FPSC, IQPF issue updated guidelines for financial planners

The Financial Planning Standards Council (FPSC) and the Institut québécois de planification financière (IQPF) have released a new version of their projection assumption guidelines, which aim to provide financial planners with independent return projections for various asset classes to be used in long-term financial planning.

The re-released 2016 guidelines (which took effect June 30, 2016) clarify that these projections are designed to be used in long-term financial planning efforts (at least 10 years). The guidelines also include new insight into the sources used to develop the projections, along with some historical data.

Read: FPSC, IQPF update expected returns

For example, the guidelines spell out that the projected 4.9% annual return for Canadian equities is based on an average of the assumptions used by the Canada Pension Plan, Quebec Pension Plan, an annual Willis Towers Watson survey of portfolio managers and the 50-year historical average of the S&P/TSX composite index — minus a 0.5% margin of safety to adjust for the variability in long-run returns.

A committee of actuaries and financial planners develop the guidelines and design them for financial planners to use in order to promote trust and confidence in the assumptions used in their planning work.

“The Projection Assumption Guidelines aid financial planners in developing financial projections that are credible and objective to best help clients in meeting their important life goals,” says William Jack, a member of the FPSC’s standards panel, in a statement. “The addition of the Addendum will help ensure the Guidelines are understood and readily adopted by financial planners across the country.”

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