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Pioneers: Lessons Learned

Pioneers: Lessons Learned

Jim Tilley is a Fellow of the Society of Actuaries, and was a founding trustee of The Actuarial Foundation in 1994. He was the chairman of the Actuarial Foundation's Board from 1995 - 1997 and an emeritus trustee in 1999. The Actuary recently asked Tilley a few questions about his career.

Please provide a brief history of your work experience.

After earning my Ph.D. in Physics from Harvard in 1975, I took the first two actuarial exams and started work as an actuarial student at Sun Life of Canada's U.S. headquarters in Wellesley, Massachusetts. I took the final fellowship exam in the fall of 1977 just before leaving Sun Life to join the John Hancock in Boston where I worked with other actuaries on compensation programs for both John Hancock's general agents and debit agents. During that time, I started a "hobby" of learning about and doing research on asset/liability management for life insurers. I joined The Equitable in New York City in 1981 as the actuary in charge of designing and pricing GICs. My principal colleague there was Bob Platt, the manager of the GIC asset portfolio. When he left to establish a fixed income research department at Morgan Stanley in 1983, I followed him. I spent 18 years at Morgan Stanley, becoming global head of fixed income research, then doing a two-year stint in investment banking designing catastrophe insurance products, working to help fund the nascent California Earthquake Authority, and then becoming chief information officer for the institutional securities business for my last four years.

How did the education you received prepare you for the positions you held/hold?

My education in physics and mathematics set me up to undertake major independent research projects, indeed to cherish the opportunity to think creatively about unsolved problems. Obviously, the tools of mathematics are essential to building stochastic models of financial institutions and financial markets, and that became my research passion. The syllabus material for the actuarial examinations and my training as an actuary provided a fundamental understanding of the life insurance industry and pension funds so that the research I undertook was grounded in the reality of the business.

Please describe what inspired you to donate the book "Money Math Learning Series: Personal Finance & Investments" to the Actuarial Foundation.

I have always felt that the gift that most actuaries can give back to their profession is their volunteer time. I served for several years on an examination committee and for one term on the Society of Actuaries' Board of Governors. But it was my stewardship of the newly formed Actuarial Foundation that I enjoyed most, particularly its emphasis on mathematics programs for middle and high school students. I have believed for a long time that graduating high school students should understand the basics of money and finance in order to be better prepared to take on the responsibilities of adulthood. All of these factors, plus my love of writing, drove me to create the Money Math textbook and to donate it to the Foundation.

In your opinion, what needs to be done to ensure quality young people are attracted to and remain interested in the actuarial line of work?

I learned about the actuarial profession in high school and happened to visit Colin Jack, the chief actuary of Prudential of Canada, in his palatial office in Montreal when I was a senior. Based on my performance in the mathematics contest exams sponsored jointly by the Mathematical Association of America and the Society of Actuaries, I received a scholarship from Sun Life of Canada to attend McGill University as an undergraduate. So, I knew about the actuarial profession before I graduated from McGill and Harvard, and when I realized that I didn't want to pursue a career in physics, I thought immediately of becoming an actuary and approached Sun Life of Canada about employment opportunities. As they say, the rest is history. Why do I tell you this? Because I think that my story contains valuable lessons. As a profession, we need to continue to make sure that students interested in mathematics, economics and science know of our profession. They need to understand their compensation potential working as an actuary. And they need to be encouraged to think beyond the boundaries of examination syllabus material and industry and company practices to continue to innovate in the area of risk measurement and management. We can't force people to join our ranks; we can only make them aware of and interest them in the possibilities. If we build that "playing field," they will come.

What do you consider the greatest career accomplishment?

In the actuarial profession, it is being involved early on in the development of the "science" of asset/liability management for financial institutions and in being one of the first people to emphasize the criticality of cash inflows and outflows and the importance of market values of assets and liabilities in lieu of the traditional amortized cost and reserve valuations. In the specific area of research, my greatest accomplishment was proving that American options could be priced by means of a Monte Carlo simulation, something that had previously been claimed in textbooks on investments and finance to be impossible.

What advice would you give to an actuary that is considering pursuing a non-traditional role?

Don't try to stake your claim to the nontraditional territory by reason of being qualified as an actuary. Let those skills speak for themselves through the quality of the work you do. Be interested in acquiring credentials, in finance and investments, for example, in addition to your explicit actuarial designations. Don't be afraid to do research and to push the boundaries of our existing theories and models of financial markets and institutions. Innovate, especially when someone tells you that you can't or shouldn't.

How have you turned risk into opportunity throughout your career?

I guess many people feel that it's risky to change jobs/employers as often as I did early in my career. I think that people need to do that until they find a true home for their interests and talents. Careers are generally 30-40 years long. In order to survive and actually thrive over such a long working lifetime, one has to situate oneself in a business and at a firm in which one can continue to innovate and grow. That worked for me and I think it works for almost everyone. I know it sounds trite to say this, but I feel that I never "caved" on my principles. If I felt that something I saw was wrong, I wouldn't be hushed until I had been understood. Over time I learned how to do this increasingly tactfully, and thus, with greater success.

Is there anything you'd like to comment on that you weren't asked about?

Yes. I enjoy my retirement. I still do some management consulting as an advisory director for Morgan Stanley and I have recently undertaken a position on the advisory board of a start-up software company serving the insurance industry, but my real passion these days, my outlet for creativity and innovation, is writing. For a little more than three years now, I have been writing poetry and have just shy of twenty poems published or accepted for publication in various literary journals.