Actuarial Career vs Investment Banking

Hi all,

I am in my final year of uni, studying a course orientated towards actuarial work...have done an internship for an actuary team, but found it rather dull ...

Was wondering what your views are on the investment banking industry? Particularly on the markets side...i.e. trading / sales, etc.

Not only does it appear that they earn a great deal more money than actuaries, it seems far more interesting and exciting, and certainly use more maths on the job ! (if you're in derivatves at least).

I haven't turned my back on actuarial work, but just wanted some views from people here on investment banking careers, particularly those within the trading / sales side of it. Same for hedge funds.

Thx vm

 

Investment banking is largely a mixture of Ponzi schemes and control frauds,. I have nothing against crime as a career, I considered it myself as originally I trained as a synthetic chemist and so I got a lot of offers to make illicit drugs. The first thing to consider when entering a criminal career is to decide can you do the time if you get a prison sentence. The second is to ask even if you get away with it, will it come back to haunt you at a later stage.

Actuaries on the other hand are unlikely to go to prison!!

 

Evening Cardano, thanks for the reply

If possible, can you kindly elaborate ?

How exactly is being a trader for an Investment Bank, a "criminal career", and comparable to making *illegal* drugs?

A trader, for instance, will (a) market make for clients on markets such as equities, interest rates, and commodities, and (b) take speculative positions on the markets.

You can of course question the morality of such a thing (but then actuaries are surely in it for their self-interest too ) but what exactly is *criminal* about it?

You are effectively saying that there are tens of thousands of people out there who are publicly and openly engaging in mass illegality? Well why haven't they been arrested? Investment Banks have been operating for many decades, and i'm not sure I recall a trader / banker being arrested for merely being a trader / banker, rather getting arrested become they actively participated in illegal activities (like Nick Leeson).

And if they've been getting away with it for decades, why should it change! Do you know any bankers that are going to be arrested or something ?!

Needless to say.....please do elaborate!

I've only heard such views from my chum who is a member of the SWP and likes nothing more than to bash a banker!

thanks.

 

I wish I had time and the inclination to give a detailed explanation, but I'll keep it simple. In the period 1982-2007 we had the biggest credit expansion of all time. Bankers largely took increasingly ridiculous risks, systematically underreserved (this is fraud) and paid themselves massive bonuses. Since 2007 they have lost 2 trillion dollars roughly and this has been handed to the taxpayers. This is just the beginning as much larger losses sit on their books and the liquidation of this lot will lead to political situations which will make the 1930's look pretty.
You should bear in mind that the last time a major credit expansion was liquidated and the political situation deteriorated the Jews largely served as a proxy for the bankers and 6 million of them died in labour camps. The prisons I talked about in the first post are more likely to resemble labour camps than Wormwood scrubs.
Hope this helps - only a simpleton would ask such an obviously stupid question

 

You kind of give your game away with that unnecessary insult at the end. Seems like you have some kind of personal bitterness to the industry. (I'ld maybe have thought you were a Communist type if you weren't an actuary / actuarial student.)

The only simpleton here was you when you simplisticly compared creating illegal drugs in a lab, to being a market maker for a bank. Your answer to my question was an attack at the industry in very general terms, rather than actually addressing the questions I asked. My questions are genuine.

As to bankers going to jail - it's been 3 years since the credit crunch, and there's been little to no political motivation to lock up bankers. & how to deal with the tens of thousands of bankers that have been around since the 80's ... Sounds more like your own fantasy right now! Unless you can actually add something real to your argument

And a simpleton's comparison to the Jews & Nazi Germany will not do

 

Sir you are very naïve to think that the Banking/Finance industry is free from criminal activity. The American capital markets are basically controlled by organised crime. If you want to know more about this you will need to do your own research.

 

