Update from standards-setting bodies removes 'outlier' timeframe to account for current environment
The FP Canada Standards Council and the Institut québécois de planification financière (IQPF) have jointly announced the new 2020 Projection Assumption Guidelines and Addendum for Canadian professional financial planners.
"Periods of market volatility, like the one we've seen recently, can trigger fear and uncertainty among clients,” said Lesley Poole, CFP, Chair of the FP Canada Standards Council's Standards Panel. “The Projection Assumption Guidelines provide a useful tool for financial planners in helping clients stay focused on their long-term plan.”
The projection guidelines for 2020, developed by a committee of licensed financial planners, actuaries, or CFA charterholders, are:
The FP Standards Council emphasized that the projections are meant for long-term planning that spans 10 years or more, with the latest iteration having been developed prior to the recent spate of coronavirus-driven market volatility.
“Professional financial planners can provide perspective on shorter-term current events as they relate to clients and their individual circumstances,” a statement from the FP Canada Standards Council said, noting that professional judgment should always be exercised when applying the guidelines.
This year, the 50-year historical average rate was disregarded when determining assumptions for both short-term and fixed-income asset classes. That portion of the calculation was dropped “given its position as a significant outlier” when considering the current environment, resulting in lower rate forecasts for the two asset classes.
“Armed with these Guidelines, planners can help their clients build and implement long-term financial plans that are rooted in unbiased and objective financial projections,” said Martin Dupras, a.s.a., F.Pl., M.Fisc., ASC, who is a member of the Projection Assumptions Guidelines Committee.
