The pass rate for Level 3 this year was 46% and the rumblings that I am hearing indicate that this is pretty low compared to historic percentages.  Below I will discuss: a Passing Score; Challenges for 2010 exam takers; Study Strategies, and Essay Section guidance.

Anatomy of a Passing Score – Fortunately, I passed.  For sixteen topic areas, I scored 70%+ in six; 51-70% in four; and 50% or less in six.  There are two factors which I strongly feel carried the day.  First, I was above 70% in four of the six most heavily weighted point sections.  Second, I was above 70% in Ethics.

Challenges – Discussing the exam with other Level 3 candidates, the recurring theme is that AM scores, which is the essay portion, were brutal.  I think this highlights the challenges of transitioning from a full multiple choice exam to one that is half essay.  For me personally, this was unequivocally the toughest of the three tests and the essays were the primary reason.  Further, in practicing with prior year essay tests (which CFAI makes available to Level 3 candidates on its website) I felt that 2010 was more difficult than 2007, 2008, and 2009.  This is just my opinion; others may disagree.

Study Strategies – I recommend the following:

1 – Plan to study more than 250-300 hours.  Start earlier than January (my norm for L1 and L2) and study more time each day than you did for the previous tests.  If you pass, then you won’t care that you spent 450 hours studying.  Passing is the primary main objective.

2 – Hit Portfolio Management hard from all angles.  The portfolio management process is so central to the entire exam and with so many permutations of potential item set and essay problems, a candidate needs to know this material front and back.

3 – Practice many many essay problems.  I thought I did a lot of them and thought I could handle the morning session in three hours.  I left points on the table with some partial blanks.  The only way to avoid leaving points on the table is to do practice essay questions under a time constraint over and over and over again.  There is no substitute for intense essay practice.

During the Essay Section –

1 – Order: Because the question story lines are often sequential, a test taker must start with number one and work through to the end.  When you hit a question you do not fully know how to solve, I recommend jotting some notes down in the margins and move forward.  Keep a list of questions you need to go back to; work through to the end and then start hitting your list.

2 – Essays with Formulas: When you come to an essay that requires a formula, write out that formula.  If you only write the answer and get it wrong, you will probably get zero points.  By showing the formula, you set yourself up for partial credit even if the final answer is wrong for some reason.

3 – The Break: No matter how poorly you feel you may have done on the essays, wash this off during the break.  The PM item set section is a whole new ball game.  I did not feel good about the essays during lunch (the bitter taste of the essays completely ruined an otherwise delicious Wendy’s hamburger).  However, I regrouped and focused on the item sets in the afternoon.  This paid off big time, as my afternoon scores were central in earning a passing grade this year.