Financial planning projections generally brighter in 2024

Financial planners can expect equity returns between 6% and 8% in the coming decade, as well as an inflation rate of 2.1%, according to new projections from FP Canada and the Institut québécois de planification financière.

The associations’ 2024 Projection Assumption Guidelines published Tuesday include anticipated returns for the next 10 years.

The guidelines were established using sources such as the actuarial reports for the Quebec Pension Plan and Canada Pension Plan, as well as from a survey of investment and financial services firms.

“Use of the Projection Assumption Guidelines is strongly encouraged to promote trust and confidence in the financial planner’s projections, given their objectivity and basis in reliable sources,” said Julie Seberras, chair of the FP Canada Standard Council Standards Panel, in a release.

Over the next decade or so, Canadian equities are projected to return 6.4%, a slight increase from last year’s projection of 6.2%.

By comparison, the return for foreign developed-market equities was unchanged from last year’s forecast at 6.5%. And the return rate for emerging market equities is projected to be 8.3%, up from the 7.4% projection in last year’s guidelines.

The financial planning associations also noted return projections for short-term and fixed-income investments.

The guidelines assume return rates of 2.4% and 3.4% for short-term and fixed-income investments, respectively. Those figures are up from last year’s 2.3% and 3.2% projections.

Despite stubborn inflation, the guidelines suggest that financial planners can continue to assume an inflation rate of 2.1% for long-term planning — the same as last year’s projections.

Bank of Canada governor Tiff Macklem has said a key interest rate cut is “within the realm of possibilities” this June if core inflation sustainably slows. Canada’s inflation rate was recorded at 2.9% in March, a 0.1% increase from the month prior.

The yearly maximum pensionable earnings growth rate assumption is 3.1%, also unchanged from last year.

Meanwhile, the borrowing rate, which is equal to the return assumption for 91-day T-bills plus 2%, is projected at 4.4%. This is up slightly from last year’s projection of 4.3%.