The CFA Institute, which manages the chartered financial analyst certification, is looking into how artificial intelligence could improve its products and exams, which have an average pass rate of around 50%.

AI "could change the way we test" over the next five to seven years by making exams more interactive, rather than just questions and answers and multiple choices, Marg Franklin, the Institute's chief executive officer, said in an interview. But that doesn't necessarily mean more candidates will succeed.

"It could be that there's just not one answer," Franklin said in an interview in Montreal, where the organization was holding a conference last week where AI was among the themes discussed. "If you are sitting there and you've said something that was close enough, but not quite, we could ask another question to validate it. We could discern that it's not that you haven't answered right or wrong."

The CFA Institute last year announced changes to its three-level exams to focus more on practical skills and to make candidates more job-ready, Franklin said. New offerings include Python, a programming language, and financial modeling. The first cohort that will be completely in the new system will start writing their Level III exam early next year.

"What we really care about is the ability to discern the candidates who really do have the knowledge, skills and ability from those who don't, and we think that testing will become much more refined going forward," she said.

Some of the CFA Institute's research is focusing on the ethical use of AI, which can help investment professionals enhance decision making and better understand their clients.

"If you think about our code and standards, one is that you're able to essentially show your work, defend how you made investment decisions," Franklin said, adding that there's a need to understand how generative AI is being used. "That introduces a different level of responsibility."

The AI theme could eventually be added into the curriculum, she said, but the effort is still in just in the research stage for now.

The exam is always subject to changes. While climate and transition risks weren't even a consideration a few years ago, about 15% of ESG considerations are now weaved throughout the exam, Franklin said.