Actuaries can be found working in many sectors, and one of those is the world of finance.
Actuaries working in finance and investment work in many areas, including investment management, corporate finance and banking.
In this article, we look at what actuaries do in the world of finance and investment and whether this area of work is right for you.
Can actuaries work in investment management?
Actuaries have been involved in the field of investment management for decades. It is even true to say that more people see the word ‘actuaries’ through the daily stock exchange indices than any other source.
Investment centres around the capital markets. This includes stock and bond markets, currency, property and derivatives. An actuary working in this area is involved in the day to day activity in these markets on behalf of clients or employers. Some actuaries may be involved in advising on the long-term characteristics and implications of different strategies.
An actuary can be useful to investors as they are used to measure the risk involved in an investment portfolio. They are also used to assess risks on loan products.
Actuaries can also be involved in buying and selling assets, investment analysis and portfolio management.
Why are actuaries valued in investment management?
Actuarial techniques are ideal when measuring investment performance as they can solve problems while making correct investment decisions. This means that actuaries are well valued when it comes to working in investment management.
Actuaries bring strong analytical skills and have a deep understanding of how assets interact. This is particularly important in the world of investment management.
Employers recognise the skills that actuaries bring to their company and see that actuaries often seek to improve the development of valuation models and the refinement of traditional methods. Therefore, they allow actuaries to further develop these skills as well as develop skills in other areas such as financial economics.
Can actuaries work in corporate finance?
Although generally regarded as the province of the investment banker, actuaries can add value in this area. An actuary’s basic skills in forecasting and assessing risks are vital in this area. For example, they have the skills to estimate whether a capital project is financially viable.
Employers may include government departments, management consultancies or property companies specialising in this area.
Actuaries working in corporate finance may work in areas such as financial reporting, capital management and mergers and acquisitions.
What is the difference between a financial analyst and an actuary?
If you are considering a career as an actuary, you may also be considering a career as a financial analyst. So what’s the difference?
The main difference between the two is that financial analysts deal with financial information, whereas actuaries deal with risk analysis.
Can actuaries work in banking?
Actuaries are becoming increasingly involved in banking. For example, some of the leading insurance companies now have their own established banking operations, with actuaries filing some of the senior executive positions for finance and risk.
Leading retail banks are also increasingly employing actuaries, as they recognise that the longer term approaches advocated by actuaries can add value to their businesses. As insurance companies increasingly hedge their risks, we have seen a corresponding increase in the demand for actuaries from the investment banks that provide the hedge products.
Some actuaries may move into financial analysis and work with a range of businesses. They may work in areas including regulations, markets and investments. Alternatively, actuaries can be used to measure the potential loss in an investment portfolio.
As the insurance and banking markets continue to converge, we can expect to see the demand for actuaries continue to grow.
As you can see, there are a variety of opportunities for actuaries within the finance sector.