FP Canada™ and the Institut québécois de planification financière jointly publish the 2023 Projection Assumption Guidelines

TORONTO and MONTRÉAL, April 28, 2023 /CNW/ - FP Canada and the Institut québécois de planification financière (IQPF) today announce the joint release of the 2023 Projection Assumption Guidelines and Addendum for professional financial planners across Canada. The new guidelines take effect April 30, 2023.  

"Making projections is critical to creating financial plans that help clients realize their long-term goals," says Julie Seberras, CFP®, MBA, FCSI and Chair of the FP Canada Standard Council™ Standards Panel. "The Projection Assumption Guidelines are a useful tool for planners to ensure their projections are based upon sound assumptions."  

The Standards Panel is an independent panel comprised of CFP professionals, at least one licensed financial planner from Québec, and a member of the public. The Panel's mandate includes oversight of the Projection Assumptions Guidelines Committee, which develops and maintains the Guidelines and Addendum.  

When applying the Guidelines to client situations, professional financial planners must always use professional judgement, and they must document and clearly communicate their assumptions to clients. In times when markets or economic conditions are changing, including in high-interest-rate environments, it's important to note the long-term nature of these projections.  

The Guidelines are intended to be used when making long-term projections of 10 years or more, and they're meant to look beyond the current day rate environment. For shorter-term financial projections (less than 10 years), financial planners may use actual rates of return on fixed-term investments held to maturity and dividend yields on equities.  

The Projection Assumption Guidelines for 2023 are as follows: 

Inflation rate	2.10 %
Return rates
Short-term	2.30 %
Fixed income	3.20 %
Canadian equities	6.20 %
Foreign developed market equities	6.50 %
Emerging market equities	7.40 %
YMPE or MPE growth rate	3.10 %
Borrowing rate	4.30 %

After an extended period of stable and relatively low inflation, global economies continue to see elevated inflation related to geopolitical pressures and other global factors.  

The Projection Assumption Guidelines include a chart in the Addendum displaying the Consumer Price Index (CPI) results from 1997 to 2022, which provide context and perspective in the face of recent inflation increases. Inflation can show more marked movements in some shorter-term time frames. However, in looking at inflation rates over a longer period, it's noted that previous higher levels are not sustained for the long term. As of December 2022, the CPI has averaged 3.03% over the last five years and 2.21% over the last 10 years.  

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; Québec Pension Plan Actuarial Valuation; and historical data based on the S&P/TSX Composite index (Canadian equities), the S&P 500 Composite index (U.S. equities), the MSCI EAFE (Europe, Australia, Far East) index, and the MSCI Emerging Markets index. To support the development of the Guidelines, the FP Canada Standards Council and IQPF also conduct a joint annual survey of industry firms and a second survey of professional financial planners who hold both CFP certification and the CFA designation. 

This year, the Addendum includes a chart outlining the PAG results from 2009 and how they've tracked compared to real rates of return over the years. "When looking at the actual rates from January 2009 to January 2023, the PAG rates are within the same range, which speaks to the reliability and validity of the PAG projections," says Derek Dedman, CFP®, M.Sc., CFA, and Chair of the Projection Assumption Guidelines Committee. The Committee is comprised of individuals who are professional financial planners (through either CFP certification or the Pl.Fin licence in Québec) in addition to being actuaries or CFA charterholders. 

The Guidelines are accompanied by an Addendum containing the data sources on which they are based. The Addendum offers financial planners an opportunity to fully understand and replicate the recommended calculations. FP Canada also publishes an FAQ document, which is a useful resource for those who wish to learn more about the development and appropriate usage of the Guidelines. 

You can find the 2023 Projection Assumption Guidelines, the Addendum, and the FAQs on the FP Canada website. 

About FP Canada 

Established in 1995, FP Canada is a national not-for-profit education, certification and professional oversight organization working in the public interest. FP Canada is dedicated to championing better financial wellness for all Canadians by leading the advancement of professional financial planning in Canada. 

About the Institute

For over 30 years, the Institut québécois de planification financière has been a pillar of financial planning in Quebec. It has established itself on the North American scene by setting the highest standards. The Institute has made the financial planner the expert sought after by all consumers concerned about preserving and increasing their wealth.

As a leader in developing and promoting personal financial planning, the Institute's mission is to ensure that today's and tomorrow's financial services professionals have the knowledge, the know-how and the social skills required to contribute to the financial well-being of people, families and communities. For more information, visit iqpf.org.

SOURCE FP Canada

For media inquiries, please contact: Megan Harman, FP Canada, [email protected]; Liette Pitre, IQPF, [email protected]