Acing the FMI Exam Personal Experience

Charting Success in the FMI Exam: A Personal Narrative

Introduction

As Albert Einstein once said, 'The only source of knowledge is experience.' Today, we delve into the profound wisdom behind these words with our very own Babatope Agbeyo, a financial modeler who sat down with three of our FMA alumni participants who shared their personal experiences regarding the Financial Modeling Academy, the Financial Modeling Institute exams, their preparations and comparison to other financial modeling bodies and more.

We begin by looking at the professional backgrounds of our alumni participants:

Ajibola Abiodun: Ajibola is an investment and finance professional. He currently works as an Investment Associate at Blackaion Capital. Additionally, he is a part of the FMA program and has recently obtained the AFM certification​​.

Oreofe Olamoyegun: Oreofe works with Kairos Capital Limited as a Corporate Financial Analyst. He participated in the webinar to share his experience with the AFM exam conducted by the FMI Institute​​.

Sodeeq Akorede: Sodeeq is a financial analyst. At the time of the webinar, he was transitioning between jobs but was actively engaged in financial modeling​​.

Motivations for Taking the Exam

The reasons for taking the FMI exam, as shared by one of our alumni participants, Ajibola, were primarily centered around certification and recognition of his existing skills. Ajibola had been involved in building financial models for a while and was aware of the FMI exam's significance in the field. His decision to take the exam was influenced by a desire to officially certify his modeling abilities. This certification was seen as a way to demonstrate his competence in building financial models, a skill he already possessed and had been practicing. In summary, his motivation was more about obtaining formal recognition and validation of his skills through certification​​.

Perceptions of Exam Difficulty

Oreofe's Perspective: Oreofe mentioned that the difficulty of the exam depends on the individual's perspective. He didn't find it particularly difficult due to his thorough preparation through the Academy, which included a lot of practice questions. He acknowledged that while it was not difficult for him, it could be challenging for others depending on their preparation level​​.

General View on Preparation: It was noted that regardless of whether a candidate is new to modeling or not, going through a structured learning platform like dbrown can significantly aid in understanding and practicing financial modeling. The exam is seen as manageable with sufficient practice and learning, regardless of the candidate's professional background​​.

Challenge of Industry-Specific Modeling: The difficulty can also depend on the specific industry for which a model is being built. For instance, building a model for the manufacturing industry might be simpler than for telecom or real estate. This indicates that having knowledge about the specific industry and understanding the depth required in the model can influence the perceived difficulty of the exam​​.

Impact of Modeling Experience on Time Management: Another participant, Chipola, reflected on how his previous modeling experience helped him complete practice attempts in less time than initially. He mentioned that initially, candidates might spend more than 8 hours on a model, but with practice, this time can be significantly reduced. His previous experience allowed him to attempt models in less than 4 hours, which highlights how familiarity with modeling can affect efficiency in the exam​​.

These insights show that the perceived difficulty of the FMI exam can vary greatly based on an individual's background, preparation style, and familiarity with financial modeling.

Preparation Strategies

Learning Platforms: Participants emphasized the importance of going through learning platforms like the Financial Modeling Academy (FMA) scholarship program for structured modeling learning. This approach was considered beneficial for both beginners and those with some background in modeling​​.

Mock Exams: Mock exams were a crucial part of the preparation process. It was noted that the mock exams were often more difficult than the actual exam, serving as an effective preparation tool. Participants also recommended focusing on Excel shortcuts during practice to improve speed and efficiency in building models​​.

Combination of Prior Knowledge and Structured Learning: One participant discussed how combining his previous knowledge of financial modeling with the structured learning provided by the Financial Modeling Academy (FMA) greatly simplified his exam preparation. The FMA platform offered a plethora of practice questions and a mock exam, making the actual exam seem easier​​.

Dedicated Practice Sessions: Some participants committed to practicing for several hours each day. One example was spending four hours each night on practice, often working with a practice buddy. This approach helped in consistent practice and staying motivated​​.

Minimum Hours for Mastery: For those without prior financial modeling experience, it was recommended to spend a significant amount of time in preparation – at least 60 hours. This would involve both learning the basics and practicing extensively​​.

Daily Modeling Practice: A method of building at least one complete model per day was suggested. This consistent daily practice was deemed crucial for improving skills and reducing the time required for model building as the exam approached​​.

Structured Course Timeline: The FMA program, spanning about 8 weeks, was mentioned, where the initial six weeks focused on learning how to build models, followed by two to three weeks dedicated to exam-focused practice. Participants would spend a couple of hours daily during the learning phase to keep up with the course material​​.

