AFP cheat sheet
AFP · Keep the key ideas within reach.
Financial Planning
Net worth = total assets − total liabilities; cash flow surplus = income − expenses − taxes − debt service.
Emergency fund target = 3–6 months of essential expenses; 6–12 months for single-income or variable-income households.
Future value of a lump sum: FV = PV × (1 + r)^n; present value: PV = FV ÷ (1 + r)^n.
Future value of an annuity: FV = PMT × [((1 + r)^n − 1) ÷ r]; solve for PMT to derive the required annual savings.
Real return ≈ nominal return − inflation (exact: (1 + nominal) ÷ (1 + inflation) − 1).
Rule of 72: years to double ≈ 72 ÷ annual return percentage.
Human life value = present value of the client's future earnings net of self-maintenance; needs analysis = income replacement + debts + education + final expenses − existing resources.
Education funding: inflate current cost by (1 + education inflation)^years, then discount at the assumed return to get the annual contribution.
Asset allocation is driven by time horizon, risk tolerance, and liquidity needs; rebalancing restores target weights rather than chasing returns.
Ethics and Professional Standards
Fiduciary duty comprises duties of loyalty and care: act in the client's best interest and disclose conflicts of interest.
Priority order when duties conflict: client interest first, then integrity of the profession/market, then employer, then self.
Material conflicts of interest must be disclosed in writing and managed; disclosure alone does not cure a conflict that harms the client.
Client information is confidential; disclosure is permitted only with consent or where required by law or to prevent a crime.
Suitability requires knowing the client's objectives, risk tolerance, time horizon, liquidity needs, and financial constraints before recommending.
Referral fees and commissions must be disclosed to the client and to the employer; hidden compensation is a violation.
Do not misrepresent credentials, performance, or the nature of services; performance must be presented fairly and comparably.
Keep records supporting recommendations and client communications for the period required by the employer or regulator.
When in doubt about an ethical issue, escalate to a supervisor or compliance before acting; document the decision and rationale.