How to Pass & Prep for the CFA^® Level III Exam

By: Kaplan Schweser

August 16, 2024

How to pass and prep for Level 3 CFA exam

So, you passed Levels I and II of the CFA® exam. It wasn’t easy getting here, but you did it. Now the final CFA exam step is in your sights: Level III. Get a passing score, and you’ll have finished up this stage in your career, so naturally, you want to know how to accomplish that.

The Level III CFA exam is a considerable step up from the Level II exam so having a CFA study plan and understanding the differences between Level II and Level III will help ensure you are prepared to pass the Level III exam.

To pass the exam, you will need to achieve at least the minimum passing score (MPS) set by the Board of Governors of CFA Institute after each exam. The all-time average CFA Level III pass rate is only 56%, and recent pass rates have been even lower. That means you must have a study plan and adhere to it.

TABLE OF CONTENTS:

Start CFA Exam Level III Prep Early
How Long To Study for CFA Exam Level III
Review CFA Institute’s Learning Outcome Statements (LOS)
CFA Level III Practice Questions Quiz
Know CFA Exam Level III Weights and Curriculum
Learn the CFA Exam Level III Question Format
Recommended CFA Exam Level III Prep Breakdown
Learn How to Take the CFA Exam Level III
Apply Level III CFA Concepts to Real Life
Last-Minute Level III CFA Exam Study Tips
Can You pass CFA Level III with Self Study

Start Your CFA Exam Level III Prep Early

Starting early to prepare for the Level III CFA Exam means beginning to prepare six-to-nine months before your exam day, and be finished three months out from your exam date. Many successful CFA charterholders credit their study routine for their success in taking the CFA exams.

Not only do you need to study the CFA Level III notes and materials, but you also need to be able to apply what you learned to scenarios on the exam. This level of understanding and practical application takes time to develop. Therefore, you must get into a study routine early and stick to it.

How Long to Study for CFA Exam Level III?

Across the six-to-nine months that you should spend studying for the CFA Level III exam, you should plan to devote at least 344 total hours (the average study time) to your Level III prep. If that number seems daunting to you, then consider spreading your studies across nine months instead of six.

That way, you would only need to devote roughly 1 hour and 25 minutes per day (on average) to your Level III prep (versus closer to 2 hours per day). Prep for longer periods on certain days to earn yourself an occasional day off from studying.

How Many Study Sessions Do You Need for CFA Level III Exam Prep?

You should engage in 80-100 study sessions across your six to nine months preparing for the Level IlI CFA Exam. We arrived at this range because most CFA Candidates prefer to prep for a few hours, almost every day of the week. If your preference is to take more frequent days off from your prep, you can engage in fewer study sessions than that.

However, keep in mind that if you were to only engage in 60 study sessions, then you will need to average 6 hours per study session to meet the minimum suggestion of 344 total hours studying. The more often you sit down for a study session, the less demanding each study session will be.

Review CFA Institute’s Learning Outcome Statements (LOS)

Your focus should be on the Learning Outcome Statements (LOS) from the CFA Institute because they detail exactly what you are expected to do on exam day.

The Learning Outcome Statements (LOS) and core concepts are built from the Candidate Body of Knowledge, developed by the CFA Institute. They have devised study sessions and LOS to help candidates figure what should be gained from each reading. Be sure to develop your CFA Level III exam prep plan around these, as they will help you focus on the right topics for the exam.

One method of studying to help focus on the LOS is through self-explanation or by pretending you’re the teacher who has to explain to a student. Interleaved learning is another. This is the process of taking breaks so that you’re not trying to learn or practice large quantities of material all at once. Interleaved learning can morph into distributed practice, which is spreading learning over a long period of time rather than “cramming.”

Remember, the most important and effective way to focus on the LOS is to practice. Take quizzes, do problems, put pencil to paper. And if you make a mistake, that can be used to your advantage. Your brain will flare up and recognize that this is the kind of mistake that can be made, and the result is that you’re unlikely to repeat it.

Try Today's CFA Level III Practice Question

CFA Level III Exam Quiz

Answer these five questions to test your readiness for the Level III Exam.

Know CFA Exam Level III Curriculum and Weights

Level III is a computer-based, 4 hours and 24 minutes, split into two equal sessions of 2 hours and 12 minutes, with an optional break in between. The first session of the CFA Level III exam is comprised of 8 to 11 vignettes followed by several questions that require a written response. There will be some multiple-choice questions in this session, as well. There also may be some numerical entry questions, where only a number is required, with no opportunity to show work. The majority of the questions though will be traditionally essays.

The topics covered, with their exam weights, are:

Asset Allocation: 15–20%
Portfolio Construction: 15–20%
Performance Measurement: 5–10%
Derivatives and Risk Management: 10–15%
Ethical and Professional Standards: 10–15%
Pathway (Portfolio Management, Private Markets, or Private Wealth): 30–35%

Many CFA charter holders have used Kaplan Schweser’s Secret Sauce for a concise review of the CFA Program curriculum and topic-by-topic listings of high-probability exam topics.

