Why the pass rate for Level I of the CFA exam just exceeded its 10-year average: ‘Test takers were very similar—with one caveat’

Good morning. CFA Institute, a global association of investment professionals, announced on April 4 that among the 16,932 candidates worldwide who sat for the Level I CFA Program exam in February, 44% passed—well above the 10-year average of 40%.

February’s pass rate was also an increase from those seen in November (35%) and in August (37%), and Chris Wiese, the institute's managing director of education, said the organization is taking a look at what's driving those increases because the difficulty level hasn't changed.

“Demographically and geographically, test takers were very similar—with one caveat,” he said. “The average age of the February 2024 tester did skew slightly younger.”

Younger test takers pursuing the chartered financial analyst credential are often still students in study mode, Wiese explained. Many of those already in the working world simply don’t have as much time to prepare consistently.

This batch of test takers is the CFA Institute’s first cohort to go through a revamped study program, with a lot more practice opportunities, and more “learning by doing,” he said. For example, if there’s a piece of content like the weighted average cost of capital, there are study components to help put that into greater context to hopefully increase students' understanding.

First-time testers scored a pass rate of 52% on Level I. Those who sat for the exam after having deferred it at least once passed at 28%. The CFA exam, in total, comprises three parts, often completed over multiple years.

Demand for financial analysts and AI's role

I asked Wiese if financial analysts are in demand, and he said It varies geographically. CFA Institute is seeing a gradual return of strength in Canada, the U.K., and the U.S.

“India is particularly strong,” Wiese commented. “They've got a booming stock market. Interesting fact, Goldman Sachs’s second-biggest office in the world is no longer London—now it's Bengaluru.”

But on the flip side, Wiese added: “We do see an ongoing lower number of candidates in China, and that's also not surprising as they're undergoing a really tough macroeconomic environment.”

Has the marketplace for financial analysts been affected yet by the growth of AI? Wiese said he hasn't seen too much of that yet, but it could be on the way for some employers.

“A lot of them are still struggling to understand how AI is eventually going to change the analyst workflow, and what that's going to mean,” he added. “It's probably an effect we might see three, four, or five years from now.”

And generative AI isn’t yet in a position to take over, which was shown in a recent study by researchers at Queen's University, Virginia Tech, and JPMorgan A.I. Research that examined how large language models like ChatGPT and GPT-4 performed in mock CFA exams.

“We concluded that ChatGPT would likely not be able to pass the CFA level I and II, under all tested settings,” the researchers wrote, although GPT-4 might have “a decent chance of passing” if specific prompts were used.

AI most likely will come to supplement a financial analyst's work, similar to the introduction of spreadsheets for accountants, Wiese added. “It made the accounting profession a lot more efficient, and a lot more capable of handling much more complexity,” he said.

Sheryl Estrada
sheryl.estrada@fortune.com

María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.

This story was originally featured on Fortune.com