The Chartered Financial Analyst (CFA) exam is not easy to pass. In June 2012, only 38% of candidates passed the level I exam, while just 42% passed level II and 52% passed level III. Progressively fewer candidates have passed the exams over time as well. In 1963, the exam's first year, 94% passed, while in the mid-1980s, the pass rate fell to around 65%, and since 2000, pass rates have ranged from 34 to 55%. If you're one of the many who failed their exam, here's what to do to increase your odds of passing when you retake it.

Step 1: Analyze Your Performance
The CFA Institute website states, "All candidates who sit for an exam are provided with their exam result and a summary of their performance in each topic area. Candidates who do not pass the exam are provided with additional information regarding their performance relative to all other candidates who did not pass." Make sure to review this information to gain an understanding of your strengths and weaknesses. You'll put this understanding to use in step 2.

Step 2: Re-Evaluate Your Study Plan
Regardless of how hard you studied the first time around, something about your plan didn't work, or else you would have passed. That's why part of your strategy to pass the CFA exam the next time around should involve re-evaluating your study plan.

The CFA Society of Minnesota points out a couple of obstacles that CFA candidates commonly face in their studies: unexpected events disrupt study plans and the amount of material to study is overwhelming. To combat these problems, the society recommends setting up a week-by-week plan for covering all the material before you begin studying. The plan should provide a cushion of several weeks so that you're scheduled to complete your studies several weeks before the exam. This schedule leaves extra time to review difficult concepts and provides a cushion to deal with unexpected life events that might derail your original study plan.

The society also recommends that candidates schedule regular progress testing to get a sense of where they stand throughout their course of study. In other words, don't wait until the week before the exam to discover that you don't understand a topic as well as you thought.

Step 3: Consider Taking a CFA Prep Course
When you've already spent nearly $1,200 to take the test once and bought official study materials and now you will have to shell out another $700 to $1,000 to retake the test (depending on how far in advance you register), spending hundreds more on a CFA prep course isn't appealing. But if it means passing the test, you'll save hundreds of hours of further study and you'll achieve any career advancement or pay increase associated with earning your CFA sooner. In other words, an effective test preparation course can easily pay off.

You can take a prep course in person, online or by watching a series of video recordings. Courses include features such as a final review, practice exams, ongoing quiz questions and a structured study plan. A class can help you stay on track with your study plan and identify your weaknesses. Look for a class with guaranteed success, where you'll get your money back if you don't pass the exam as long as you complete the requirements of study course.

Step 4: Plan Your Test-Taking Strategy
Along with a strategic study plan, you'll need a strategic test-taking plan. If you didn't have a plan the last time you took the exam, this step will give you an advantage. If you did have a plan, you can use your real-life test-taking experience to restructure it, keeping in mind which aspects of the test you found easier and which ones were more challenging.

Here are a few specific test-taking strategies from the CFA Society of Minnesota:

  • Understand the exam's 40/50/10 structure, in which 40% of the questions will be easy, 50% will be moderately difficult and 10% will be challenging.

  • Plan your exam-taking time around the 40/50/10 structure. Make three passes through the exam, first quickly answering as many of the easier questions as possible, then addressing the more difficult and time-consuming questions on the second pass. Use the third pass to quickly make sure you've answered every question.

  • Move on when it is taking you too long to answer a question. You want to manage your time in such a way that you can answer all of the questions before the exam time is up, though you don't want to rush so much that you read the questions carelessly.

  • Prepare for exam day by doing a test run. Drive to the exam site and, if possible, visit the actual exam room to familiarize yourself with what you'll experience on the big day.

The Bottom Line
If you don't pass and decide to retake the CFA exam, you'll be in good company. In the CFA Institute's June 2012 candidate survey, 68% of respondents said they planned to retake the exam if they didn't pass. You can cut your losses by registering for the exam early so you'll pay the lowest registration fees and taking the steps described in this article to make sure you pass your retake. Make this time the last time you have to pay exam expenses and invest the hundreds of hours of required study time.

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