Latest CFA Level III Curriculum Updates >>

Learn the CFA Exam Level III Question Format

The big difference with Level III is the format of the exam and specialized pathways. The format of the Level III exam contains both the vignette-style item set questions seen at Level II, but also includes constructed response (essay) sets.

In these vignette question sets, you may be asked a multiple-choice question to select the portfolio (A, B, or C) that meets a particular objective, followed by an essay question to justify that response. Candidates’ responses to constructed response questions require a higher degree of specificity.

The constructed response question sets have a variable number of parts, and each part varies in length. The point of this format is to test your ability to apply and use judgment and follow a prescribed path, which is what CFA charterholders have to do for their clients and firms. No client is going to benefit from your ability to recall factoids from memory; they are relying on you to make the right decisions for them based on their situations and needs and your knowledge of finance and investment.

You might have noticed how much weight is to Asset Allocation and Portfolio Construction. If you don’t pass them, you aren’t likely to pass the exam. Here’s an important tip to remember for structuring your study: except for ethics, all Level III exam topics relate to portfolio management.

Recent Level III Exam Format Changes

Recommended CFA Exam Level III Prep Breakdown

We recommend following the Prepare > Practice > Perform® method of studying. In your prep stage, you absorb information through reading and listening to lectures. In the practice stage, you start working through practice problems. In your perform stage, you simulate exam conditions to assess your level of readiness.

Read more about what exactly your CFA Level III Exam Study Plan should look like.

Level III CFA Exam Prep: Reading & Lectures [PREPARE]

To increase your odds of passing, you should spend up to 40 percent of your study time preparing, which involves absorbing the information by reading and listening to lectures.

Successful CFA charterholders report that CFA review workshops were part of their preparation strategy and helped them pass. These review workshops pull everything together, which is critical to doing well on the exam. They show you slightly different perspectives for the same topic, which can help you remember solutions to questions when you’re taking the exam.

Level III CFA Exam Prep: Practice Questions [PRACTICE]

On top of that, you should spend up to 50 percent of your self-study time on CFA practice questions and doing final CFA Level III review activities such as review workshops and mock exams. Research studies have shown that practice is the most effective way to prepare for Level III.

For too many candidates, this means taking a brief quiz, marking it, and moving on. When practicing Level lII CFA questions, you should spend an average of 90 seconds answering the question. However, you should spend significantly more time thoroughly debriefing the question and answer.

Debriefing Is a Critical CFA Level III Exam Study Strategy

Start your debrief by making sure the questions you got right were correct for the right reasons. Guessing right on exam day is a bonus. Up until then, it’s just another question that you need to review. For all wrong answers and guesses that resulted in a correct answer, it is crucial to find the area of the curriculum that let you down. If it’s a missed calculation, find at least five examples of that type of calculation.

CFA Program Examiners are masters of hitting calculations from every angle. Just correcting the single instance which that question hit may not address the deeper issue. Your aim is to repeat the calculation multiple times until you can do it backward (which is incidentally a popular CFA examiners’ trick). Kaplan Schweser’s CFA Level III Qbank is a great way to learn question debriefing.

CFA Level III Resit Strategies

Passing this rigorous and comprehensive exam is no easy feat. For those who have faced the disappointment of not passing, hope is not lost. Below we offer some tips for when it comes to retaking the Level III exam.

Different Forms of Level III CFA Exam Question Debriefing

If it’s a narrative point, find the explanation in the curriculum and see if it’s an isolated fact, part of a list, or a piece of analysis on a calculation. Isolated facts need learning. Little and often is the best way. Five minutes a day, squeezed in whilst lining up for your lunchtime sandwich, can make a huge difference.

Lists are more common. Most relate to a model or a theory. It’s much easier, therefore, to learn them in the context of that model. For instance, low barriers to entry in perfect competition? It means zero economic profits in the long run. Tie facts together where you can, your brain is wired to remember stories. Cause and effect will stick a lot better than disorganized memorization.

And what if it’s a piece of analysis on a calculation? Go back and find an example of the calculation. Make up your own numbers if you need to. For example, we would recommend always having a simple balance sheet and income statement handy to help with ratio analysis.

If you can’t figure out why the answer was an increase, decrease, or neither, put some numbers through your simple statements and calculate the result. This approach fits with the classic definition of analysis: a detailed examination of the elements or structure of something, typically as a basis for discussion. You can’t hope to get the discussion questions right if you don’t do the detailed examination.

If you’re using something like the SchweserPro™ QBank, then you’ve got thousands of questions to attempt to cover the whole syllabus. It’s a big ask to do that, but an effective use of the questions should ensure you cover the majority of every CFA exam topic.

CFA Exam Level III Prep: Mock Exams [PERFORM]

The CFA Institute will give you one mock exam, and you can purchase others with exam prep providers like Schweser. The Schweser Online Level III Mock Exam includes an exam sim mode that uses the same interface as the actual computer-based exam.