These varied approaches highlight the importance of consistent practice, structured learning, and efficient time management in preparing for the FMI exam.

Challenging Aspects of the Exam

The Revolver: A challenging aspect was understanding and incorporating the revolver (revolving credit facilities) into models. This part involves dealing with scenarios where cash in the balance sheet becomes negative and how to treat it, like converting it into a bank overdraft. The complexity lies in understanding the mechanics of revolving credit and its impact on the financial model​​.

Declining Balance Method for Depreciation: Another challenging area was the declining balance method for depreciation. This aspect was particularly highlighted in one of the case studies, and participants noted the need to understand different methods of calculating depreciation, especially when it varied from the more commonly used ones. Understanding the technicalities of various depreciation methods and how they affect the financial statements was crucial​​.

Technical Aspects of Debt and Financing: The technicalities involved in modeling revolving debt and other financing aspects were also mentioned as challenging. This includes understanding the nuances of different types of debt and how they are treated in financial models, which requires a good grasp of finance principles and their application in modeling scenarios​​.

Our alumni participants addressed these challenges primarily by deepening their understanding of the concepts through study and practice. Emphasis was placed on learning the theory behind these challenging areas and applying them through practice problems and case studies, which allowed for a more comprehensive grasp of complex financial modeling aspects.

Grading Criteria and Exam Structure

Our alumni participants provided insights into the grading system, what examiners look for in candidates' models, and the overall format of the FMI exam:

Grading Criteria: The grading criteria for the FMI exam focus more on the steps taken in solving the problem rather than just the final answer. This approach is similar to solving a mathematical problem where the process and steps are crucial. Examiners look at how candidates approach the problem and their methodology in building the model​​.

Pass/Fail Outcome: There is no specific cut-off mark in the FMI exam. Candidates are either informed that they have passed or failed. This suggests that the exam assesses overall competence in financial modeling rather than being based on a numerical score​​.

Model Evaluation Aspects: In terms of evaluating the models, the examiners look for several key aspects:

• Whether the model is printable.
• Consistency in the formatting of the model.
• Overall completeness and accuracy of the model.

It is important to note that a model not being perfectly balanced does not automatically mean failure. Minor errors, like missing a cell, do not necessarily result in failing the exam, as the emphasis is on the overall structure and approach to modeling​​.

These insights reveal that the FMI exam grading system is comprehensive, focusing on the candidate's practical application of financial modeling concepts, attention to detail, and consistency in their work, rather than solely on the final outcome of the model.

Advice for Prospective Candidates

Our alumni participants shared several practical advice and tips for future exam takers, focusing on study resources, practice routines, and mindset:

Focus on the Learning Process: One key piece of advice was to concentrate on learning how to build a financial model rather than solely focusing on the exam. Emphasizing the learning process ensures a solid foundation in financial modeling​​.

Mock Exams and Excel Proficiency: Participants highlighted the importance of mock exams, which are often more challenging than the actual exam. They also advised mastering Excel shortcuts to improve speed and efficiency, suggesting that practicing without relying on the mouse can be beneficial​​.

Gradual Improvement with Practice: There was a consensus that consistent practice over time can significantly reduce the time taken to complete models. Starting with longer sessions and gradually becoming more efficient was a common theme​​.

Preparing for the Worst: Participants advised preparing for the most challenging scenarios in the exam. This means studying all aspects of the curriculum, even those that seem less likely to be tested​​.

Utilizing Review Sessions of Mocks: After completing each case study or mock exam, reviewing the solutions and methods used can offer insights for improving future attempts. This approach helps in understanding various ways to tackle a problem in Excel​​.

Daily Model Building Practice: Building at least one model per day was recommended, with the understanding that the time required for each model would decrease with regular practice​​.

Balanced Approach to Practice: While rigorous practice is essential, participants also stressed the importance of not overworking oneself. They suggested setting achievable targets for each study session and ensuring rest and sleep as necessary, underlining the importance of a balanced approach to exam preparation​​.

These insights collectively emphasize a balanced and consistent approach to preparing for the FMI exam, focusing on both the learning process and practical skills development.

Comparisons with Other Financial Exams

Here our alumni participants shared specific technical advice and modeling insights, which can be summarized as follows:

Preparation for Various Scenarios: One participant advised to prepare for the worst-case scenarios, such as not limiting oneself to familiar industries or financial concepts. For example, if someone has a background in manufacturing, they should not solely focus on that but prepare for other areas like real estate as well. This comprehensive preparation ensures that candidates are not taken by surprise by any topic in the exam​​.

