Strategies to ace CFA level III Morning Essay based Exam

If you look at the results of the CFA candidates in past, you would realize that a majority of the candidates perform poorly in the morning session of CFA level III exam. There are even examples of many guys who had cleared CFA level I and CFA level II in the first attempt itself but fail to clear CFA level III exam even after multiple attempts. So, whenever anyone says that CFA level II exam is the toughest of all the three levels, I always chuckle. If CFA level II is the hardest exam then how come 50 percent of the people who have cleared the hardest part, fail to cross the last hurdle. The essay exam makes CFA level III the most challenging exam of all three levels.

The primary reasons behind the poor performance in the essay based exams are following:

  • Most of the candidates have lost the art of writing the subjective exams and are too slow in attempting the exam and eventually end up skipping 10-20% of the morning session.
  • The exam requires quick thinking. If you are not able to think quickly during the exam, then you are more likely to lose time while thinking and eventually fall short of time.
  • Candidates do not read the question carefully and instead of answering what is being asked in the question, answer something else.
  • Candidates end up devoting more time to few questions and thus fall short of time. Or they make mistakes in solving some numerical question and have to redo that question again and thus wasting precious 5-10 minutes in doing so.


CFA level III candidates need to understand that every year CFA Institute is making the essay based exam more challenging. If you browse through the previous years’ actual exam papers, you would realize that earlier they used to allocate more marks to few of the questions and now they have reduced the allocation of marks. Suppose earlier if they asked the question related to risk tolerance then the question would have been of 5-6 marks and now it would be of 4-5 marks only. So, it may happen that you might have been able to solve the previous years’ actual exam just in time but fail to solve the actual exam in the given time because the exam might be 5% lengthier than the previous years’ exams. So, you need to take care of that thing in mind and practice the mocks/actual exams accordingly.

The trade-off between accuracy and attempts: What would you prefer? 160 marks attempt with 70 percent accuracy or 180 marks attempt with 60 percent accuracy? Obviously, the former one. If you are losing your accuracy by a higher amount than the gain in the number of marks attempted, then you need to slow down a bit. Ideally, you should be able to have good accuracy with 100% attempt. But if you are unable to do that, then 160 marks with 70 percent accuracy is also not a bad attempt. Here, you also would have the option to skip the 20 marks question for your weakest area.

That is another mistake made by the candidates that rather that attempting their strong areas first, they simply go through the exam in normal way i.e. start from the first question and end up with the last question. The problem with this technique is that the last question could be asked from your strong areas and you might have been able to score 80-90% marks in that question instead of skipping that.

Which part of the exam should be done in the end?: The questions related to private wealth and behavioral finance are usually dicey question and also time-consuming. So, it is advisable to do those questions at the end of the examination if you do not have any specific weak area. Most of the candidates end up making a mistake in the return requirement calculation for private wealth question and that question also consumes a decent amount of time. So, it is always a good strategy to solve those questions at the later stages of the exam. You may solve their theoretical part earlier but the return requirement question is better off to be left for the end.

By using the following strategies, you can have a fairly decent attempt in the morning essay based exam:

