Standards setting organizations, FP Canada and the Institut québécois de planification financière (IQPF), jointly released 2023 Projections Assumption Guidelines for professional financial planners in Canada to use, effective April 30.
They say the committee which develops and maintains the guidelines and related addendum is overseen by a standards panel, an independent panel of Certified Financial Planner (CFP) professionals, at least one licensed planner from Quebec and a member of the public.
“Making projections is critical to creating financial plans,” says July Seberras, chair of the FP Canada Standard Council. “The projection assumption guidelines are a useful tool for planners to ensure their projections are based upon sound assumptions.”
They add that the guidelines are intended to be used when making long-term projections of 10 years or more. “They’re meant to look beyond the current day environment,” they state. “For shorter-term financial projections of less than 10 years, financial planners may use actual rates of return on fixed-term investments held to maturity and dividend yields on equities.”
An addendum in the guideline contains the data sources on which the guidelines are based on, including information from the Canada Pension Plan Actuarial Report, the Québec Pension Plan Actuarial Valuation and historical market information. The guidelines are also informed by a joint annual survey of industry firms and a second survey of professional financial planners who hold both the CFP designation, along with the Chartered Financial Analyst (CFA) designation.
First released in 2009, the addendum also includes results from that year and how the guidelines have tracked over time. “Predicting the direction the economy will take and how financial markets will evolve is a difficult exercise, requiring the integration of a large number of variables and highly sophisticated valuation models,” they write. “These projection assumption guidelines are intended as a guide and are appropriate for making realistic, long-term financial projections.”