Opinion

Finance Careers and the Future of the Actuarial Profession

by Sholom Feldblum

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Last September, I sat amidst the Directors at the joint Board meeting of the Casualty Actuarial Society and the Society of Actuaries, and I listened to the visions of the future of our profession.

Our traditional calling is dying out, more quickly on the life side but soon on the casualty side as well, warned one participant. We must expand our profession to include financial engineers and investment analysts, who also deal with financial risk. We must invite the best of our brethren to become actuaries like us.

What have we to offer them that they should seek to join our ranks? we asked.

We offer them what we do best: professional examinations and credentials, codes of conduct, standards of practice, and a valued reputation, was the answer.

Is there not already an organization which does this, the AIMR? asked one of the Directors. Is not the CFA designation already recognized as the mark of investment expertise?

The remark was perfunctorily dismissed. The AIMR exams are judged to be elementary in comparison to our own, and the AIMR cannot be viewed as serious competition.

I wanted to object, but I kept my silence.

Silence is dangerous if it leads to complacency.

I had heard intriguing comments about the CFA examinations. There were two CFA charterholders at my company, and several other persons were sitting for exams. I had signed up for the first of the three CFA examinations, I had purchased the textbooks, and I had browsed through the AIMR Web Site.

My friends, if you wish to help our profession, browse the AIMR Web Site.

In early June, I sat for the first of the three CFA exams.

There are already 43,000 CFA charterholders around the globe, with an average salary of $140,000 a year. The AIMR Board includes many of the leading names in investment theory, global heroes of the capitalist age, well-known theoreticians, even a Nobel prizewinner or two.

There were 2,809 candidates in Boston taking the CFA exams on one day in early June. There were nearly seventy thousand more in other cities around the globe.

But the syllabus—is their syllabus comparable to ours?

The CFA syllabus is designed to teach, not merely to test. Parts of their syllabus are easier; they lack the theoretical hoops that our students learn to leap through. Their syllabus focuses on the work of investment professionals. They study economics, accounting, investments, and finance from well-written educational texts. They spend much time studying ethical handbooks that put our own code of conduct to shame.

The skilled college graduate from Harvard or Yale, from Stanford or Princeton, adept in mathematics and eager to join our global economy, has a choice. Three CFA exams give practical investment expertise and a secure job at over $100,000 a year, with much advancement potential. The first four actuarial exams teach esoteric statistics that most employers deem unrelated to the job.

I meet hundreds of students every half year in seminars for the actuarial examinations. They seek advice: should we continue in the actuarial career path, or should we take the CFA exams? What can I answer them?

They ask: Is the Society aware of this problem? What is the Board doing?

I wonder as well. Yes, our exams are effective. Exams 3 and 4 persuade many of the students that we seek to attract to opt instead for CFA exams, for MBA programs, for other financial and investment careers. We say: "How wonderful that our new students are learning advanced modeling and simulation techniques." In fact, we ought to say: "How ironic that our advanced modeling and simulation exams—with study time and pass ratios out of proportion to work requirements and financial rewards—lead the best students elsewhere."

The actuarial examination system is valuable, but it works only if the syllabus teaches the material that our employers value. Perhaps we once had the liberty to load the syllabus with excessive theory. I don't know; but we surely don't have that liberty now.

I am an actuary, and my life is tied to the success of our profession. But I fear our societies have lost their way; they have become complacent, and cannot see the future.