2019 Changes To The CFA Exam

The most significant changes to the CFA® program in 2022 are the introduction of a comprehensive reading on fintech, covering artificial intelligence, the application of machine learning to big data, and robo-advisers among other areas, and other changes to the curriculum in specific topic areas.

To clarify, there are changes to some of the CFA® Exam content in the following topics:

  • Ethical and Professional Standards
  • Portfolio Management and Wealth Planning
  • Quantitative Methods
  • Financial Reporting and Analysis
  • Fixed Income

Furthermore, in 2022 the importance of some topics in each of Levels I, II, and III have declined while those of others have increased. Consequently, these changes may require candidates to alter the time that they spend on different topics.

Let’s examine each of these changes in detail:

Introduction Of  The First Reading-length Coverage  Of Fintech

Coverage of Fintech on CFA® Exam

Financial technology, or “fintech,” has had a substantial impact on the investment industry in recent years. Activities that required human intervention can now be done equally efficiently by algorithms embedded in computers and smartphones.

With the introduction of new reading on fintech, the CFA® exam has given this subject the importance that it deserves. Some of the areas that the reading covers include:

Artificial intelligence: This new technology has a great role to play in the field of investment management. Artificial intelligence (AI) can be used in financial analysis, client servicing, and report generation.

Big data and machine learning: Recent technological developments allow for the capture and storage of tremendous volumes of data. However, the challenge is to convert this data into a usable form. Machine learning can play a pivotal role in this area.

Robo-advisers: These provide automated investment advice to retail investors. Fund allocation is carried out by computers on the basis of the investor’s profile and risk appetite. Investment services that were previously only available to high-net-worth individuals can now be made available to investors who have lower amounts to deploy in the financial markets. The role that robo-advisers play in investment management is bound to increase in the near future.

Blockchain technology: Bitcoin and a host of other cryptocurrencies are dependent upon blockchain tech for their existence. However, this new technology also has many other applications. It can provide a way to record financial transactions and transfer financial assets in a secure, fast, and tamper-proof manner.

The new reading on fintech will form part of the course for Levels I and II of the CFA® program.

Changes To The Curriculum In Specific Topic Areas

Here are the changes that have been made to the different topics that form part of the CFA® curriculum. These have been described in detail in the CFA® Institute’s publication titled CFA® Program Changes – 2020 Members’ Guide To Practitioner-Relevant Updates.

Ethical and Professional Standards

Two new readings have been added to this topic that will help candidates gain a greater understanding of ethical conduct.

Specifically, these readings address:

  • Application of the Code and Standards (for Level II) – five case studies will help candidates to grasp the nuances of the Code and Standards so that they can identify violations and recommend changes.
  • Professionalism in Investment Management (for Level III) – this reading will explain the role that the CFA® Institute plays in helping practitioners improve their level of knowledge. It will also demonstrate the necessity for building greater client focus and trust.

Portfolio Management and Wealth Planning

An important addition in this topic is the reading on “Fintech in Investment Management.”

This is a summary of the changes made within this topic:

  • Fintech in Investment Management – this reading pertains to Level I, but it has also been added for Level II for 2022.
  • Overview of the Asset Management Industry and Portfolio Management (for Level III) – this is a detailed description of the asset management industry.
  • Additionally, four new readings have been added to Level III. These are Introduction to Equity Portfolio Management, Passive Equity Investing, Active Equity Investing: Strategies, and Active Equity Investing: Portfolio Construction.

Quantitative Methods

The change is this topic is applicable for Level II. For the first time, content on machine learning has been introduced. In addition to this, there is an expanded section on regression analysis titled Multiple Regression and Machine Learning

It’s important to mention here that machine learning plays a crucial role in analyzing large datasets. It can also be used to generate information in real time. Consequently, this could be of great help to investment analysts in the performance of their roles.

Financial Reporting and Analysis

The new reading titled Analysis of Financial Institutions applies to Level II of the CFA® program.

This reading includes details of two different types of financial institutions and the role they play in the financial markets. The institutions covered are banks (and quasi-digital banking companies) and insurance firms.

Candidates are introduced to the methods for evaluating off-balance-sheet assets and liabilities. Details are also provided about the different areas in which banks operate. The reading includes a description of the different revenue streams of insurance companies.

Fixed Income

The old Credit Analysis Models reading, which was applicable until 2018, has been replaced with a new version that has the same title. This reading is relevant to Level II of the CFA® program.

The areas covered in the new version include details of the tools that are used in credit risk modeling. FICO credit scores and other information about credit ratings are also addressed.

Changes in topic weights

Changes in Weighting of Certain Topics

As previously mentioned, the weights for some of the topics have changed in 2022. This should prompt you to modify your study schedule; it is critical to spend an adequate amount of time on each topic. However, you may need to increase or decrease your focus on those topics that have had their weights altered in 2022.

For example, here are the changes in weights for the ten topics in the Level I exam:

Change in weight for topics for the Level I exam

Topic Weight in 2018 Weight in 2020
Ethics & Professional Standards 15% No change
Quantitative Methods 12% 10%
Economics 10% No change
Financial Reporting & Analysis 20% 15%
Corporate Finance 7% 10%
Equity Investments 10% 11%
Fixed Income 10% 11%
Derivative Investments 5% 6%
Alternative Investments 4% 6%
Portfolio Management & Wealth Management 7% 6%

Similarly, there are changes in the weights for some of the topics in Levels II and III of the CFA® program. You can see all the revised weights here.

No Change In The Exam Format

No Change In The Exam Format

Although many of the topics have new weights in 2022, the basic exam format remains unchanged.

  • Level I consists of 240 multiple-choice questions.
  • Level II contains 20 “mini-cases” and you are required to answer six multiple-choice questions for each of these. That’s a total of 120 multiple-choice questions.
  • Level III also consists of multiple-choice questions, but it includes essay questions as well.

The Bottom Line

The Bottom Line

Candidates are advised to study the changes that have been made to the 2022 curriculum carefully. The CFA® program is now putting special focus on fintech and its applicability to investment management. Hence, you should familiarize yourself with this topic.

It’s also recommended that you modify your study program to accommodate the new weights to specific topics. This could lead to a change in your study strategy and help you to meet the minimum score requirement needed to pass the exam.

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Kenneth W. Boyd is a former Certified Public Accountant (CPA) and the author of several of the popular "For Dummies" books published by John Wiley & Sons including 'CPA Exam for Dummies' and 'Cost Accounting for Dummies'.

Ken has gained a wealth of business experience through his previous employment as a CPA, Auditor, Tax Preparer and College Professor. Today, Ken continues to use those finely tuned skills to educate students as a professional writer and teacher.