Financial planners can expect equities returns of roughly 7% to 8% in the coming decade, and fixed-income returns of about 3.4%, according to FP Canada and the Institute of Financial Planning (formerly the Institut québécois de planification financière).
The associations’ 2025 Projection Assumption Guidelines published Wednesday are designed to help financial planners make long-term projections of 10 years or more that are free from bias, a release said.
Canadian equities and U.S. equities are both projected to return 6.6%, compared to 6.9% for international developed market equities and 8.0% for emerging market equities.
Prior to the 2025 guidelines, U.S. equities were included in international (previously “foreign”) developed market equities. The change reflects how financial planners use the assumptions in practice, the release said.
For greater accuracy, the latest guidelines also include an updated approach to emerging markets historical data, it said.
In the 2024 guidelines, return projections for Canadian equities were slightly less, at 6.4%. Return projections for foreign developed market equities were 6.5%, and for emerging market equities were 8.3%.
The latest guidelines assume an annual inflation rate of 2.1%, and return rates of 2.4% and 3.4% for short-term and fixed-income investments, respectively — the same as 2024’s guidelines.
The latest guidelines set the borrowing rate at 4.4%, unchanged from last year’s guidelines.
The guidelines are based on a variety of sources, including the actuarial reports for the Canada Pension Plan and the Quebec Pension Plan, historical data for inflation and benchmark fixed-income and equities indexes, and the Shiller earnings-to-price average for relevant equities market indexes.