A Suggestion to the CFA Institute

Image Credit: Andy Kobel || Remember, the market is mostly a weighing machine, not a voting machine

There are three main gripes that I have with respect to the CFA Institute regarding the way they do exams.

• The exams cost far more than the marginal cost of providing them. CFAI is a nonprofit that acts like a for-profit enterprise. If you are a non-profit, why are you building up so much cash? Is it merely to employ people who have non-economic goals?
• For the last 30 years, you have gone in search of novelty. Do students really need to learn derivatives? Alternatives? Do they have to learn about fads like ESG, which have little attachment to making profits over the long haul. Focus on the basics.
• Why did you adopt a lousy testing method like multiple choice? Good exams are essay exams where you can see what the person is thinking and whether they can get to the correct answer via good reasoning, with out specifying possible answers.

I have an idea to improve things. Go ahead and continue to hold exams at testing centers via computers. Turn the exams into essay exams. Make them submit answers to essay questions. See if they get the right answer. See if they give the right logic. Have correct answer template, and use AI to see the degree to which the answers correspond to the template. Rank the answers from a given set of exams, question-by-question from 0 to 100.

We need to get CFA students thinking in a qualitative way, as it was when I passed the exams. This would not be hard, and would improve the quality of CFA Charterholders that pass the exams.

Please stop following fads, please create better exams, lower the fees, and stick to matters that CFAs genuinely care about.

Remember, we ripped out the head of CFA International back in 2003. We can do it again. I was at the meeting in Boston. We can have another revolution.