  • Try not to allocate more time to any question than the total number of minutes allocated to that question. Keep an eye on your watch. It is always better to keep on checking you watch after attempting one full question rather than checking it after doing 2-3 questions. Because it can happen that you might spend one hour in doing first 2-3 questions and those questions would have been for only 40-45 marks. So, you always end up chasing the time. If you keep an eye on the watch, then you will have a sense of urgency and you are less likely to be behind the time schedule by a big margin.
  • Navigate through the questions first and identify the easy questions. Sometimes you get easy questions like calculation of Roy’s safety ratio. Around 60-80 marks questions would be relatively easier on the exam. You should not leave any of those questions and try to have an accuracy of 80-90% in those questions.
  • If you have to think a lot for answering some part of the question, it is better to skip that part and move forward to other questions. Your subconscious mind would automatically be working for that problem while you would be busy in attempting other questions and that would also save you time.
  • Most of the candidates are slow starters. You need to destroy that initial inertia. How can you do that? It is simple. First, attempt the question from your strongest topic and give yourself a challenge that you would be attempting that question in less than 80% of the allocated time to that question. Suppose institutional investors chapter is your strong area and there are two questions for that having a total of 30 minutes. Try to finish those two questions in 24-25 minutes. If you challenge yourself at the start then it would save you previous five minutes. And you are more likely to do this with the same accuracy at the beginning only because you would be fresh and you would be attempting your strong area and also there would be a sense of urgency to solve it. That is the general problem with most of the candidates. They end up spending 5-10 minutes more in the first two questions. If you can challenge yourself to solve that 5 minutes earlier, then that would effectively save you 10-15 minutes.
  • Just go through the command words again to know what is actually being asked in the question. Always read the question carefully whether they are asking you to calculate before-tax nominal return or after-tax real return. Attempt the questions at their respective allocated pages. Do not restate the facts in the case to answer any question. Do not repeat the same reason again in different wordings. For example, if they ask you two reasons for the high-risk tolerance of a pension fund and you write these two reasons: (1)The employees are young and thus more risk can be taken. (2) Defined pension plan has a longer time horizon and thus a high-risk tolerance. The two points are stating the same thing again i.e. the risk tolerance is high due to longer time horizon. Now, this question is very important and you are more likely to get a similar question in the exam. So, you should prepare yourself in advance so that you also do not need to think again and you can provide different reasons as well. The other reasons could be profitable company and surplus for defined benefit plan, low correlation between the assets and company’s operating results and low spending requirements (less liquidity required). Once you keep these 3-4 reasons ready for yourself then you would be able to provide different reasons and would also be doing that quickly. Make similar notes for all kinds of questions that had been asked in last 3 years’ actual exam papers.
  • Do not attempt the questions passively. Attack the questions and always try to maintain a surplus amount of time with you. A sense of urgency is your best friend in the morning exam.


And even after doing all the above things, you end up skipping 10-20 marks portion, then you shouldn’t lose heart. Because the result of the exam is more dependent on your performance in the afternoon exam. Many candidates panic after the morning exam if they are not able to complete it and then end up attempting the afternoon exam in 1.5 hours. Solving the afternoon exam in 1.5-2 hours is not going to improve your performance in the morning exam. But it can definitely hurt you as you would end up making more silly mistakes in the afternoon exam. A sense of urgency in the afternoon exam is your worst enemy. The afternoon exam can easily be finished in 2 hours 45 minutes because it is generally very less calculation intensive as compared to CFA level II exam. Most of the candidates would finish it before 2 hours 45 minutes. Attempt the afternoon exam slowly so as to minimize your silly mistakes and maximize your potential score.

Let’s take an extreme scenario. Suppose you end up skipping 40 marks questions in the morning exam. Now 40 marks are a lot of marks. But suppose you attempted 140 marks questions from your stronger areas then you would be hoping to get at least 65% marks in those questions. That would be a total of 91 marks in the morning exam. Now the MPS (minimum passing score) for CFA level III exam is around 60-63% of total marks. Let’s take the upper limit of 63%. 63% of 360 is 227 marks. That means you need to score around 135-136 marks in the afternoon exam. And you can get that much score by scoring 45 question correct in the afternoon exam. 45 questions can be easily attempted correctly in the afternoon exam if your Ethics and GIPS are strong. If you can score 14 from 18 questions in Ethics and GIPS. Then, you need to score only 31 questions correct out of rest of 42 questions and that is not at all a difficult task given the difficulty level of CFA level III topics.

So, even in that extreme scenario, you can easily pass the exam by scoring well in the afternoon exam. You should not lose your cool and try to focus more on the afternoon exam after the morning exam. Attempt the afternoon exam slowly to minimize the silly mistakes and if you can minimize the silly mistakes then scoring 45 questions correct would be a cakewalk. However, if your Ethics and GIPS are weak, then you might end up getting 8 questions correct in that and then you need to score 37 out of rest 42 questions. Scoring 37 questions correct is a little challenging but if you can minimize your silly mistakes then it is also very much possible. But it is better to revise your Ethics and GIPS from the curriculum books to boost your score in those two topics. Those two subjects might eventually end put putting the wind in your sails.

All the best for your preparations and exam.


One thought on “Strategies to ace CFA level III Morning Essay based Exam

  1. […] Please find the strategy for attempting CFA level III morning exam here. […]

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A blog of the NYU Colloquium on Market Institutions and Economic Processes

Fundoo Professor

Thoughts of a teacher & practitioner of value investing and behavioral economics

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