Is FSA Enough?

Is FSA Enough?

Risk Management and PBGC

By Mark Sorensen and Jay Jaffe

Does today's COMPETITIVE BUSINESS MARKET REQUIRE ACTUARIES to have more than an actuarial degree? The authors of this article think the answer is yes.

Actuaries are a talented group of professionals but individual actuaries may not be properly positioning themselves for the future. The purposes of this article are to increase the awareness of actuaries about their career options, and propose new educational initiatives that may be of help to the membership. The article also covers the personal experiences of the authors from having obtained an MBA degree.

The basic question that each practicing actuary needs to consider is whether having the FSA designation is all that is needed during a long and, hopefully, successful career. While the FSA is a respected credential in some areas of the financial services business, it is not as broadly recognized as initials such as MBA, Ph.D., LLB, CPA, etc.

Moreover, the SOA has received clear feeback from users of actuaries that actuaries lack many of the skills currently being sought by businesses.¹ This report specifically mentioned that "... in order to climb the corporate ladder, actuaries need to demonstrate broader leadership and communication skills."

Another factor to be considered by actuaries is that in today's business environment many, if not most, SOA members will have to re–invent themselves and/or their careers. These events can occur voluntarily, or involuntarily, such as when a company is part of a merger, downsized or otherwise contracts its work force. Sometimes entire fields of actuarial practice (e.g., defined pensions) will no longer provide employment to substantial numbers of actuaries. The key question is when an actuary is faced with a career crisis—will he or she be able to easily and even proactively move to a new phase of professional activity or will the change result in a long period of unemployment and unhappiness?

Particularly younger actuaries need to evaluate whether they have sufficient professional recognition and skills being sought by businesses to overcome potential career roadblocks. The first step for any actuary concerned about his or her future is self–examination of his or her current talents and skills. If an actuary concludes that he wants to diversify and expand his abilities and opportunities, there are practical solutions that will not only better position an actuary for the future but may make advancement at an actuary's present job more likely. The end goal of this self–examination is to provide "career reinvention insurance" should an actuary be faced with the need or desire for a career change.

Many, if not most, of career changing projects directly involve some form of additional education. Although there are many ways for FSAs to gain extra education credits, this article concentrates on the MBA because the MBA is an excellent way for actuaries to gain skills and recognition. This particular degree will introduce an actuary to a variety of new business experiences and, additionally, be a way to gain the business skills being requested by companies.

The authors of this article have received MBA degrees. Although our experiences are separated by many years, both of us have strong feelings about the positive impact on our careers as a result of the business education we received from the MBA.

The soft benefits of the MBA curriculum are numerous. If nothing else, the MBA student meets a variety of exceptional people from other businesses and academic fields. For example, during our MBA schooling both of the authors of this article had personal contact with Nobel Prize winners and other leading academics. While there are other ways to duplicate these types of experiences, they are much easier to achieve while getting exposure to a pool of talented business school students that in all likelihood come from a variety of professional backgrounds.

Students have the option of either a full–time MBA program or enrolling in Executive MBA (EMBA) programs. The EMBA programs are particularly attractive to people working full–time because they allow students to continue employment while acquiring additional education.

A few statistics about the impact of one EMBA program demonstrates how these programs can benefit students:

• Data from the Class of 2007 at the University of Michigan EMBA program shows that:
• 60 percent of students were either promoted within their existing organizations or changed jobs by the time of graduation; and
• 37 percent of the class expected a promotion upon graduation and 43 percent received promotions while enrolled in their program.
• 75 percent of students rated the overall value of their EMBA Program as excellent and said that their value to their organization greatly increased.
• In 2007 the Graduate Management Admissions Council (GMAC) reported a 21 percent salary increase from $107,000 when entering their EMBA Program to $130,000 after program completion.

Based on its own research, the SOA is aware that companies believe it is the nontechnical skills that are holding back those actuaries who seek to move into higher levels of management. While some people innately have the skills being needed for moving up the corporate ladder, many actuaries may need assistance to learn these skills. The MBA programs offer an excellent opportunity for actuaries to increase interpersonal skills and the capacity to manage human capital and, thereby, attain the personal growth desired.

Courses at business schools can either be taught using the case method or from a more quantitative perspective or some combination of the two. While actuaries might feel more comfortable with the quantitative approach, learning through the case method may better impart certain types of skills. Practically speaking, a mixture of the approaches may be the most beneficial for actuaries.

As a practical matter, it may be that most actuaries seek the MBA through an EMBA program rather than attend school full–time. Because EMBA programs are expensive and require time away from work, anyone interested in the EMBA degree needs to consult with his or her company president and talk about his or her situation. Some companies are willing to sponsor employees in these programs including both granting more time off as well as with direct financial support.

The motivation for expanded business education must come from each individual but the SOA could play a role in this process. For example, the SOA could assist members interested in MBA education by disseminating information about such programs and/or working with a select group of business schools to develop a fast track MBA degree for FSAs.

Looking longer term, the SOA might consider working with universities to create special MBA programs that not only teach the basics of actuarial science but include a sufficient number of business topics to make its graduates both better actuaries and businesspeople. This may require a three–year MBA rather than the two years it takes for a nonactuarial MBA but law and architecture are also three–year programs—and the law and architecture schools are crowded.

Not only should the SOA be expected to provide its students with courses needed to prepare them for the current working environment, but it should also recognize that the end product of our educational system must be a person who is employable not only today but throughout that person's expected working lifetime. This longer term educational perspective will dramatically change not only the way actuaries think of and educate themselves but also the way the nonactuarial world values the services that actuaries can provide.

By itself FSA may not be a sufficient credential in a world where rapid and radical change is now a way of life. For those members of the SOA who seek additional education, the MBA or some other advanced curriculum could provide improved knowledge of actuarial science and related topics as well as another level of recognition in order to open up doors for those actuaries interested in certain types of employment.

Mark Sorensen is president of MioMed Orthopaedics, Inc. He can be contacted at msorensen@miomed.com.

Jay Jaffe, FSA, MAAA, is president of Actuarial Enterprises, Ltd. He can be contacted at jay@actentltd.com.

FOOTNOTES: 1 A Report on In–depth Interviews with Top Business Executives working in Insurance, Benefits, and Broader Financial Services Sectors was prepared for the SOA by KRC Research, August, 2006