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How to pass Level 3

When i passed L2, I came on the L3 forum and there were some pretty nasty posts from L3 people awaiting results and telling people not to pester them.  I don’t want to be that person, so here are my thoughts on L3 keeping in mind I don’t have my results but passed the vast majority of my 8 practice tests.

Differences between L2 and L3
The L2 material is on balance probably a little harder than L3 but the L3 test is on balance harder than L2 largely because of the AM session.  There’s no opportunity to guess in the morning session and time management is much harder (see below).

The test itself is the invisible study session
Unlike the other levels, the morning session requires you to actually write short answers (and they prefer responses in pen although pencil is allowed).  This means you have to actively recall information and be able to explain topics rather than passively choose the best answer.  For me, this meant you have to know the information a lot better than you did at the other levels because you are actively recalling it.  It’s kind of the difference between being a student and being a teacher.  The student needs to understand the information enough to pass; the teacher needs to understand it enough to explain it thoroughly.

Start Earlier
Because the test requires active knowledge and the format is completely different in the AM session, you need a lot more time to practice the test format itself and learn how to answer succintly.  This means considering the question thoroughly and then considering your response before you commit the answer because if you decide you are wrong, you have filled up the space to answer and need to start again.  So i would aim to finish the reading about two months early and do as MANY PRACTICE TESTS AS YOU CAN.

Time Management
From my experience and the experience of Schweser professors, the most difficult thing about L3 AM is time management.  In L1 and L2 you could manage your time by looking at where you were in the question block versus the time because all questions were an equal number of minutes.  In L3, you will have 9-15 questions, each with multiple sub parts.  Each sub part has minutes allotted to it which can VARY WILDLY.  Part A may be 18 minutes while part B may be 4mins.  Keeping track of time is crucial and I found it to be very challenging in the heat of the real exam especially.

Answering ‘essay questions’
The ‘essay’ questions are really short answer and you can use bullet points etc. to get across your knowledge.  There is a tendency to want to write tons to display your knowledge but the real key is actually understanding what they are asking and write as little as possible to answer the question.  In L1/L2, if you didn’t quite get what the question was asking, you could deduce it from the responses provided.  Here there are no responses to guide you and you will be frequently frustrated by the model answers given in practice tests e.g. “That’s not at all what the question asked!” “How can you just put that sentence and get it right!?”  I’ve written an expanded post on tackling essay questions here.

Partial Credit
The only good thing about essay questions in the AM is that you can receive partial credit so SHOW YOUR WORK on calculations.  This can be frustrating as well since we have been trained to just get to the answer as quickly as possible and I needed to train myself to write out all the steps.  You also have a chance to really explain yourself but remember to keep it brief.

Cross Pollination of Topics
More so than any other level, this one combines topics and asks questions that were never asked in the curriculum.  In L1 and L2, you are tested pretty much how the material is explained.  In L3, you can get pretty much anything and it will likely combine lots of different study sessions together in one question.  Basically, when you are studying, think about how the topic you are reading connects with other areas you have already read.

Practice Tests
The Schweser practice tests are good but you are grading yourself in the AM session.  For those of you, like myself, who loved getting metrics from L2 and L1 on how you are doing in each topic to target your revision, this throws a spanner in the works.  You are asked to grade your written answers against a model answer.  This causes many challenges: (1) it’s not always clear how to grade yourself and (2) you are asked to be hard on yourself in the grading which is difficult psychologically when all you want to do is hit 70% and (3) the graders have discretion your answer can still be correct even though it is different from the model answer but you have no way of knowing when this will be the case.   It is very frustrating to finish an AM session and then find out that you misunderstood a 15 pt question and got zero on it.

The CFA graders grade individual questions.  i.e. the person grading question 1 will not be the same as the one grading question 2.  So don’t be afraid to be redundant if you feel it is correct to do so since the info you put in question 1 will not have been seen by the grader grading question 2.

GIPS are a significant part of the curriculum.  Unfortunately, there are chock full of arcane rules that vary by investment line and year and you have to know them pretty darn well.  It’s still not clear to me how you study them since they are not conceptual really so you are really force feeding your brain lots of little rules.   Make sure you go through this material a lot.  Flash cards are probably a good way to go but you are talking about a very large stack of cards.

Most years you will find a bunch of IPS questions.  I found these extremely difficult to study for since they can be absolutely anything.  The variety of questions is as varied as there are individual circumstances in life.  I found it useful to write “base case” IPS’s for most of the institutional investors and the individual investors so that I could have a ready response already honed if the typical case came up and adapt it to a different case.  Answering IPS questions takes a lot of practice in my view to get them whittled down to a good, succinct response.

Topic weights
Level 2 was made harder than L1 by the fact that the topic weights were ranges rather than absolute percentages.   In L1, you can more or less game the system by focussing on FRA, Ethics, Quant and one other topic.  L2 at least gives you comfort that if you know Equities, FRA, Ethics, and a couple of other topics well, you can make it through.  L3 is made harder still since, not only are there ranges, but “Portfolio Management” accounts for 45-55%.  This vague subject heading makes it very difficult to know how to target your studying.  For instance, you have a reading on Economics but Economics is not listed as one of the topic areas on the CFA website.  This is because Economics, like several other topics, are all pooled under the PM heading so it is very difficult know whether you should place a lot or a little emphasis on this and other topics.  All this speaks to knowing the material better than L2.

Calculate, Evaluate, the stuff for which you want your calculator
In L1 and L2 you could count on the action verb in the LOS to tell you whether you needed to learn the calculation or just learn the concept.  As you will see from the past exams in L3 on the CFA website, there are several instances where you are asked to perform a calculation even though the action verb is something like “explain X”.  Be prepared.  All this speaks to starting your studies earlier.

My results
I think that the above really summarises a good, productive approach to L3, however, I think I failed so bear that in mind.  I hit a time warp in the AM session and spent a long time on two 4 minute questions (worth just over 1% each).  I thought I was doing ok since there were roughly 10 questions and halfway through the exam I was on question 5.  The problem was that the bulk of the minutes were in the latter half so I was wayyyyy behind and panicked and rushed through making mistakes no doubt and also not finishing by a long shot.  I probably finished only 70% of the morning session.  When that happened in L2, I could just guess A, B, or C but here you are left with no way of getting ANY points on the ones you didn’t complete.  Bottom line is that I definitely knew the material much better than L1 or L2 (both of which I passed first time) but the format of the exam and poor time management probably sunk me.  That’s why I think it is the key difference between L3 and L2.

Bombing the morning session

As I noted above, I thought I bombed the morning and, indeed, I did.  I’m proof you *can* still pass while sinking the morning.  One thing I did that saved me is shake it off.  At lunch after the morning session, I was devastated that i didn’t even finish the morning.  I decided that the only thing to do now would be to shake it off and refocus because half the test was still sitting there waiting for me and I could at least kick ass in the afternoon which very fortunately I managed to do.   


Update - my actual results

i Passed!!!!!!  Looks like I squeaked by but who cares!?   I had to wait an excruciating 10 hours to get the email and use up a miracle or two but it is done.  Good luck all!

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