How Level 2 is different from Level 1 By Dr. Tim Smaby, CFA, FRM - Level 2 Manager
First of all, I’d like to congratulate all new Level 2 candidates who were successful on the 2007 Level 1 exam and are now embarking on the journey called “CFA Level 2.” And to all of you returning (I prefer “experienced”) Level 2 candidates, I want to tell you how much I admire your perseverance.
If you are a new Level 2 candidate, you may have asked yourself “How is Level 2 different from Level 1?” and “What do I need to do differently this year to be successful at Level 2?”
There are the obvious differences between Level 1 and Level 2: the topics and LOS are different, the Level 2 exam consists of 6-question item sets, and there are fewer questions. However, there are other differences that are not so obvious that have important implications for your Level 2 study plan.
* Level 1 knowledge base is required. At Level 2 we don’t usually start at the “beginning” with any topic, which means you are expected to bring the base of knowledge you developed during your Level 1 studies. For example, at Level 1 you learned the basics of forward rate agreements (FRA); at Level 2 we jump right into FRA valuation. If you don’t remember what an FRA is and how it works, you will find it frustrating as you try to grasp the nuances of FRA valuation. That’s why we’ve introduced a new product this year called “Book 0,” which is included free with your Study Notes Pack purchase and includes everything you need to remember from Level 1 in order to be successful at Level 2.
* The Level 2 material is more challenging. The Level 2 exam demands a higher level of knowledge than what you needed to pass Level 1. According to CFA Institute, Level 1 requires “knowledge and comprehension,” while the Level 2 exam demands “analysis and application.” For example, at Level 1 you are simply expected to be able to “discuss, with respect to global industry analysis, the key elements related to return expectations.” At Level 2 you are expected to be able “demonstrate how to conduct a global industry analysis by analyzing return potential and risk characteristics…” It’s the difference between simply knowing “what” financial analysis is and actually being able to “do” financial analysis.
* The level of competition is much higher. Even though the pass rate was 40% for both Level 1 and Level 2 in 2007, you’re competing against a more select group of candidates at Level 2. In June 2007 about 2/3 of the people sitting in the exam room were successful Level 1 candidates new to Level 2. These candidates have already proven themselves at Level 1 by being part of the 40% who passed in June. The other 1/3 of the group was experienced Level 2 candidates who have already spent 6 to 9 months studying Level 2 and have been through the rigors of an actual Level 2 exam.
The mistake I sometimes see new Level 2 candidates make is ignoring these additional challenges and, based on their success at Level 1, developing a false sense of confidence about their Level 2 prospects. Then they develop a study plan that starts too late and doesn’t include crucial study tools to complement the CFA Program Curriculum that is now bundled with the exam registration fee.
So here’s my advice to all Level 2 candidates:
* Start studying early. We can help you get started: this year the first two books of our Study Notes Pack will ship on October 3, almost five weeks earlier than last year.
* Use Schweser Study Products to complement the CFA Program Curriculum. Don’t go it alone by depending only on the CFA Program Curriculum.
Now I’d like to hear from you! If you’re a new or experienced Level 2 candidate, tell us about your strategy for success on the 2008 Level 2 exam. If you were successful on the Level 2 exam in 2007 and have moved on to Level 3, tell us what worked for you and what didn’t.
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