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Alerts & Updates

FPSC and IQPF Update Unified Projection Assumption Guidelines for Financial Planners Across Canada

TORONTO, ON – April 30, 2018 – Financial Planning Standards Council (FPSC) and Institut québécois de planification financière (IQPF) have released updated unified Projection Assumption Guidelines for financial planners across Canada. Developed and updated annually by a committee of professional financial planners and actuaries, the Guidelines help financial planners make longterm financial projections (10 or more years) that are free from potential biases or predispositions. The 2018 Guidelines come into effect May 1, 2018.

Changes incorporated for 2018 include: 

  • A reduction in projected fixed-income returns to account for the appreciation in historical bond prices that cannot be explained by changes in interest rates;
  • Inclusion of the S&P 500 Composite Index in the calculation of the guidelines for Foreign Developed Market Equities; and
  • The addition of the S&P 500 Composite Index for U.S. equities in the Historical Rates and Standard Deviations 50-year data. 

The Projection Assumption Guidelines for 2018 are as follows: 

Inflation rate:

2.0%

Return rates

Short-term:

2.9%

Fixed-income:

3.9%

Canadian equities:

6.4%

Foreign developed market equities:

6.7%

Emerging market equities:

7.4%

YMPE or MPE growth rate

3.0%

Borrowing rate:

4.9%

 
To ensure full transparency and replicability, the Guidelines are drawn from a variety of reliable and publicly available data sources, including the Canada Pension Plan Actuarial Report; Quebec Pension Plan Actuarial Valuation; and historical data based on the DEX 91-day T-bill index, the DEX Universe Bond™ (Canadian bonds) index, the S&P/TSX (Canadian equities) index, the S&P 500 (U.S. equities) index and the MSCI EAFE (Europe, Australia, Far East) index.

Further qualitative guidance is provided to planners when developing financial projections over the shorter term (less than 10 years) and to emphasize the importance of sensitivity analysis to account for deviations from assumptions, including life expectancy, rates of return, inflation and exchange rates.  

“The Projection Assumption Guidelines report is an important resource for financial planners who recognize the need for projections that are free of personal bias as they assist their clients in achieving their financial goals,” said Susan Howe, EPC, MBA, CPA, CMA, CFP®. Howe is Chair of FPSC’s Standards Panel, an independent panel of CFP professionals and members of the public, which oversees the standards for the financial planning profession, including the Projection Assumption Guidelines. “Accuracy and currency of the Guidelines offers planners an objective resource to provide unbiased professional advice.”

The Projection Assumptions Guidelines is accompanied by an Addendum containing the data sources on which the Guidelines are based, as well as the specific calculations for inflation and rate-of-return guidelines. The Addendum offers financial planners an opportunity to fully understand and replicate the recommended calculations for their own use.

First created in 2015, the Projection Assumption Guidelines and Addendum are developed by the Projection Assumption Guidelines Committee, a team of financial planners and actuaries. FPSC and IQPF thank Committee members Nathalie Bachand, A.S.A., F.Pl.; Martin Dupras, A.S.A., F.Pl., M.Fisc., ASC; Daniel Laverdière, A.S.A., F.Pl.; and A. Kim Young, CFP, FCIA for their significant contributions to this important publication. FPSC and IQPF also recognize members of the FPSC Standards Panel for their oversight and leadership.

Among the Committee’s priorities for the development of the 2019 Guidelines are to further investigate a replacement source for the discontinued Willis Towers Watson Annual Canadian Investment Perspectives Survey.

About Financial Planning Standards Council

A professional standards-setting and certification body working in the public interest, FPSC’s purpose is to drive value and instill confidence in financial planning. FPSC ensures those it certifies―CERTIFIED FINANCIAL PLANNER® professionals and FPSC Level 1® Certificants in Financial Planning―meet appropriate standards of competence and professionalism through rigorous requirements of education, examination, experience and ethics. There are more than 18,500 Financial Planners in Canada who have met, and continue to meet, FPSC’s standards. More information is available at FPSC.ca and FinancialPlanningForCanadians.ca.

About Institut québécois de planification financière

The Institut québécois de planification financière (IQPF) is the only organization in Quebec authorized to grant financial planning diplomas and to establish rules concerning the ongoing professional development of professional financial planners. Only professionals recognized by the Institut québécois de planification financière are authorized to use the title of Financial Planner (F.Pl.) in Quebec. The IQPF is also the only organization in the province entirely dedicated to and reserved for financial planners. More information is available at IQPF.org.

For more information and to arrange an interview, please contact:
Caroline Horcher
Manager, Public Affairs
Financial Planning Standards Council
chorcher@fpsc.ca
(416) 593-8587, ext. 232 or 1-800-305-9886