Thinking About Actuarial Work? Why? I Mean, Read On...

Morning Monkeys,

For one reason or another, I've been seeing quite a few references regarding the potential benefits and downsides to being an actuary. And, unsurprisingly, there seems to be a bit of confusion as to the nature and progression of those within the actuarial profession. Hopefully, this will clear some of thse misconceptions up.

Actuaries as a group have to take an ungodly number of tests. Everyone who has ever ventured into the SOA's (Society of Actuaries) website has long since figured this out. But, as you can see, starting in July 2013, there are new FSA tracks available (we'll get to these in a moment.) What's important, especially for readers of this site, is how to get into the industry:

  1. Have a mathematics degree: Do you need to know the difference between abelian and non-abelian groups, or be able to identify connected and compact sets? No, of course not, but most practicing actuaries have math degrees, and they tend to think that if you don't have one, you might not be up to snuff.
  2. Pass the first two tests: Oftentimes, when you get your first job, you'll be expected to pass the first two within some period of time, usually 6 months. If you don't, bad times. But, if you've already passed them, that'll really set you apart and maybe, they'll ignore the fact that you don't have a math degree.
  3. Enjoy modeling: If you think bankers do a lot of modeling, you haven't seen anything until you see these monstrosities that actuaries build. In fact, modeling is so ubiquitous that it's now becoming required by regulatory authorities.

Some other key points about the actuarial profession. Unlike banking, you're not likely to work 1,000 hour days, or catch a bunch of shit from overzealous associates/senior bankers, and the pay is pretty good. One misconception I need to clear up is the "top end" of the salary range for actuaries. Many on this site have pointed out that early on, sure you're probably going to do as good, or only slighly worse than someone in banking, and work substantially fewer hours (except during year end) but that once bankers transition into private equity or a hedge fund, they'll quickly start to outpace their actuarial counterparts. In some ways this is true, but these people don't realize that the top position for an actuary is "Chief Actuary" which is a C-level position. That's nothing to sneeze at by any stretch of the imagination, and I hear that C-level guys tend to do well in the money department.

A last point of note, just in case someone is still interested in this profession, there's plenty of tests (as well as "modules," "experience," and "seminars," but we'll stick to tests) that are required:

  1. Exam P (Probability): This is unreasonably hard and is considered a "weed out" test.
  2. Exam FM (Financial Mathematics): This is like your finance tests on steriods. Way more math than you're probably used to in a finance exam.
  3. Exam MFE (Models for Financial Economics): This is likely most familiar to everyone, but not surprisingly, requires a lot of math. Unlike the CFA, they expect you to know how to use Black-Scholes at least in it's closed form.
  4. Exam MLC (Models for Life Contingencies): This is where you really get into the guts of actuarial science. If you hate this test, the profession probably isn't for you.
  5. Exam C (Construction and Evaluation of Actuarial Models): Yep, the third test in a row that has the word "Model" in it somewhere, I wasn't kidding about all the modeling.

Once you get through those tests and other requirements, you can then move forward to one of the ASA/CERA/FSA tracks. Because you're probably sick of reading this already (I'm shocked if you've gotten this far), I'll stick to the FSA tracks (for July 2013) that are available upon completion of Exam C:

  1. corporate finance and ERM (CFE) Track
  2. Quantitative Finance and Investments (QFI) Track (this is new, a replacement for the previous "investment track" and looks interesting...)
  3. Individual Life and Annuities Track
  4. Retirement Benefits Track (the old Pension Actuary)
  5. Group and Health Track (if you want to have a job forever that pays a lot, this is your winner, I hear heathcare is big business these days...)
  6. General Insurance Track (this is also new, which seems odd to me for some reason)

I hope this has cleared up the actuarial profession for those of you who are interested. Like others have noted, it's a pretty different life than that of a banker, but for some, it could be more preferrable, and as you can see by the picture, chicks dig actuaries. True story.

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