Dealing with Circular Referencing: A significant technical insight was shared about handling circular referencing in financial models, especially when dealing with variable and fixed debt. The participant discussed the importance of deciding whether to use the average or beginning balance for interest calculations. This decision is crucial because it can lead to circular referencing errors. Being well-practiced and having a clear strategy for such scenarios is vital to avoid being thrown off during the exam. For instance, the participant chose to use the beginning balance over the average in the exam for simplicity and to avoid potential issues with circular referencing​​.

These insights emphasize the importance of thorough preparation covering a range of topics and scenarios, as well as being well-versed in complex technical aspects of financial modeling, such as dealing with circular references.

Technical Tips and Modeling Insights

Our alumni participants discussed the differences between the FMI exam and other financial modeling or professional finance exams:

Focus on Practical Modeling: A key distinction of the FMI exam is its emphasis on practically building a model. Unlike some other exams that might involve answering multiple-choice questions, the FMI exam requires candidates to construct a financial model from scratch. This approach tests not just theoretical knowledge but also practical application skills.

Comparison with FMV: While the participant didn't have personal experience with the FMV (Financial Modeling and Valuation) exam, the feedback they received indicated that the FMI exam is more rigorous in its requirement for hands-on model building. In contrast, exams like FMV may focus more on theoretical understanding or apply a different assessment format.

Overall, the FMI exam is distinguished by its practical, hands-on approach, requiring a deeper engagement with financial modeling tasks compared to some other certifications, which might have a more theoretical or multiple-choice question format​​.

Q&A Summary

During the webinar, attendees asked various questions about the FMI exam, and our alumni participants provided insightful answers. Here is a summary of the most informative and frequently asked questions along with the responses:

Curriculum Content: An attendee inquired if concepts like revolver security would be taught in the Financial Modeling Academy (FMA). The response confirmed that such concepts are indeed covered in the FMA program, along with a step-by-step guide to writing the FMI exam​​.

Comparison with Other Exams: A question was raised about the differences between the FMI exam and other financial modeling exams like the FMV (Financial Modeling and Valuation). The response highlighted that the FMI exam is more granular and rigorous, requiring candidates to build models from scratch, unlike other exams that might focus more on theoretical aspects​​.

Exam Logistics: Questions about the logistics of the exam were also asked. For instance, one attendee inquired about the feasibility of taking the exam at midnight. The response indicated that there are multiple time slots available for taking the exam, including a midnight option​​.

Use of Second Screen During Exam: Another query was regarding the use of a second screen during the exam. The response advised against using a double screen, suggesting that candidates should stick to a single screen setup, whether it's a laptop or desktop​​.

Remote Proctoring: There were questions about the exam's format, particularly whether it is conducted remotely. The response confirmed that the exam is indeed remote but proctored, meaning candidates are monitored through a camera to ensure exam integrity​​.

Camera Requirements: Attendees also asked about camera requirements for the exam. It was emphasized that having a working camera is essential as the exam is proctored, and candidates are required to show their environment before starting the exam​​.

Exam Content and Focus: Another question focused on what the FMI exam tests. The panelists explained that the FMI exam not only tests knowledge but also the practical ability to build financial models from scratch, which is a key difference from exams that might only test theoretical knowledge​​.

These questions and responses provided attendees with a clearer understanding of the FMI exam's content, format, and requirements, helping them prepare more effectively.

Closing reflections

The key takeaways from the Acing the FMI Exam Personal Experience webinar began with a major focus on the importance of practical skills in financial modeling. The FMI exam's requirement to build models from scratch highlights the necessity of practical, hands-on experience. Consistent and regular practice was emphasized as crucial for success in the FMI exam. Participants shared their personal strategies, such as building one model per day and gradually improving efficiency. Utilizing mock exams and their review sessions was recommended for understanding different approaches and refining modeling techniques.

The webinar stressed the importance of preparing for all possible scenarios in the exam, including challenging aspects like revolver security and declining balance methods in depreciation. Information was also shared about the remote, proctored nature of the exam, including technical requirements like camera setup and examination slots.

The webinar concluded with thanks to dbrownconsulting for hosting the event our hosts, our FMA alumni, expressed their hopes to see the attendees in future events and extended their goodbyes with a friendly farewell.

Summing up, the webinar provided comprehensive insights into preparing for the FMI exam, highlighting the need for both theoretical knowledge and practical skills in financial modeling. The closing remarks reflected a sense of community and support for those preparing for the exam.

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