Devon, the comparison to the 1930's is apt at all levels. The period from 1914 to 1929 was the last great credit expansion. The liquidation of that particular event was moderately well done in North America, where banks and overleveraged individuals and businesses were allowed to fail. It was very poorly handled in middle and eastern europe where the financial elite were bailed out by printing of money creating a plutocratic elite and transferring large amounts of wealth from the lower and middle classes to the rich. This is largely what is happening in North America and Western Europe today.
Credit expansions transfer money from the poor to the rich since the rich have the political skills to get loans early and buy up real estate and shares as they become increasingly overvalued. How they are liquidated will determine how the political situation will develop from that point onwards. If deflation is allowed to occur then the overborrowed go broke and money is returned to the poor as living costs become much cheaper and the rich lose loads of money as they have most of their assets in real estate and shares
If money is printed to buy up bad paper as it was during the aftermath of the 1st World war in central Europe then money is transferred from the poor to the rich. With the situation already bad for the bulk of the people at the end of a credit expansion, this further transfer of wealth leaves the situation ripe for political revolution and social revolution.
It may have escaped your notice but the major side effect of quantative easing so far is the political instability in North Africa and the middle East. Quantitative easing and a raft of measures enacted in 2008-2009 allowed the banks to exchange bad paper for cash, which they then used to bid up the price of foodstuffs (as well as shares bonds etc). The political stability of most of the rest of the world depends on keeping food cheap and when countries such as Egypt, Tunisia, Libya, which typically spend 40% of their income on food get hit by 20% inflation with no real rise in wages they eject their Governments.
I believe that QE was brought in specifically for two reasons. 1) to stop the banks from having to realise the bulk of there losses and 2) fo force China to revalue. China has about 750 million people who live at subsistence levels. The Chinese government can not afford to have large price rises in foodstuffs as they did in the late 1980's when the Tiananmen Square protests took place. To avoid such a calamity the Chinese government would be forced to remove the dollar peg from the Yuan and revalue to reduce foodprice inflation. The Federal Reserve has now miscalculated and the Middle East is in flames, oil prices have risen to the point where further recession/depression is inevitable. This is going to mean more liquidation, more bank failures and more political instability. Europe hasn't even begun to deal with its debt crisis and keep bailing Southern European countries out so that they can impose austerity of their populace and repay money recklessly lent to the German and French banks.
The debt levels are about typically 300-400% of GDP across the Western World. These have barely even begun to fall and the long term stable level is about 100% of GDP. Debt liquidations historically have taken more than a decade. The consequences of the bailouts have not even begun to be felt yet. Loss of democracy across some of Europe is a foregone conclusion.

I was probably a little flippant in the comparison of Investment banking and illicit drug production as bad Investment banking is going to lead much much more death and suffering than a little bit of guerilla capitalism in illicit laboratories!

 

If you found it rather dull, then I wouldn't recommend it as a career!

 

Okay Cardano, I think you can comfortably be described as a bear....can't say i've ever heard an opinion like this before...

So you believe political and social revolutions are going to be the fashion over the next decade, for the reasons you gave.

May I ask - which Western nations do you believe will see a lack of democracy in the near future then? And - what about the UK?

Your comparison was flippant - contrasting the actions of making a 2-way price on BP shares for a client, to creating illegal drugs for a mafiaso, is indeed a little silly

 

How do you find actuarial work?

Boring or stimulating?

Ignore the exam side of it - what do you make of your day to day routine?

I was put off because it seemed nothing more than a glorified pension administator.....

 

Actuary boy, I would largely say the answer depends on what motivates you.

If you decide to move to a more sales orientated position and you are good at it, then your potential earnings are exponential. That said, you will work long hours and travel all over the country and possibly the world. This may sound glamorous and exciting, but can also be lonely.

I got my first post-grad job in a sales and marketing team of a small investment firm, and soon realised that this wasn't the route I wanted to go down. As a result I transferred to the actuary department where I remain today. My colleagues would agree with your statement about being a 'glorified administrator' when they first started out. One of the plus sides of working for a small firm is that you are involved in a wider variety of work so I have never found this to be the case. And I certainly use my maths skills a lot more now than when I was in the sales team (which was hardly ever).

Good luck with which ever route you decide to go down...

 

investment bankers are criminals - discuss

some funny views there

I might be getting the wrong end of the stick here, but Cardano seems to be saying that the credit expansion was the source of the problem, and is somehow blaming the investment banks for the credit expansion (and therefore branding them criminals).

But did the investment banks cause the credit expansion? Again, I may well be wrong, but isn't it the job of governments, central banks, and regulators to control this? And it was banks, not investment banks doing the irresponsible lending, was it not? (And the man on the street borrowing irresponsibly.)

The investment banks get a bad press, but if you create a system where there is an easy way to make easy money (legally), I don't think you can blame the guy who comes along makes the easy money - if it wasn't him, it would be someone else. I'd blame the guy who made the system. Individuals and companies tend to behave in line with their incentives, and this is especially true of those operating in financial markets. Investment banks will just respond the incentives created by the market and the capitalist system. Its the job of the governments, central banks and regulators to oversee the system (and arguably, in theory, the shareholders of the relevant companies).

By the way - pensions is the most boring thing an actuary can do, isn't it? There seems to be a large flow of actuaries from pensions to GI, presumably responding to the incentive of far more interesting work (and probably more cash too).

 

http://en.wikipedia.org/wiki/Godwin's_law