It also includes a multimedia tutorial that takes you through each question and helps you understand where the answer comes from, the calculations required, and what terms they are testing you on. This helps to fill in your knowledge gaps and give you an idea of how you should pace yourself during the actual exam.

Learn How to Take the CFA Exam Level III

There’s a difference between learning the material and learning how to take the exam. Be sure you practice taking the exam in realistic simulated exam conditions in the last four weeks of studying. Mock exams offer realistic simulated exam conditions that can help you in your last weeks of studying.

If you make a mistake, you can use it to your advantage. You can train your brain to recognize that this is the kind of mistake that can be made. Then, you’re less likely to repeat it. Successful CFA charterholders have told us they spent the entire last month working and reworking exams and focusing on the main issues.

Also, it’s important to remember that once is not enough, particularly when preparing for the constructed response portion of the exam. That’s why mock exams often repeat questions. You should never think, “I’ve seen this question before, so I’ve got this,” and write the same answer you did before.

Challenge yourself to write a better answer this time around. Your goal should be a more effective written response each time you answer. In addition, answering questions multiple times helps you learn from your mistakes, which is important in the exam preparation process.

Looking for more help passing Level III of the CFA exam? Check out our Level III study packages.

Apply Level III CFA Exam Concepts to Real Life

Just knowing the material isn’t enough to pass the CFA exam. You must be able to take the knowledge and apply it to real situations. Most questions are not asking you to regurgitate memorized material. They are asking you to use problem-solving skills and apply knowledge to situations you may encounter on the job.

Many CFA charterholders advise you to always tie back what you are learning to the real world. Saqib Baig, CFA, recommends, “As you are going through the learning outcomes, keep asking yourself questions as to why you are learning this and how you are going to use this in your work.” The more you can make the study material real to you, the easier it will be to remember it.

Following these tips will ensure you are as prepared as possible for Level IlI of the CFA exam.

Last-Minute Level III CFA Exam Study Tips

Use these last-minute study tips to keep you feeling motivated and prepared during the last few weeks leading up to the exam.

1: Practice Constructed Response Questions

If you haven’t already started practicing Level III constructed response questions, now is the time. These types of questions require test-takers to provide longer, written answers vs. multiple-choice answers. It is a unique question format that you will only face on the Level III exam. 50% of the Level III exam consists of constructed response format so this is crucial to your success.

2: Pay Attention To How You Are Feeling

You’ve spent a lot of time getting to this point and this last exam can test your mental stamina in ways you haven’t experienced before. Don’t let your fatigue take control and convince you to start taking shortcuts or lose focus. If you feel this happening, stop, take a day off and do something you enjoy. Allow yourself to reset and remember, that you are almost there.

3: Focus on Time Management

When you start taking CFA mock exams, keep track of how long it takes you to read vignettes and answer questions. If you notice you're taking too long to read the question, try skipping ahead to find one that you understand right away. Answers those ones first and then go back to the ones that were giving you a hard time.

4. Use Mock Exams to Test Your Readiness

Take a CFA mock exam a week out from your actual exam to simulate what taking the exam will be like and what your score could be. If you're on the brink of a minimum passing score, pay special attention to Asset Allocation and Portfolio Construction. Both topic areas can put you over the top due to their combined large topic weight (30-40%).

5: Keep Summary Notes

As you evaluate your practice exam performance, try using a spreadsheet to keep track of the questions and topics you are struggling with. Create a column on this spreadsheet for summaries about what you were thinking that led you to this incorrect answer and use this data to help you identify which topics you still need to work on.

6: Don’t Be Afraid to Ask For Help

It’s understandable to feel overwhelmed and anxious about preparing for the Level III CFA exam. This exam can really test your readiness and stamina. If you don’t understand how to do something or just need some advice contact Kaplan Schweser.

Candidates that take advantage of Kaplan Schweser instructor-led review workshops can get direct expert guidance all the way up to exam day.

Can I pass CFA Level III with Self Study?

Yes, it is possible to pass the CFA Level III Exam with self-study. However, most CFA members strongly suggest that you prepare with a CFA expert who can help guide you through the curriculum and keep you motivated along the way.

One of the biggest challenges of CFA Exam prep is longevity. On average, it takes 4+ years for a CFA candidate to complete the full CFA program. You should only pursue the self-study method if you are a highly-motivated self-starter who does not want guided instruction.

Getting guided instruction ensures that you have a CFA expert who knows what it takes to pass the exam in your corner. An expert can help you break down your study routine into specific weekly tasks based on and leading up to your CFA Exam date, and can also provide detailed feedback following your mock exams, and ultimately help you master the CFA curriculum.

Ready To Start Preparing for the CFA Exam?

As you get ready for your next CFA exam, consider making a Kaplan Schweser CFA Level III exam prep package—complete with classes, study tools, and mock exams—the centerpiece of your mission to earn a passing grade.