AFP Entrance study guide
AFP Entrance · Work through your exam, one topic at a time.
The AFP Entrance examination is the gateway assessment for candidates beginning the Associate Financial Planner (AFP) certification pathway. It is designed for people entering financial planning practice - new graduates, career changers, and paraplanners moving toward advisory work - who need to demonstrate that they hold a working foundation across the planning disciplines before advancing to the full certification requirements. The AFP Entrance study guide has 10 sections and about 2,494 words.
01Fundamentals of Financial Planning
Financial planning is a cyclical process: establish the relationship, gather data, analyze the client's situation, develop and present recommendations, implement, and monitor. Know the sequence and the fact that monitoring feeds back into analysis.
273 words, about 1 min02Insurance Planning and Risk Management
Risk handling methods are avoidance, reduction, retention, and transfer. Insurance is a transfer mechanism.
269 words, about 1 min03Employee Benefits and Retirement Planning
Qualified retirement plans meet ERISA and tax-code requirements in exchange for tax advantages. Know the difference between defined benefit (employer promises a benefit) and defined contribution (employee bears investment risk).
273 words, about 1 min04Investment Planning
Expected return compensates for risk. Know systematic (market) versus unsystematic (diversifiable) risk; diversification reduces the latter.
237 words, about 1 min05Income Tax Planning
Know the difference between marginal and average tax rates, and how progressive brackets work. Understand gross income, adjustments (above-the-line), the standard or itemized deduction, and taxable income.
239 words, about 1 min06Estate Planning
Know wills (probate), revocable living trusts (avoid probate, no tax benefit), irrevocable trusts (remove assets from the estate), powers of attorney, healthcare directives, and beneficiary designations. Beneficiary designations override a will, a common trap.
238 words, about 1 min07Financial Statement and Cash Flow Analysis
The balance sheet (net worth statement) lists assets and liabilities at a point in time; net worth = assets − liabilities. The cash flow statement tracks inflows and outflows over a period.
250 words, about 1 min08Debt and Credit Management
Understand how credit scores are built (payment history, amounts owed, length of history, new credit, credit mix) and how they affect borrowing costs. Know the difference between secured and unsecured debt, revolving versus installment credit, and the implications of co-signing.
249 words, about 1 min09Education and Goal Funding
Know 529 plans (tax-deferred growth, tax-free qualified withdrawals, state tax benefits, owner control, beneficiary changes), Coverdell ESAs (contribution limits, broad qualified expenses), and custodial accounts under UGMA/UTMA (irrevocable gift, child owns assets, affects financial aid). Understand the FAFSA treatment of assets and income; parental assets are assessed more lightly than student assets.
227 words, about 1 min10Professional Ethics and Fiduciary Standards
A fiduciary acts in the client's best interest, placing the client's interests above the professional's own. The duty includes loyalty, care, disclosure of conflicts, and suitability of recommendations.
239 words, about 1 min