Making financial sense of the what?

I should say now that this is a bit of a complaining post.

I know I complain a lot, but for what it's worth, I think it's justifiable to feel annoyed with the exams at this stage.

I mean why does the profession put the slogan "making financial sense of the future" on everything. The courses don't teach nearly enough economic or financial theory to enable actuaries to do this. Does anyone else find the slogan pretentious and annoying?

And what about the people who enter the profession thinking that this is what they will learn how to do, and get halfway through the exams only to realise that it ain't gonna happen? They'll be justifiably annoyed. It's certainly how I feel.

Secondly, when you've got through the CTs, you can look back and realise what heavy-weather was made of teaching a few basic concepts. For example, the majority of CT1 and CT5 seems to have been rendered obsolete by the invention of the spreadhseet! The only real concept on both these courses is that future cashflows can be discounted! So some of the CTs seem like a huge amount of work for the increase in understanding that they provide.

What's even more annoying is the sudden change in exams once you get beyond the CTs. Would it not be a good idea to make this into more of a gradual change, rather than this sudden jump?

Furthermore, it seems that exam technique becomes far more important in the later exams - which is probably not what most people expect from professional exams. I'm thinking of things like interpretting questions, judging how much to write, associating words in the questions with parts of the course.

And finally, how much use are the later exams in practice. To me they seem too vague and book-worky to be of any use in practice. We are given lists about modelling and risk-management, but it's just words at the end of the day - yes, we know we should weigh up the costs vs the advantages of mitigating a risk, but how on earth is this to be done in practice.

The CA1 course often talks about risk without considering who it effects and why they would benefit from it being mitigated. As I understand it. this is something that can be considered very nicely within the financial theory that is used elsewhere in the course, but the notes simply don't go there (and no, I don't mean taking a simplified theory as gospel - looking at the limitations of the theory can provide some useful insights). I'm not saying the course should be extended, but what is there should make sense. Students can waste a lot of time thinking that they don't understand something, when vital explanation is missing from the course.

Perhaps this kind of explanation was left out of CA1 to make space for more lists in the earlier chapters where we learn about why actuaries are so uniquely great!

And doesn't is always seem that the actuarial profession responds to any criticism by saying things like "we need to become better communicators so that people understand how great we are" (see the editorial in last months edition of the Actuary). Most people will see this as evading the criticism, rather than properly responding to it.

Sorry if that was a bit of a rant. I hope some of it can be seen as constructive criticism of the institute.



Sam

 

Hmm... some good points there.

Personally I find 'making financial sense of the future' OK - and I think we do do a better job than the man in the street. I will agree that we don't know nearly enough economic or financial theory as some do, but the current market crisis shows us that MOST people have no clue about those. Nor do we actually....

What annoys the living daylights out of me are the new photos on the profession's website.

CT1 and CT5 are much easier with a spreadsheet, but you still need to have the basics sorted in your head to program the spreadsheet. Also I've noticed that if you're going to be a consulting actuary you often need to do basic calcs off the top of your head without your trusty computer/spreadsheet to hand.

Thankfully I've avoided studying CA1 (although I had to do all those risk chapters INDIVIDUALLY in EVERY subject before they split them out). I can tell you that that was almost as bad.

 

Hear! Hear!

I was quite looking forward to studying CA1 and really getting stuck into the meat of actuarial theory. But I was quite disillusioned when I realised that the handful of interesting concepts that it teaches are diluted in an ocean of waffle.

ST2, to be fair, is somewhat better. However, I am dismayed by the simplistic approach to investment risk, which basically says providing it's capped below a certain level we're indifferent to it. And we're supposed to be financial risk experts?

The more I study the more I'm convinced that the Actuarial exams are principally a deliberate entry barrier to protect the high salaries of those who have qualified.

Maybe SA2 will change my mind.

 

It makes senses after all

Maybe that is what "making financial sense of the future" is really referring too ... the financial future of qualified actuaries, hee hee hee.

 

Thanks for noting your agreement Rob.

I think your quote reveals another key aspect of the problem. What on earth is actuarial theory? I think it should only be seen as the application of statistics, economics, finance and business studies.

It makes sense to talk about actuarial exams teaching a mixture of the above things in a way that is appropriate for people working in certain roles. But actuarial theory as a seperate science? No thanks.

I know, I know - I would be better off spending time studying than complaining about the exams. But hey, complaining makes me feel more positive about the exams somehow - and will make me do more productive study when I do get round to it.

 

The Bitter Truth

I couldn't agree more with you Rob. This point you made definitely hits the nail on the head.

However, it is a generally accepted economic principle that we are all slaves for money so we can't and shouldn't really be complaining. It is fair to say that the main reason actuarial trainees complain so much is primarily because of the subjectivity involved in the regular analysis by one's soul in the true valuation of one's aspirations and responsibilities. Consequently, this results in regular distortions in the expected value of the cost and benefits of being an actuary. Moreover, we can't go by the reflections of qualified actuaries for the true value of the cost and benefits as it will be biased by many factors mainly the sacrifices they made for actuarial exam success.

In my opinion, thinking too much about the nature and purpose of the exams or the content of the examinable material is not really productive. If you want to qualify, it is better to play their game as a blind man and then open your eyes ,if you want to, if you win.

 

I had the same feeling when I took CT2 for the first time. It was the first time I had to self-study on a subject like this. I don't know if it was the notes not making sense or I was too dumb. These things never happened to me when I was at university studying statistics. I was confused and frastrated. Not surprisingly I failed it.

It was not until I took the block tutorial (CT8) that I realise what the real problem is behind this. Theories printed on paper have to be orthogonal and rigorous. This is why the Martingale representation theorem is presented in weird symbols and took a 1/3 page in the notes, although it could be simply explained by a few words (by tutor). I realised that I was infact distracted and frastrated by those obscure wordings whereas what I really should do was to interpret it into simple words. I guess this happens in every CT core readings.

However I don't blame the Institute (or the person writing the core reading/notes). Like accounting, every company/organisation is so different, that why we need accounting standards. I don't think the Institute delibrately make the exam a barrier, but try to make the exam right for everyone.

In other words, it's more important for me to think how I should learn things rather than critisize how the institute should present the knowledge. (at least it's not that bad )

I must say I learned a lot. By saying that I don't mean exam techniques or how many formulae I have remembered, but the way of thinking improved. I believe whatever you learn, it is worthwhile only if it improves the way you think.

Look at the bright side. Once you are qualified you can work in your way, instead of guessing how others (examiner) want you to do.

(ps. to those who think exams are made to be barriers, well, all exams are some sort of barriers. Accounting, CFA etc.)