Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 152

The time has come for actuaries

The combination of the retirement income challenge and the big data opportunity will create the age of the actuary. The skill set possessed by actuaries is central to delivering solutions in both these complex areas. An actuary’s toolbox contains a unique combination of technical and problem solving skills. Successful firms will make the most of their talents and skills.

But first, two disclaimers. Firstly, I am not the David Bell who is the CEO of the Actuaries Institute (though I am helping his cause here!). Secondly, I am not an actuary so my views are strategic and come from the outside looking in.

Sometimes the training and skill set of an actuary are not well understood or appreciated. This is partly because of stereotyping and partly because we are all too quick to pull out actuary jokes (which I have banned myself from making in this article, for a change).

Actuaries are equipped with the highest quality technical tool kit for quantitative financial analysis, drawing on mathematical, statistical, economic and financial analysis techniques. This may not surprise most readers. In my view the skill sets are more technical and advanced than most other finance-related professions.

What is not well understood is the emphasis on application, communication and problem-solving. A large part of the training program for actuaries is focused on developing the ability to apply their tool kit of skills to real world problems.

Insurance has been the stereotypical occupation of actuaries due to their abilities in risk modelling and pricing; the Actuaries Institute note that around half of their members work in the insurance sector. However, the skill set of actuaries means they are valuable for many other industries, finance and non-finance.

The retirement income challenge

The superannuation industry faces many challenges, with the largest surely the retirement income challenge, ensuring that the industry delivers appropriate and sustainable retirement incomes. While undoubtedly a multi-faceted problem, at the heart of this challenge lies a highly complex problem with many moving parts, most notably variability in investment and mortality outcomes.

Despite the undoubted appeal of adding actuarial talent, the superannuation industry appears anchored to acknowledging investment risk while directing little attention towards mortality risk. With a clean sheet of paper, would the ratio of investment professionals to actuaries be as it currently is? I would hazard a guess at a ratio of 10:1 minimum.

Why is this so? My view is that it is because the complexity of a whole new range of technical risks and terms is daunting for senior management and trustee boards (for example ‘idiosyncratic mortality risk’ isn’t exactly an easy term to get your head around, but it is one of the most crucial risks to a member’s retirement outcome). A recent example illustrates my concerns. I attended an industry conference on post-retirement. The conference started at a technical level, but acknowledged the communication challenge (to members). The challenge of keeping the communications simple somehow morphed into the need for simple solutions and the banning (somewhat lightheartedly) of important words for the rest of the day such as ‘stochastic’. If the industry is not ready to address a complex problem within closed doors, how can it be solved in a public environment?

Consider the way the major asset consultants are structured. Two have significant actuarial capabilities (it was a separate business line) while the other two less so. If solving the retirement outcome challenge is a top priority for super funds, which asset consultants are best placed to deliver a holistic solution? The interesting challenge being addressed by the two consultants with significant actuarial and investment skill sets is to ensure these two areas work together on solutions rather than working down traditional business line silos.

As all these barriers erode away it is likely that super funds will increase the actuarial headcount within their business.

Big opportunities in big data

The world of big data creates big opportunities for actuaries. Big data applications cross many industries and sectors and it is likely that more actuaries will find a home in big data roles than in retirement outcome work.

Big data refers to the collection and analysis of large amounts of data and analysing it to make predictions and design responses and activities. The data sets can be huge, as can the applications. Speed and accuracy are both important. What is notable, particularly from a strategic perspective, is that no single career discipline is recognised as the go-to for big data analytics. Big data is a relatively new industry and it takes time for undergraduate degrees to accommodate these changes. Programmers, statisticians, econometricians and marketers would all stake a claim and in many cases add much value. However, actuaries are potentially the best resource of the lot: they have many of the technical skills found in each of the other disciplines. Incoming changes to the actuarial undergraduate degree curriculum will make data analytics a greater component of the actuarial degree.

To become a fully qualified actuary is a difficult path. The typical path is a degree and then attainment of the full actuarial qualification takes a further three years of part-time study. Last year, the ATAR entry requirement for the Bachelor of Actuarial Studies was 97.5, so the filtering process is strong.

