Are You Smarter than a NEW CFA Charterholder? CFA Society of Minnesota Michael G. McMillan, PhD., CFA, CPA

2 Four Virtues of the CFA Charterholder  ETHICS  TENACITY  RIGOR  ANALYTICS

Page 3 Total CFA Registrations & Members May 2009

Page 4 May 2009 New Candidate Enrollment

June 2009 Exam Results  128,506 registered candidates from 163 countries; 104,116 sat for the exam  182 exam sites worldwide in 89 countries  19% no-show rate (10-year average of 25%)  Overall pass rates (weighted average 45%) 46%: Level I (44% avg. from ) 41%: Level II (49% avg. from ) 49%: Level III (64% avg. from ) Page 5

Charterholders and Candidates  As of 22 March 2010, there are 139,701 candidates registered for the June 2010 CFA exam (all 3 levels) worldwide.  Over 62,000 candidates are projected to register for the December 2010 Level I CFA exam. Currently 11,637 Level I candidates are registered for December.

7 Candidate Enrollments (December 2009 and June 2010 exams) U.S. 54,650 Canada 15,787 Singapore 6,482 U.K 13,081 P.R. China 22,387 Hong Kong 10,028 Korea 8,594 Taiwan 2,568 Australia 5,148 Latin/South America 3,309 South Africa 2,846

2011 Registration/ Exam Change  Effective 1 January 2011, a valid international travel passport will be required for CFA Program enrollment and exam registration. This will apply to all candidates.  This means that a passport will be required to register for the exam and to be admitted to the testing facility.

9 First CFA Exam, 1963

10 Today’s CFA Exam

The CFA ® Program A graduate level program that takes a generalist/foundations approach to investment analysis and portfolio management and emphasizes the highest ethical and professional standards for the investment profession. 11

A Practitioner Driven CFA Program Process 12

The CFA Program Cycle Page 13

Bodies of Knowledge Candidate BOK PWM BOK CIPM BOK Frontier (emerging) Global Body of Investment Knowledge Page 14

Purpose of Practice Analysis Process  To ensure the continuous development of the Global Body of Investment Knowledge (GBIK)  GBIK: The comprehensive outline of mainstream knowledge for the investment profession, encompassing an entire career – novice through expert – for both generalists and specialists.  To identify the relevant content for the CFA Program Candidate Body of Knowledge (CBOK)  CBOK: The inventory of knowledge and responsibilities expected of the professional practitioner of investment management at the level of a new charterholder. It is the roadmap for the CFA curriculum development and is organized into four functional areas: Ethical and Professional Standards, Investment Tools, Asset Valuation and Portfolio Management.

CFA Program Candidate Body of Knowledge 16

Portfolio Management and Wealth Planning Investment Tools Asset Valuation Portfolio Management Ethical and Professional Standards Quantitative Methods Economics Financial Reporting and Analysis Corporate Finance Equity Investments Fixed Income Derivatives Alternative Investments Ten CBOK Topic Domains Page 17

Curriculum The topic focus and learning focus differ at each level Topic FocusLearning Focus Level IInvestment ToolsKnowledge Ethical StandardsComprehension Level IIAsset ValuationApplication Ethical StandardsAnalysis Level IIIPortfolio ManagementSynthesis Ethical StandardsEvaluation The curriculum at each level is organized into 18 study sessions Page 18

Principles of Curriculum Development Teach the knowledge and skills required of a generalist Identified in the Global Practice Analysis Defined by CBOK and DUO Select, develop and regularly review materials that: Are appropriate in a distance-learning environment for a global candidate base Are clear and accurate Contain numerous examples/problems with solutions Avoid curriculum materials that are: Predominately empirical/historical in nature Topical (current events oriented or survey articles) Country specific and/or specialist in nature Page 19

Custom Curriculum Custom curriculum gives us flexibility to: Publish only the pages of a reading that we wish to require Add pedagogy (examples, questions, problems) where needed Make improvements to readings based on practice analysis Update examples and scenarios to current environment Page 20

2009 Curriculum Changes All MC and IS questions have 3 answer choices The fourth choice is often ineffective Exams are adequate samples of CBOK Time management is a factor in exam success but the primary objective is to determine mastery of the targeted KSA’s The Standard Setting process evaluates exam difficulty over time Page 21

2010 Curriculum Major Changes Increasing proportion of curriculum developed by CFA Institute Revision of Level I Equity Asset Valuation readings Revision of Level I and II Financial Reporting and Analysis Readings for IFRS and US GAAP changes Expansion of Private Wealth Management curriculum (Level III) Expansion of end-of-reading problem Page 22

37 Standard Setting The objective of Standard Setting is to determine the score that represents acceptable competence or mastery of the concepts Conducted by independent psychometricians Group represents member and candidate demographics Each participant works independently to evaluate each exam question/answer Average score = recommended MPS

40 The MPS Process CFA Institute Board of Governors (who are CFA charterholders) determines CFA Exam Minimum Passing Scores Primary input is standard setting Pass rate for each level is a residual determined by each level’s MPS Since 1996, the Board has considered performance on Ethics for candidates in a narrow band around the MPS

Volunteer Opportunities Practice Analysis Curriculum Development Curriculum Review Exam Development Exam Review Grading Standard Setting Page 25

Chartered Financial Analyst ® A Symbol of Integrity and Professional Excellence Page 26