How China CFA applicants keep beating finance’s hardest exam
For three gruelling years, Ranger Yu tipped out of bed almost every day at 6 am. and studied until midnight to prepare for China’s infamous college entrance test, known as the Gaokao. After that, he said, the trio of exams to become a chartered financial analyst were relatively pleasant.
The Shanghai native used his old prep skills to study on his commute, after work and on weekends and breezed through all three levels of the English-only program on his first try, adding the letters CFA to his resume as a health-care analyst at a medical research group.
Now, Yu may hold the answer to a question that’s arisen in recent years as professionals obsess over the pass rate: How is it holding up so strongly even as applicants facing a significant language barrier pile in?
The CFA has long been renowned as Wall Street’s toughest test -- with questions spanning economics, derivatives, complex valuations and ethics written in a financial jargon thick enough to stump the average US college graduate. The Charlottesville, Virginia-based CFA Institute, which administers the exam, warns that each level takes about 300 hours of studying to pass. Aspiring charter holders spend years taking and retaking tests, a slog that’s spawned an industry of textbooks, classes and websites like 300hours.com where hopefuls trade tips, complaints and even conspiracy theories.
In recent years, a trend appeared in the broad statistics published by the institute: applicants from Asia -- and especially China -- have been flooding into the exams, overtaking interest from every other region. At the same time, the global pass rate has edged higher.
In interviews, CFA holders and applicants from China described surmounting the exams as a warm-down after spending their youth in the marathon run-up to the Gaokao. Many were unfazed by warnings about the hefty commitment, saying they were willing to spend much more than a mere 300 hours.
Yu, who said “diligence is key” to getting ahead in China’s growing financial-services industry, carved out time before and after work, then spent weekends in the library or in an all-day class at Golden Education. That’s one of country’s largest CFA prep schools, many of which tout pass rates of 70% or 80% -- far exceeding last June’s global rate of 45%.
According to Nick Pollard, Asia-Pacific managing director for the institute, the uptick in test takers tracks “a growing demand for financial talent” in the region. The average pass rate in Asia “is in line with the rest of the world,” he said.
Golden Education and competitors try to make studying efficient by honing in on material that optimizes chances of passing. A program priced at more than $1,500 on Golden Education’s website starts with a crash course on financial English.
“We have the language barrier,” said Niu Jia, a senior lecturer for the school’s CFA program. But there are also other challenges for Chinese test-takers, he said. “The exam relies on accounting principles and valuation models that sometimes differ than those most often taught in universities.”
The school assigns every customer an “inspector” to track their progress through the curriculum and even prepares a lunch on exam day. It claims its customers in college have a CFA pass rate of around 80%. There’s no way to independently verify the figure.
ZBG Education, based in the southeastern metropolis of Guangzhou, offers 15-day summer and winter camps paired with weekend classes and online courses. The program has achieved a roughly 70% pass rate, in part, because of the calibre of students who enrol, said Jason Pi, a senior lecturer. Even still, instead of 300 hours, he recommends at least 400.
“Most of the CFA takers are top students in China,” he said. “For most of my students, a few hundred hours is really not a big commitment. It’s nothing compared with the efforts you need to make to squeeze in a top university in China.”
The CFA publishes regional registration figures for its semi-annual exams in June and December, but only posts global pass rates. On its website, it urges aspiring charter holders to carefully examine prep services before signing up and offers a list of those it vetted and approved. (The dozens of approved services include Bloomberg Prep, a unit of Bloomberg LP, the parent company of Bloomberg News.)
“We encourage candidates to use approved prep-providers, and we provide information about how to select and research a prep-provider to meet a candidate’s learning needs on our website,” Pollard said in response to questions about the pass rates disclosed by schools. “CFA Institute publishes average passing rates every year, and candidates should use this information as their best guide to what is generally achievable.”
China’s obsession with scoring well on the Gaokao is the subject of documentaries on the anguish young people suffer during years of intense cramming, sometimes at dedicated boarding schools far from home. Formally called the National College Entrance Examination, it’s known to induce breakdowns and even suicides. In 2019, a record 10.3 million students took the exam.
The test, administered over a few days, grills students on a broad range of subjects, potentially asking them to prove the Pythagorean theorem, calculate the power of a crane given the size and speed of its load or write an essay in a foreign language introducing tea culture. A sample question published by the China Daily in 2015 required students to know the currents and wind direction they would encounter on a sailing from Fujian province to Venice via Mumbai.
Yet it’s hardly Asia’s only epic test. In India, for example, top technology schools use the Joint Entrance Examination as a basis for admission, making it a widespread source of anxiety among young people. In Japan, it’s a test administered by the National Center for University Entrance Examinations.
None of this is to say that people in Asia emerge immune to the emotional strains of preparing for the pass-or-fail CFA exams. For Priscilla Wang, who now works at a credit-rating company in Hong Kong, focusing her life around the test took a toll.
“I had no time for fun,” said Wang, who grew up in China and attended college in the US. She headed straight home from the office every day to study, and found quiet places to read on weekends. “I had to say ‘no’ to a lot of socialising opportunities. Even when I did relax a bit, my heart was always heavy. I thought I should be studying.”
One reason for the CFA’s popularity in Asia is that it offers a globally recognized credential to applicants who may not have attended a school with international name recognition, such as Harvard Business School or the Wharton School of the University of Pennsylvania, where costs are far out of reach for most people.
Ronald Leung and Eddie Chung, both Hong Kong-based financial advisory managers at Deloitte China, estimate almost half their team is working on earning a CFA charter. The pair saved their money by eschewing prep schools, taking time off work and studying independently. Their employer chipped in an extra three days per level. Chung has one test left and Leung is finished.
It was “very painful,” said Leung, who typically spent three months studying for each exam, passing the third on his second attempt. Even though he’s also a certified public accountant, he still isn’t done finding ways to burnish his curriculum vitae. “I would like one more professional title,” he said.
(With assistance from Jeanette Rodrigues.)