The strategic opportunity for business leaders is to make sure they have the right amount of actuarial skills in the business, and give them the opportunity to use the unique skills they have developed.


David Bell is Chief Investment Officer at Mine Wealth + Wellbeing. He is working towards a PhD at University of New South Wales.


May 18, 2016

I am not an actuary.

However using an actuary should be mandatory, in previous times where the investment and life risk was borne by the employer/fund, actuaries played an important role. In current environment were investment and life risk is borne by the individual, this need to work out these variables have evaporated.

Asset managers and financial planners, bear no risk in the post defined benefit environment, and current industry view (dangerous to generalise) is the pension will be there.

Attitudes need to change, lots of talk and not much action across all sectors of the post retirement sector. We may need to combine some of the defined benefit features with defined contributions?

April 24, 2016

The problems of investment and mortality are TOTALLY different.

Mortality is a biological problem. Biological problems are suited to actuarial analysis because many things in nature are normally distributed.

Investing is a behavioural problem. Advanced statistics and higher maths are of limited use in trying to solve Keynes "beauty contest".

"Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it" - Peter Lynch

April 22, 2016

Peter & David

Despite the global decline of DB funds, the ingredients of long term, investment, human contingencies and probability make the dominant DC sector ideally suited for actuarial analysis.

My joint paper 'Actuarial Challenges in DC Schemes' (2012, Actuaries Institute: expounded this and recommended along with other professions (auditors, CFAs...) actuaries should a movement of financial ecumenism focused on member interests rather than professional turf lines.

I believe the exhortation remains valid.

Peter Vann
April 21, 2016

Hi David
Re: recent conference on post-retirement. I think of this analogy!

At the recent ABS (Antiskid Braking Systems) conference the techo experts are all talking about their latest wheel lock up detectors, the new feedback loops to take action on wet roads etc etc, and how fast their new widget with the new fangled release valve (sorry for the techo speak) releases a bit of the brake fluid pressure to prevent the wheels skidding under heavy braking. The jargon abounds. Fortunately they all realise that when it comes to explaining this to car drivers, all they need to say is “our ABS delivers a safer driving experience by preventing skidding”.

Apply that analogy to the super fund industry . What is something that all members understand? One word pops into my mind “paycheque”. Members don’t need much financial literacy to understand that. So I challenge the industry to start thinking about expressing the outcome of super in terms of a retirement paycheque, members will understand that. The actuaries that prospered in the DB days still may have a role in the DC funds re retirement outcomes, but I also know that some math modelling skills help here too.

Cheers, Peter

Ps I’m aware that some funds are thinking down this line (incl yours). Keep up the good work.


Leave a Comment:



Misplaced focus on high yielding stocks in retirement


Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.

Latest Updates


Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Survey: share your retirement experiences

All Baby Boomers are now over 55 and many are either in retirement or thinking about a transition from work. But what is retirement like? Is it the golden years or a drag? Do you have tips for making the most of it?


Time for value as ‘promise generators’ fail to deliver

A $28 billion global manager still sees far more potential in value than growth stocks, believes energy stocks are undervalued including an Australian company, and describes the need for resilience in investing.


Paul Keating's long-term plans for super and imputation

Paul Keating not only designed compulsory superannuation but in the 30 years since its introduction, he has maintained the rage. Here are highlights of three articles on SG's origins and two more recent interviews.

Fixed interest

On interest rates and credit, do you feel the need for speed?

Central bank support for credit and equity markets is reversing, which has led to wider spreads and higher rates. But what does that mean and is it time to jump at higher rates or do they have some way to go?

Investment strategies

Death notices for the 60/40 portfolio are premature

Pundits have once again declared the death of the 60% stock/40% bond portfolio amid sharp declines in both stock and bond prices. Based on history, balanced portfolios are apt to prove the naysayers wrong, again.

Exchange traded products

ETFs and the eight biggest worries in index investing

Both passive investing and ETFs have withstood criticism as their popularity has grown. They have been blamed for causing bubbles, distorting the market, and concentrating share ownership. Are any of these criticisms valid?



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.