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Plenum 2013 – Financial Services Executive Search

The Trouble With Actuaries?

Precision At The Expense Of Accuracy?

Actuaries often come in for a hard time from many other professionals in the financial sector.

Perhaps the problem isn’t with actuaries, who are an essential part of the financial world, but might be with some of the methods they have historically employed? My conclusion, after numerous discussions with both sides of the fence, is that actuaries focus on precision rather than accuracy, where as other investment professionals are more interested in accuracy rather than precision.

Here’s my analogy: at the bus stop you ask an actuary and an investment manager what time the bus will arrive. The investment manager tells you he is sure it will arrive within 20 minutes, as he gets the bus every day and has never had to wait longer.

The actuary normally gets the train but will tell you the that based on a series of assumptions; average traffic conditions for the last 2 years, the likely hood of the bus breaking down, the number of stops made at this time in the morning……that the bus will arrive in precisely 7 minutes and 32 seconds.

If the bus arrives after 10 minutes, does that make the actuary wrong?

For any thoughts on this subject please email TC Jefferson tcjefferson@theplenumgroup.com