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The Actuary The magazine of the Institute & Faculty of Actuaries

Contrasting views on the actuarial profession

Late January saw the near-simultaneous appearance of sharply contrasting views of the actuarial profession in the pages of the Financial Times and The Economist.

‘This may sound like ranking Michael Bolton above Celine Dion in terms of musical merit, or expressing a preference between contracting bubonic plague and ebola, but, on reflection, I think I would rather be an actuary than an accountant’ was the opening to an FT article by Sathnam Sanghera on 27 January. Sanghera apparently was very impressed by the stories told by three Mercer actuaries as to what they did and how much they were paid for it. Perhaps inevitably, this lighthearted piece provoked reactions from both professions, with Eric Anstee complaining gently about stereotyping of members of the Institute of Chartered Accountants in England and Wales as ‘bean-counters’ while actuary Hyman Wolanski was dismayed that Sanghera’s article might lead the public to expect actuaries to display personality!

Sobriety was all too quickly restored by the following day’s issue of The Economist, which opened a review of pensions problems with ‘Among the many jokes about actuaries, one cruelly hits the mark. An actuary and a farmer are looking at two fields of sheep. The farmer asks the actuary how many sheep he thinks there are: “1,007”, is the quick and confident reply. The astounded farmer asks how the actuary reached that number. “Easy, there are seven sheep in that field and about 1,000 in the other.”’ From the point of view of the profession, the theme of the article was that actuaries bore most of the responsibility for historical mismanagement of pension fund finances but that it was also actuaries – led by heroes Exley, Mehta, and Smith – who had pointed up the errors of old ways and stimulated change which made Britain a leader in exploring the possibilities of liability-driven investment. The Actuary welcomes comments from readers on this interpretation of our history!

The Economist of 18 February carries several responses to the original article, including one from Donald Segal of the American Academy of Actuaries defending work with government to strengthen the pensions system. Others were more pessimistic or cynical:

  • ‘Reducing all future liabilities to net present value to compare them with current assets, and then advocating immediate corrective action, has actually promoted short-termism and risk aversion, which is a bad thing.’
  • ‘Workers are being led into retirement plans that will fail them. The future will be ugly.’
  • ‘… corporate managers are also to blame for searching high and low to find actuaries who would supply such inaccurate forecasts in order to lower pension costs and improve profits.’