My CFA Level 2 Experience

It was a beautiful day in June, but instead of enjoying the outdoors, I was headed to a convention center to take Level 2. Things were a bit different from my Level 1 experience. I bought a lunch this time, so I didn’t make the same mistake as before but still brought a lot of pencils.

I figured that the option value of having a pencil in the unlikely circumstance of 2 or 3 breaking was greater than the physical task of carrying a few extra pencils.

The most significant difference was that I was taking this exam in Boston opposed to Jacksonville. I was not prepared for the size difference of the whole ordeal.

In Jacksonville, I was in a room with under 100 people for Level 1, and Level 2 and Level 3 test takers were in other rooms. However, Boston does it big. Instead of separating everyone into rooms, the CFA exams for all levels are combined in a massive convention center. Easily over 1,000 people in one massive space.

Mini “classrooms” were roped off throughout the hall so that monitoring and check in was decentralized. The separation made everything run very smooth, but the number of people and size of the room was daunting. One of the proctors reads the instructions over a microphone to the entire room.

“You may remove open your test booklet” was followed by the sound of thousands of papers being flipped through at once.

It was right around then when I was thankful I brought earplugs.

CFA Level 2 Setup

Level 2 is put together in a different format than Level 1.

My level 1 experience is detailed here.

For one, the questions are no longer independent. There are groups of questions called vignettes that are based on a single passage of a page or two in length. There are also fewer questions; 120 vs. 240.

The combination had its pros and cons. On the plus side, there were fewer questions, and if I got a vignette on a topic that I knew well then I had six questions on a cake topic.

However, if I were to come across a vignette that I had no clue about… well 5% of my grade would be based on guessing, sometimes not even an educated guess.

The need for guessing on a vignette happened to me twice throughout the exam. One vignette, in particular, was a complete loss. I had no idea what was going on, much less how to solve the problem. I had seen the topic before but was just not prepared for the required level of detail.

The second time, I had an opportunity for some educated guessing which helped eliminate some of the wrong answers. The previous vignette from Hell haunted me until I received my results.

So much to juggle

The difficulty of level 2 stems from the breadth and depth of the material. Both Level 1 and 2 have the same topics to cover, albeit the weights shift a bit. The depth of the material is much different.

Level 1 can be passed with a mastery of flashcards. A finance major who can memorize enough FR equations and read through ethics would have a chance, probably not a good chance, but a chance at passing.

Level 2 requires so much more detail on all the topics. On top of concepts and formulas, there are now processes in the mix. That’s great that you know the pension liability formula, but can you take a balance sheet and a page worth of information and recreate that formula step by step in each one of the vignette’s six questions. That is level 2.

It was a whole new ball game from Level 1, and I now know why it is considered the hardest of the three exams.

Time Constraints

Since there were half as many questions, I didn’t think time would be an issue. I knew from practice exams how it would work out, but I came close to the wire for both the morning and afternoon sessions. I had less than 20 minutes to spare for both sections which was considerably less of a margin than I did for Level 1.

Lunch Win

I had a mini cooler in the car, so at lunch, I headed to the parking lot, ate, and returned. I am so glad I changed my lunch strategy for this exam. Not having to worry about finding food or waiting in long lines was a small win. I didn’t even bother looking at my notes.

There is no sense in stressing over past questions or trying to study in 15 minutes for something that requires 300 hours of study.

How I prepared for CFA Level 2

After reading through so many forums and Reddit posts, I decided to stick with my Level 1 game plan. I used notecards, and Schweser notes. Once again I never touched the CFA curriculum. This plan served me well.

I could’ve used more prep time. I didn’t have as much free time as I did for Level 1, so I knew I needed to be concise and tactical in my study habits.

Custom Note Packets

Just like level 1, I typed up a note packet for each of the main sections. These packets were supplemented versions of the Schweser summaries. The packets considerably narrowed the material, and since I had word documents of each section, I could trim and tailor the material as I studied.

There was some material that I didn’t have to study which helped knock down some of the topics, especially corporate and equity.

I teach the CAPM, why would I need to have this in my notes taking up precious space, so I eliminated it. Some areas lacked detail so I would include more, but overall I focused on consolidation.

I wanted quick note packets that I could read through up to the exam that would quickly hit and review the main takeaways from each LOS.

Notecards

My notecard pile was surprisingly taller than for Level 1. This was not a comforting feeling during prep because I thought Level 1 was supposed to have a lot of memorization and Level 2 more application.

I was wrong. Level 2 had more memorization and more application. On top of that, the level 2 memorization included a lot more complicated formulas.

I longed for the return of the Level 1 formulas of net working capital and assets minus liabilities equal to equity. Instead, I was stuck with a bunch of free cash flow formulas and currency translations.

My CFA Level 2 Study Materials:

• Custom note packets
• Schweser notes
• Notecards

The Result

Another pass, but the margin was not as good as Level 1. In Level 1, I walked out of the exam nervous, but I knew I had prepped as much as I could. For Level 2, I was nervous, but I felt it was warranted. I could have put in more time in my weaker areas, but I gambled on my strengths. The gamble paid off and now onto another entirely different test, Level 3.

photo credit: Boston public garden cc license