The problem with actuaries

First Actuarial Students

First Actuarial Students

You can’t please all the people all the time.

The platitude was on my lips as I met with the Institute and Faculty of Actuaries (IFA) yesterday. This fine body has upheld standards through the changes of the last thirty years. Actuaries remain relevent and the IFA remains relevent to actuaries. But their sphere of influence could shrink, certainly in the part of the economy I operate in – the provision of pensions.

Like all trade groups, the IFA needs to be a broad church representing one man bands through to the global actuarial consultancies, Aon, Mercer and Towers Watson. There are more actuaries working for PWC than in any of these actuarial consultancies. Pleasing all these people all the time is not going to happen.

But that is no excuse for inaction.

Where the IFA has always been brilliant is in its concentration on maintaining standards. Doctors, lawyers and accountants can all look to actuaries and learn things from the self-regulation they have adopted through the IFoA.

But they have problems with outreach. As I talked with them , I tried to remember the last time the IFoA touched my day to day life. Perhaps the reporting of whiplash statistics that made the Sun last year. Maybe some reporting in the Mail of the demise of defined benefit pension schemes. But the actuarial profession has hardly embraced the consumer!

This time last year, my firm was involved in one on one meetings with over 3,500 employees of a company which had had industrial strife over changes to its benefits package. What became clear once our work had finished was that those employees did not relate to the people who they spoke to as actuaries.

But our work was successful. Staff told us they valued our independence, the depth of our understanding and – surprisingly – our empathy with their issues.

The risk transfer from employer to employee is what the closure of  DB plans is about. Risk has always been assessed by actuaries who help trustees and companies take decisions on how to avoid unnecessary risks and fund for acceptable ones.

The problem with actuaries, is they lack the confidence to act on behalf of the new risk-takers – the members of the defined contribution pension schemes. The experience we had suggests that they should be confident they are tremendous!

Why the hesitancy? I think actuaries are fundamentally frightened of the consumer. This is why you see so little of actuaries on the key consumer websites – moneysaving, confused, moneymail and which. Lawyers, Doctors , Accountants and Dentists are regulars on our TV screens but when I was asked how many actuaries I had seen on twitter , let alone on TV – I struggled.

The closest most actuaries get to the beneficiaries of pensions is behind a one way mirror watching a focus group arranged by a marketing company.

So where are all the actuaries? Who makes a difference to me?

Other than my great colleagues, I could only name two  – my friends Alan Higham and Jim Hennington. I think about them all the time because they are focussed on the issues I think about and the risks I am taking. There are others who blow their trumpet on twitter- Steve Simkins is a hoot and I admire the dogged determination of Actuary 21C but they’re not tearing it up with the general public!

Now I’m sure that there are loads of actuaries who I have missed out , but the kind of people who I listen to on the radio, read in the press and take heed of on financial websites are people who impact my day to day life.

There are some stunning actuarial characters in Britain, Andy Cox and Kevin Westbroom at Aon, Dick Stratton at Mercer, Peter Thompson and Alan Pickering at BesTrustees and Raj Mody at PWC.

These are people who could speak to the great mass of our population about pensions in the way that Martin Lewis cannot.

People like me, who do not have brains like them, watch and wait, and wait and wait.

The longer that the actuarial profession sits on the margin of the great debates on retirement provision, on long-term care, on motor claims , even on what makes for a good workplace savings plan, the shorter will be their shelf life.

They have a lifeline, it is the means of engagement we call the internet. It is not novel anymore, it is the way we live our lives. Twitter, Facebook, smartphones, laptops are not new, they are everyday.

The problem with Actuaries is that while they know these things, they cannot agree a plan. To do that needs leadership, people who can please most of the people most of the time and aren’t afraid to annoy some of the people most of the time.

A broad church like the Institute and Faculty of Actuaries knows what good is, it has its holy grail and it has the determination of the pilgrim.

Like the 60 or so members of First Actuarial who spent three months as pension buddies to those 3,500 staff, actuaries need to get out more , use the web and evenly more importantly , start thinking of ways to help the millions of people entering into DC schemes in the next five years to understand the risks of screwing up and the reward of getting it right.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in actuaries, Australia, auto-enrolment, Financial Education, First Actuarial, pensions and tagged , , , , , , , . Bookmark the permalink.

10 Responses to The problem with actuaries

  1. George Kirrin says:

    Henry, I thought the actuaries estimated the (DB, Care, DA, whatever) liabilities? Recent critics of their approach to estimating, like Con Keating (discount rates) and CASS Business School (mortality models and “the idiosyncratic features of different populations”), suggest they may not even be doing such a great job there either. When their “investment advice” is to “match” liabilities with gilts, I’m sorry to say they look like a busted flush to me.

    I’m really, really struggling to see where actuaries can help us punters in a DC world, without simply adding their costs for little or no added value for us. This is where Martin Lewis, NEST and many others (including your good self, as a non-actuary, you say) have an important role to play. In helping the rest of us, leading us, to invest our savings (common) sensibly. And in managing personal debts alongside our investments.

    • henry tapper says:

      Thanks George. My general point is that they keep us honest. Specifically they help us do the right things by organising data to show us likely outcomes.

      In DC as with db we need statistical evidence to back our hunches.

      Don’t disagree with your issues re db solvency!

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