feb 2023, the pass rates have been
- 38% for Level 1
- 44% for Level 2
- 48% for Level 3
This is on expected lines as the average pass rates increase as candidates move on from Level 1 to 2 to 3. Fresh applicants appearing for Level 1 do not have that much clarity on what to expect in the CFA exam. But as they go through Level 1 and appear for Levels 2 and 3, not only are their skill sets vastly improved but their concepts and knowledge of the topics are clearer. It has to be noted here that some topics of Level 1 overlap with Level 2 and hence the rise in pass rates too.
How does the pass rate for CFA 3 compare with that of the other two levels over a 12 year-average?
- Level 1 ranges from 22%-49%, with a 12-year average of 39%;
- Level 2 ranges from 29%-55%, with a 12-year average of 44%;
- Level 3 ranges from 39%-56%, with a 12-year average of 50%.
A year-on-year comparison shows that the pass rates changed significantly for all three Levels during the Covid-19 pandemic. This was also the time when the CFA Institute introduced computer-based exams and increased testing schedules. However, initial results post-pandemic indicate that the pass rates have slowly and steadily recovered to the previous average levels.
There have also been a lot of fluctuations in the number of candidates appearing for the exam over the years and this has impacted the pass rate CFA Level 3.
The volume of candidates appearing for CFA Level 3 in 2013 was 25,766 and this steadily rose over the years to a peak of 38,777 in 2019. Consequently, the pass rate for CFA Level 3 also crept up in this period from 49% to 56%. But then came the crash of 2020 when the volume of candidates appearing for the exam dropped to 11,330 and then to 2,769 for the August 2021 exam. The pass rate though was pegged near the all-time average of 42%.
The signs of recovery are visible as the pass rate CFA Level 3 has reached 48% for Feb 2023.
CFA Level 3 Efficient Learning Path
With the amount of content to absorb for each exam, it’s just as important to study smarter as it is harder.
Sure, it may still take 300+ hours of study time for each exam, but a lazy 300 hours simply won’t be as good as 300 hours of well-organized, highly focused studying. Regardless of how much prep time you have, you should always aim to follow the most efficient learning path.
One of the best ways to do this is with a CFA review course that offer a balance of learning methods and are adaptable to your learning style. Add in plenty of practice questions and formats on each topic and mock exams that simulate the real exams, and you’re bound to improve over time as you approach exam day.
The Bottom Line
The pass rate for CFA Level 3 has fluctuated over time, but it generally has the highest pass rate among the CFA exams. That doesn’t mean it’s easy, so you’ll still have to take this exam seriously if you want to make it to the finish line and finally earn the CFA charter.
The Level III exam is considered one of the tougher exams for the CFA, as many of the questions incorporate an essay-type response. This trips up a lot of candidates, as it requires a more thorough understanding of the material. The key to success is practicing as many essay-type questions as possible and continuing to master topics specifically related to portfolio management, which is at the heart of this exam.
