Banking on an alternative

Recruitment consultant Michael Stefan takes a look at the actuarial profession
Other finance

It has been a very difficult 18 months for the world economy, and nowhere is this more evident than in recruitment patterns - everywhere you look in the world of banking and finance, staff numbers are being slashed, companies have stopped or dramatically reduced their graduate intake and consensus is that this year will be exceptionally difficult for graduates and post graduates alike. With many of the class the 2008 struggling to find jobs and a great number of junior candidates being made redundant, what does the future hold for the class of 2009? A recent article in the Financial Times (published in Feb 2009), predicted that job vacancies for graduates will fall this year for the first time since 2003, with investment banks expected to reduce recruitment by almost a third. Is there an alternative to the traditional, well-trodden routes into investment banking and asset management? Well, the answer may be yes.

The actuarial sector has been a well-kept secret for many years, with many graduates "blinded" by the shiny city investment banks. The actuarial profession has also suffered from a poor image and the impression that it's full of stuffy actuaries with poor communication skills locked away in a room has not helped matters either. That being said, the profession has worked really hard in recent years to shed this image which is so far from the reality of actuaries today, by introducing professional development and soft skills training, and this image has also been helped by the ever-increasing demand for actuaries and their skills.

So what do actuaries actually do? Well, the definition used by the actuarial profession shows that "Actuaries are experts in risk. They use their skills in maths and statistics to model the world around them, using models to help measure the probability of wide-ranging future events, from where and when storms may hit, to the risks associated with investments.." The profession has been growing over the last decade, with actuaries now common-place at life insurance companies, general insurance companies, pension consultancies, as well as investment banks, asset managers and governments. In the UK, there are 2 actuarial bodies - the Institute of Actuaries (England) and Faculty of Actuaries (Scotland), although the examinations are exactly the same. At the same time, the numbers of qualified and student actuaries (around 8000 of each, though that is a global figure, since many registered members work abroad) is still a very small number compared to the number of staff working for some of the largest investment banks in London alone. It is this small number, coupled with the ever increasing regulatory demand for their services, that has ensured actuarial work is one of the most stable and secure of professions in the City.

So what is it that makes an actuary's role so secure? Well, the answer to that is largely regulation that aims to ensure that customers / policyholders are protected as much as possible. One way to ensure policyholders are not left in the lurch is to ensure all insurance companies hold a minimum level of capital to pay out future claims, and the three main regulators that affect UK insurance firms (the FSA, the Corporation of Lloyds and the EU) have all introduced rule-based systems in the last decade, with the rules being refined constantly. For instance, every syndicate operating within the Lloyds of London Market must to have their annual reserves signed off by a holder of Lloyds Actuary certificate. This means the actuarial market is currently in a situation where the demand for candidates STILL outstrips the supply of candidates available (and this has been the story for a good decade now!), and this demand-supply imbalance ensures job stability for candidates in a job, and it also ensures that, should candidates want to find a new position, they usually have a number of options open to them. There have been some redundancies amongst qualified actuaries, but at the time of writing the number of actuaries that I know have been made redundant is still in double figures. It has to be remembered that actuaries will never enjoy the stellar salaries that can be enjoyed by some of their banking and investment counter-parts, although stellar actuaries will rise to the top, with the most talented sitting on company's director boards or holding CFO / CEO / partner-level positions.

So what opportunities are available at present? Well, that depends on one's skill-set and current experience. Many clients are now flexible when it comes to recruiting actuarial analysts at the 1-3 year experience level, and we have placed candidates that have previously worked in (say) fund management in actuarial trainee roles. The work done by a quant (for instance) can on occasions be very similar to the work done by an actuarial student working for an insurance company and indeed, some investment banks have previously employed actuaries to work as quants! One of our insurance clients in the London area, for instance, has a research and development team that is in charge of researching new pricing methodologies using advanced statistical techniques, and this is the kind of role that a postgraduate with 0-3 years experience can easily slot into. Student actuaries are also finding their way into risk analyst roles in investment banks and asset management firms where the CFA qualification is the more common qualification, but many employers are also willing to support those who prefer to pursue an actuarial route. A background in investments is also useful for actuarial analysts working within the areas of capital modelling and Solvency II. There are also a number of large, well known consultancies that have investment consulting teams that employ a mix of actuaries and CFA-designated staff, and they always require candidates with both technical quant skills, as well as client consulting skills. Again, many of them have now realised there are many banking and investment candidates on the market and have decided to adopt a flexible approach to recruitment in order to try and attract talent they previously would have never dreamed of attracting.

So what are the skills that an actuary needs? Well, a good grasp of mathematics and statistics is essential. Balancing work and study for the exams (it has to be remembered the average time to qualification is about 5 years) requires very good time management skills. Communication is very important - within insurance companies, for instance, actuaries are often very client-facing and they are required to present, sell and negotiate. Certain actuarial roles (especially within the areas of capital modelling or asset-liability matching) can be very programming-intensive, with Excel and VBA programming being extremely useful here.

So what about the future? Well, the actuarial landscape is still growing, with Solvency II set to be implemented in 2012/3, and this is going to keep actuaries very busy for the next 4 years or so. The ever increasing regulatory requirements imposed by the FSA, as well as the realisation by senior executives that actuaries have a very important role to play in risk management will keep the profession buoyant for years to come. But perhaps the biggest factor is the fact that insurance is unavoidable. Everything, especially in today's world, needs to be insured - people, cars, houses, ships, cargo, trains, power stations, footballers, stadiums etc. Demand for M&A might go down, but demand for insurance has been growing for some time and unlikely to ever decrease due to the fact insurance is basically a risk transfer mechanism. With many predicting that banking will never be the same again, perhaps this will be the year for you to look at an alternative?


Michael Stefan manages the actuarial division for Hays in the UK. For any queries, he can be contacted at [email protected] The views expressed here are his own and do not necessarily reflect the views of his employer.

Continue learning below