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The Actuary The magazine of the Institute & Faculty of Actuaries

On the board actuary

When I was at school my father said that I would never pass my driving test because I was too academic and had no common sense. In line with actuarial principles this prediction was based on past experience. My aunt, a successful GP and in many ways not dissimilar to me, had made a number of attempts to pass the easy practical assessment. Two years later my father predicted that my brother would pass his driving test first time and was subsequently proved correct on three occasions: I failed the test twice and my brother passed first time, although O-level English and maths proved to be quite an obstacle to him. So, is this evidence of intelligence being inversely proportional to common sense or is it that the UK driving test is a lottery that seems to favour less academic entrants? If the former assertion is true it follows that actuaries may benefit from striving to improve their common sense and practical skill levels. After all, if actuaries are to be successful in management and at board level we need to be as sharp behind the corporate steering wheel as we are with the abacus.Contrary to the driving test example, I have been lucky to meet and hear about many members of the profession who have become business leaders and so clearly have excellent practical abilities. Whether these individuals needed to be actuaries to get where they are, or whether they could have achieved what they have on business skills alone is something I question. In the case of directors of insurance companies, actuarial knowledge is no doubt beneficial, but would these individuals have fared any worse if they had trained as accountants and then made the transition to management? Would those actuaries who are now partners in large accountancy firms not have made partner if they had trained as accountants? I have heard successful actuaries argue that they entered the profession as there are more opportunities as a well-rounded actuary than a mediocre accountant. This claim implies that actuaries cannot make it to the top management posts in business without being a fellow. I am reluctant to believe this as it implies that all actuaries have to offer is academic. However, in support of the ‘mediocre accountant’ argument, I would guess that there are far more qualified accountants sitting on the boards of PLCs than qualified actuaries, even after scaling to allow for the relative size of the professions. (If anyone has any figures to back this up, or challenge it, please let me know.) Assuming my estimate is correct and given that the actuarial exams are more difficult to pass than the accountancy papers, logical deduction implies that either we don’t want the top jobs or we are lacking the skills that allow us to get there.So I ask, given that we can discount as well as count, what can the accountants do that we can’t? It is clearly not academic so I am forced to return to the driving test example and conclude that the accountants’ advantage must lie in soft skills.Unfortunately, I have concrete evidence to support this and can think of quite a few examples where actuaries could have benefited from a more developed practical skill set.I know one young man with an impeccable exam record who, having studied diligently for his exams, realised the week before the exam that he had forgotten to send in his exam registration form. One actuary I know turned up to an exam on the wrong day. Other examples include actuaries climbing out of windows to escape questioning trustees and another who almost collected the wrong child at the school gate. None of these examples resulted in any great harm to anyone and I am sure accountants have made similar mistakes; however, they demonstrate areas in which we could improve.Because of the nature of what we do, individuals who focus on academic development are attracted to an actuarial career. This is brilliant, but for actuaries to be seen as players in management we need to make sure that the profession also appeals to the really business-savvy graduates who are currently joining banks and accounting firms or setting up their own companies.Like many people in the UK, I am currently enjoying The Apprentice, a TV programme in which a British businessman (and non-actuary) puts a group of candidates through a series of practical tests in order to determine which one becomes ‘The Apprentice’. These tasks are good tests at identifying which candidates are up to the job and where candidates’ strengths lie. Each week I wonder how a group of actuaries would fare in each task. It would make fascinating viewing.The profession currently examines only one soft skill, communications. The new business awareness module also addresses some practical skills, yet only at a theoretical level. The news that the profession’s education committee has proposed yet another change in the structure of the CA3 course is welcome, although I note that the proposals are still some way off the comprehensive assessment of a range of business skills ability via an Apprentice-type task. Maybe only then will we be able to develop and train not only those that find it difficult to explain compound interest to their aunts, but those that can’t drive the corporate vehicle as well.