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The Actuary The magazine of the Institute & Faculty of Actuaries
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The day the CPFE died

New CPD requirements became mandatory for all professionally active actuaries on 1 July 2006. That’s not just for those with practising certificates, but all actuaries working in the areas covered by the specialist application (SA) exams. These actuaries need to devote a minimum of 15 hours a year to CPD. For actuaries with practising certificates, the 15 hours must be verifiable (eg attending events, studying for and passing exams, writing papers) but for the rest of us this condition is relaxed provided we can explain the activity on a CPD record form. For everybody, a minimum of 10 hours must be related to their own practice area.
The simplest way to fulfil the requirements will be to attend conferences. This ticks all the boxes for CPD, but I wonder at times how much extra knowledge really is passed on to delegates.
For anybody that does feel guilty about completing the CPD requirements by attending conferences, there are other routes away from the beaten track. One possibility is to join one of the profession’s working parties. Another is to write a professional paper or an article for the Actuary. But this article is about highlighting a third possibility.

The CPFE exam
The Certificate in Practical Financial Economics (CPFE) was developed by a working party and launched to the profession in 2004. This was motivated by the wide divide in knowledge between newly qualified actuaries that had passed exams in financial economics and those of us in the older generation that had bypassed it completely. I can confirm from bitter experience that an actuary could have qualified in 1991 without having ever encountered the concepts of CAPM, derivatives, economic capital, and risk management.
At the time of writing, the course has been available for two years and over 100 actuaries have ordered the coursework, which is encouraging. On the other hand, only 16 of those actuaries have gone on to sit the exam, which is less encouraging. The exam has been moved from the April to the September sitting in the hope that more people will sit the exam if they have the chance to study during the summer. If this doesn’t work, then the days of the exam must surely be numbered. Questions are being asked about whether providing the exam is an appropriate way for the Institute to spend our subscriptions.
I would feel some disappointment though if the exam were to be withdrawn. From personal experience, building up the knowledge to sit an exam results in a much greater volume of permanent understanding than the alternative of reading through the material a few times. For actuaries that want their CPD to represent development that is truly personal, the loss of the exam represents the loss of an education opportunity.
The course covers a wide range of areas of interest to actuaries:
– Risk, return, and opportunity cost of capital
– Asset pricing models
– Market efficiency and corporate finance
– Financial institutions and markets
– Corporate finance
– Contingent claims
– Capital budgeting
– Capital adequacy
– Risk control and performance measurement
– Practical techniques
The exam can cover any or all of these areas.

Football, etc
One of the challenges in setting the exam is to set questions that do not give actuaries in one practice area an unfair advantage over others. This has been addressed by including questions on investment clubs, tyre manufacturers, building firms, and (particularly memorably) a football club calculating the value of a cancellation option on a player’s contract. Examples from practice areas are also included within the course work but are non-examinable.

A final opportunity
If September 2007 is to be the last exam, then it would be great to see a big turnout. This is probably the last opportunity for actuaries to study for the exam and (by passing it) to be able to quote it as verifiable CPD. What are you waiting for? Order the course material today!
Oh, and it is also worth mentioning that 14 of the 16 candidates to date have passed the exam?

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