How Level 3 is different from Level 2?

By Dr. Bruce Kuhlman, CFA, CAIA - Level 3 Manager


First of all, I’d like to congratulate all new Level 3 candidates! Passing the Level 2 exam was no simple task and by doing so you showed your ability to stand up to and conquer a difficult test in an unfamiliar format. At Level 1 the questions were all multiple-choice and divided into groups by topic area. Each Level 1 question is more or less a stand-alone question; each tests a separate concept about the topic. At Level 2 you were introduced to the item set. The item sets were also multiple-choice, but unlike the Level 1 multiple-choice questions, they were all related and answered according to information provided in a vignette.

At Level 3 you will see an afternoon composed of ten item sets, just as you did at Level 2. The primary difference between item sets at Levels 2 and 3, however, is that the Level 3 item sets can cover one or several study sessions. In addition, CFA Institute says it is appropriate for Level 3 item sets to include “double jeopardy” questions in which the answer from one question is needed for the solution to the next; if you miss the first one, you (probably) miss them both.

At Level 3 you will also see Constructed Response Essay questions. The morning section of the exam will be comprised of several (10 to 12) multi-part essay questions. The individual parts of the essay questions can require text (word) answers or calculations. (I’ll post another blog on answering essay questions. You can also gain insight into answering essay questions in our Secret Sauce and Essential Exam Strategies and in our Practice Exam books which give “exam answers” as well as discussion answers.)

Almost without exception candidates have told me that they finished the day feeling they performed well in the morning (essay) but had difficulties in the afternoon (item sets). Again almost without exception, when they received their scores their actual performance was the reverse of what they expected.

  • If you are like me, you found Level 2 to be very challenging, primarily due to the difficulty of the material. Level 3 is challenging for different reasons. The material in the Level 3 curriculum is, for the most part, rather interesting and not all that challenging. In fact, because of your financial experience, you might find yourself relating to a lot of the Level 3 curriculum. On essay questions in particular, this can actually be troublesome for several reasons:

    I often say (jokingly) that there are three possible answers to every CFA exam question: (1) the “real world” answer; (2) the “text book” answer; and (3) the “CFA answer.” Only one answer will earn you the points…the CFA answer. You must give the answer provided in the CFA curriculum, regardless of how you “do it” at the office.
  • At Level 1 you soaked up material and then regurgitated it when required on the exam. Level 2 is similar but the material is harder. However, you were tested on the material in much the way it was presented in the curriculum. For example, you learned how to value a forward rate agreement and then the question asked you to value a forward rate agreement.

    At Level 3 the material is presented in text-book fashion, just as with the other levels, but you might not be asked a single topic in each question. For example, you’ll probably need to pull together your knowledge of (at least) Study Sessions 3, 4, and 7 (Behavioral Finance, Private Wealth Management, and Asset Allocation) in a single case in the morning section of the exam. That applies to the afternoon section of the exam as well, and there are many different possible combinations.
  • Level 3 is fun and interesting. In many cases, it’s what you do for a living. The problem with that is that you tend to develop a “that makes sense” attitude and don’t truly learn the material. This is troubling because under the time and emotional pressures of the exam, some of that common sense material starts looking like the language of some ancient, lost civilization.
  • Your “that makes sense” attitude leads you to assume that when the time comes you’ll be able to say exactly what you want to say (or better, exactly what the grader wants to read). You must be able to answer all essay questions thoroughly in a neat, orderly fashion and do so in as little time as possible. Try it sometime…it’s not as easy as you might think.

Please…let’s hear from you! If you’re a new Level 3 candidate, tell us about your strategy for success on the 2008 Level 3 exam. If you’re a returning (i.e., experienced) Level 3 candidate, you might have some helpful hints for your fellow candidates. For example, you might share what you did last time and intend to do differently this time.

User Comments


01/11/2008 5:59:45 pm

My strategy


pka_575 Responds:

I'm new to Level 3. My strategy is basically to work through each study session by first reading Schweser Notes, do all Schweser end-of-chapter concept questions, do Schweser LOS questions from Q-bank, and then do all CFAI material questions. For areas that I still find confusing, I plan to review the CFAI material. I'm also taking a review prep course. Phew - tired already just thinking about all of it!

I am wondering if my strategy is off and that I should make a point of reading the CFAI materials directly. Don't know if I'd have enough time though. A lot of folks who have taken L3 seem to advise reading directly from the CFAI material. Will Schweser alone be comprehensive enough as it was for L1 and L2?

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01/15/2008 7:58:28 pm


tranloi Responds:

I also plan to read all Schweser notes, then do the CFAI readings. I want to finish 1 month early and do as many practice problems as possible. It is true, a lot of the things I read do make sense, but it is very difficult to answer the essay questions. I have a lot of work to do.

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01/16/2008 10:15:49 am

Is Schweser material sufficient for Level 3


Dr. Bruce Kuhlman, CFA, CAIA - Level 3 Manager Responds:

I have submitted another post (Studying for and Passing the Level 3 Exam) which explains how studying for Level 3 is different from studying for levels 1 and 2. Schweser materials are very comprehensive; they contain a thorough coverage of every LOS in the Level 3 curriculum, tips for the exam, and many practice questions and problems. Unfortunately you need more than an understanding of the curriculum to pass the Level 3 exam. You need to know how to integrate topics...how to take the level 3 exam. More to come...

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01/16/2008 1:57:31 pm

Stuck in the block!


Ros_jam Responds:

I am new to L3 but already I am in a quandary. I am already panicking because I can't seem to start, and it is almost Feb. Hopefully my Schweser material will be here by next week so I can chart a way forward. The CFAI material is a bit overwhelming.

I used only schweser for L2, completed the material early May and reviewed/practiced questions for 3 weeks and that worked.

Not too confident right now that this approach will work given that I am off to a late start.

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01/27/2008 6:45:02 am

Is Schweser material sufficient for Level 3


anil1820 Responds:

I have followed Schewser notes for both CFA level I & II and can say with confidence that it is not sufficient for passing exams. Your conceptual knowledge of subjects and topics will not be clear unless you read CFA institute material. I suggest following both. Better scheweser notes first and then CFA material.

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02/05/2008 7:16:08 am

Passing Level 3


ahadleygrave Responds:

Like "Anil1820" above, I used Schweser to successfully pass levels 1 & 2 and using the same philosophy, failed to get through level 3 last year. Like some other contributors above, I too have been in a quandry as to how to amend my approach to ensure success second time around. I have come to the conclusion that the best approach is probably a combination. First, I am going to go through the assigned readings and then use Schweser for additional questions and exam tips. May will be reserved for exam practice. Level 3 is a very different proposition to levels 1 & 2 and I found it extremely interesting, reading Dr. Kuhlman's comments about students thinking that they had done better in the essay section of the exam and finding out that in fact their performance reflected the opposite. I had exactly the same experience! I would welcome any thoughts or comments from other candidates.

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03/30/2008 11:33:22 am

CFAI Materials

stefwin Responds:

I solely used Schweser Material for both level 1 and level 2. Passed both - although level 2 was tricky as CFA-Institute included topics only touched by the Schweser package. As you are forced to buy the CFAI material starting with the 2008 exams, I thought it might be sufficient to rely on the CFAI material.

I have to say, during my entire studies (masters degree, PhD and CFA, FRM) I never read such confusing and bad written books as the material provided by CFA institute. I ordered the Schweser stuff today - maybe too late, as I am sure I can not pass the test by studying the CFAI books.

I feel cheated as I had no choice as to buy the books and now ended up buying both materials. I wonder if anyone here had similar thoughts.

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