AFP Exam 1 study guide
AFP Exam 1 · Work through your exam, one topic at a time.
The Accredited Financial Planner (AFP) designation is a professional credential for practitioners who build and deliver comprehensive financial plans for individual clients. It suits advisers moving beyond single-product sales into holistic work: cash-flow and budget design, tax positioning, insurance and risk review, investment policy and asset allocation, retirement projections, estate transfer, and the employee benefits and equity compensation that shape a household balance sheet. The AFP Exam 1 study guide has 10 sections and about 3,437 words.
01Financial Planning Fundamentals and Professional Conduct
Financial planning fundamentals rest on a repeatable process: establish the engagement, gather qualitative and quantitative data, analyze the client's situation, develop and present recommendations, implement them, and monitor progress. Candidates must know the difference between financial planning and product sales, and must recognize that the planner's duty flows to the client's interest, not to a commission.
372 words, about 2 min02Client Data Gathering and Goal Setting
Effective planning begins with complete data. Quantitative data includes income, expenses, assets, liabilities, tax brackets, insurance coverage, and time horizons.
357 words, about 2 min03Cash Flow Management and Budgeting
Cash flow planning compares inflows (salary, bonuses, dividends, rental income) with outflows (fixed expenses, variable expenses, debt service, taxes, savings). The result is net cash flow, which funds goal contributions.
367 words, about 2 min04Income Tax Planning
Tax planning hinges on the marginal rate, the rate on the next dollar of income, versus the effective rate, total tax divided by total income. Decisions such as Roth conversions, deductible contributions, and capital gain timing depend on marginal rates.
352 words, about 2 min05Risk Management and Insurance Planning
Risk management follows identify, measure, select a technique, implement, and monitor. Techniques are avoidance, reduction, retention, and transfer.
319 words, about 2 min06Investment Planning and Asset Allocation
Investment planning connects client objectives to portfolios. Candidates must understand risk tolerance versus risk capacity, expected return, standard deviation as a measure of volatility, and correlation as the engine of diversification.
333 words, about 2 min07Retirement Planning
Retirement planning has two phases. In accumulation, the planner projects future needs, assumes inflation and returns, and calculates required savings.
332 words, about 2 min08Estate Planning
Estate planning arranges the transfer of assets at death and during life. Candidates must understand wills, trusts, powers of attorney, beneficiary designations, and titling.
329 words, about 2 min09Employee Benefits and Equity Compensation
Employee benefits are a major planning lever. Candidates must understand defined benefit versus defined contribution plans, vesting schedules, employer match mechanics, and the tax treatment of contributions and distributions.
338 words, about 2 min10Financial Plan Development and Monitoring
Plan development integrates every domain into one coherent document: client goals, current position, assumptions, recommendations, implementation steps, and monitoring schedule. Candidates must understand that the plan is a communication tool as much as an analysis.
338 words, about 2 min