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Projection Assumption Guidelines

An important facet of financial planning involves projecting clients’ progress toward meeting their important life goals in areas that include retirement, child education and insurance. To make these projections, financial planners must estimate future inflation and borrowing rates, rates of return and life expectancy. In short, financial projections must make a series of assumptions.

Financial Planning Standards Council (FPSC) and Institut québécois de planification financière (IQPF) have released unified Projection Assumption Guidelines. Developed by a committee of actuarial and financial planning professionals and updated annually, the Projection Assumption Guidelines are intended as an aid in making long-term financial projections that are free from potential financial planner biases or predispositions.

As guidance, the assumptions acknowledge that each client situation is different and that financial planners will and should deviate from these assumptions when the client’s situation justifies doing so.

The first unified Projection Assumption Guidelines followed on the heels of the 2015 release of the Canadian Financial Planning Definitions, Standards & Competencies - a joint publication of FPSC & IQPF, the two organizations that establish and maintain standards for the financial planning profession in Canada. The national standards and definitions were developed in consultation with financial planners and industry firms from across the country.

2018

The 2018 Guidelines are in effect as of May 1, 2018 and include the following changes:

  • 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 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.

2018 Projection Assumption Guidelines
2018 Projection Assumption Guidelines - Addendum

2018 Normes d'hypothèses de projection
2018 Normes d'hypothèses de projection - Addenda

2017

2017 Projection Assumption Guidelines
2017 Projection Assumption Guidelines - Addendum

2017 Normes d'hypothèses de projection
2017 Normes d'hypothèses de projection - Addenda

2016

2016 Projection Assumption Guidelines
2016 Projection Assumption Guidelines - Addendum

2016 Normes d'hypothèses de projection
2016 Normes d'hypothèses de projection - Addenda

2015

2015 Projection Assumption Guidelines

2015 Normes d'hypothèses de projection