Bill Buttler, a member of the Institute of Actuaries of Australia, explains why being a professional, and being a member of a professional association, really matters.
“I hold every man a debtor to his profession; from the which as men of course do seek to receive countenance and profit, so ought they of duty to endeavour themselves by way of amends to be a help and ornament there unto.” – Francis Bacon
The quote is from Sir Francis Bacon, the English philosopher and statesman who lived from 1561 to 1626. Bacon’s quote is also the motto of the Institute of Actuaries (London), which was the forerunner to our own Institute of Actuaries of Australia.
Actuaries regard themselves as a “profession”, like lawyers, doctors and accountants, as distinct from a “trade” or occupation, like plumbers, electricians or computer programmers. This raises an obvious question – what is it that makes a profession out of a vocation, occupation or trade? And why does our society place a particular value on “professional” behaviour?
HISTORY OF THE ACTUARIAL PROFESSION
To the extent that the public is aware of actuaries at all, they are generally known for their work in developing mortality tables. Demography has a long history, going back to ancient times, but the most readily identifiable beginning for modern actuarial mathematics is probably the work of Edmond Halley (“Halley’s Comet”), who developed a life table in 1693 as the basis for life insurance mathematics.
So far so good. But why does a special technical skill qualify actuaries as professionals? The need for a professional approach emerged later with the founding of the first mutual life insurance companies and (later) salary-based pension funds.
In the early nineteenth century, British life insurance companies had such a poor reputation that Charles Dickens lampooned them in his fiction. The reason for insolvency and fraud has much to do with the uncertainty involved in estimating future scenarios and their likely impact on present day profitability. When managing a life company or a pension fund, it may well be decades before we know the impact of decisions made today. The precision of actuarial mathematical technique is countered by the need to make assumptions about future investment returns, inflation rates, expenses et cetera. Any present-day estimate of potential future outcomes is therefore going to depend heavily on personal skill and judgement. Given that financial results, like solvency and profit distributions, will hinge on these same matters of judgement, there is wide scope for advice to be influenced by the possibility of personal gain. Sound familiar? There are many close parallels between the responsibilities of the actuary and the professional planner – the major difference being that actuaries are generally providing advice to a company or trust involving many individuals, whereas a planner concentrates on personal advice to an individual or a couple. Nevertheless, in both cases the outcomes of decisions made on the basis of today’s advice will not be known for many years, and it is therefore paramount that the client can rely on both the integrity and competence of their adviser.
WHAT IS A PROFESSION?
The 1959 “Gordon-Howell” report on business education in the USA provides a widely-accepted set of criteria for a profession:
1. The practice of a profession must rest on a systematic body of knowledge of substantial intellectual content and on the development of personal skill in the application of this knowledge to specific cases.
2. There must exist standards of professional conduct, which take precedence over the goal of personal gain, governing the professional man’s relations with his clients and his fellow practitioners.
In the case of the actuarial profession, the first criterion is met by a notoriously high standard of formal qualification, based on examinations set and marked by the Institute itself, and supported by specific university degrees for the early part of the course of studies.
EDUCATION AND RESEARCH
The actuarial profession in Australia is relatively small (around 2000) by comparison with other professional bodies. There is a heavy reliance on voluntary work to provide tuition services, and to set and mark examination papers. This is where Bacon’s “man” (and nowadays “woman”) starts to repay his or her debt to the profession.
The intellectual content of the actuarial profession is not static. Although the basics were systematised in the nineteenth and early twentieth centuries, new products and financial services have required actuaries to rise to the challenge. That said, there are many other areas of scientific endeavour that maintain a significant body of technical research, without necessarily qualifying as a “profession”. It is Gordon and Howell’s second criterion that is the true measure of professional behaviour.
PROFESSIONAL CONDUCT
The key test for a professional is to provide impartial and unbiased advice. This sometimes requires a commitment to stand firm in the face of external pressure.
For example, an appointed actuary to an insurance company or pension fund may at some stage in his or her career find that the exercise of skill and judgement leads to a conclusion that creates a financial difficulty for the board or management of the relevant organisation (for example, the emergence of a deficiency, rather than a surplus). These conclusions are not always clear-cut: often a different set of assumptions could lead to a quite different result. It is a matter of judgement to assess whether a particular set of assumptions might be suitable in a particular case.
