Projection Assumption Guidelines
Every year, FP Canada and the Institut québécois de planification financière publish their Projection Assumption Guidelines, which are designed to help financial planners make long-term financial projections.
These guidelines include assumptions about the inflation rate, rates of return on major asset classes, borrowing rate, life expectancy, and more.
Snap Projections can import the assumption guidelines for inflation and default rates of return into your projections. You continue to have the option to make adjustments to these values and save your own default settings as shown below. The most recent guidelines released in 2022 are now available in Snap Projections.
First, you will need to go to the General page. This page is the second page that you come to when you are creating a new scenario. It is accessible by selecting Scenario Setup -> General. On the General page, you can choose to import the guidelines by clicking the Use Guidelines button.
By selecting Use Guidelines, the following data will be updated: the age to end the projections, the inflation rates, and default rates of return. The age to show projections will be reset to age 100 when you choose to use the guidelines. The updated 2022 values for inflation and rates of return (before fees) are displayed below.
Fees: Note that the investment management fees paid by clients both for products and advice must be subtracted to obtain the net return. Actual net portfolio returns will depend on the actual product and portfolio management-related fees.
The rate of return for Cash represents a long-term assumption of short-term returns. Please note that we used to treat return for Cash similar to a rate of return on a savings account.
The rate of return for Equity is an average of rates of return for Canadian equities, foreign developed market equities, and emerging market equities.
Still, you may wish to adjust the assumption guideline values. After making adjustments, click the Defaults button and Save current page settings for new scenarios to automatically populate these values for new scenarios that you create. Note that any assets that have already been added to your scenario will not be updated as a result of clicking this button. Only new scenarios will be affected.
Each year after the guidelines are updated you will need to click the Use Guidelines button to import the new values.