Actuaries to test skills as fee-paid advisers

ACTUARIES, the normally retiring types who specialise in the complex mathematics of risk assessment for insurance and pension companies, have emerged blinking into the spotlight with a claim to be considered as financial advisers.

The 21 member firms of the recently formed Independent Consulting Actuaries Network (Ican) said this month that their fee-based advice on pensions and insurance could be cheaper for individual investors than using traditional advisers who are paid commissions. Ican is made up of small and medium-sized firms interested in expanding their work with private clients (most actuarial work is for corporate clients).

'There is an increasing number of private individuals, mostly executives, who are requiring individual counselling - in many cases as a result of redundancy,' said Peter Chadwick of Grove Park Consultants, one of Ican's member firms. He said he had advised clients on, among other things, pension entitlements in divorce settlements.

'Another area is trying to unravel cases where personal pensions have been incorrectly sold - for example, where people have been cajoled into transferring out of a Civil Service-type pension.

'We can quantify the loss resulting from bad advice. Actuaries are well equipped with number-crunching skills,' Mr Chadwick said.

Actuaries can offer expert advice on pension transfers, according to the chairman of Ican, Geoffrey Bernstein. 'Although the regulations have been tightened up, there are still terrific variations in the basis on which transfer values can be calculated. For example, a pension scheme with an excellent past record of paying pension increases may not take future increases into account in the transfer value. In this situation, someone shouldn't really be taking a transfer,' he said.

Like the growing number of independent financial advisers offering fee-based advice, Ican members charge their clients at an hourly rate - from about pounds 60 upwards depending on the firm. However, arranging a pension in this way saves on the initial and often substantial commission charges - especially on regular premium pension policies.

Mr Bernstein (who charges pounds 135 an hour) estimates that people considering investing pounds 2,000 to pounds 5,000 a year in their pensions may benefit financially from taking fee-based advice. He concentrates particularly on comparing the conditions and charges levied by pension firms.

'Companies' policies are put together by actuaries who are used to obfuscating the true level of charges, so it needs an actuary to pull them apart again,' he said.

Actuaries who hope to become as familiar to the public as, say, accountants or solicitors will first have to overcome their image as the grey people of the financial world. (The old joke is that an actuarial career is for people who can't stand the excitement of accountancy.)

Mr Bernstein admits his profession has an image problem. 'It's a bit like railway timetables, in that everyone agrees they are very important but no one is very interested in them.'

This perhaps overstates the present level of recognition. 'The average person hasn't even heard of an actuary,' said Mr Chadwick. 'That's not the fault of the public; that's the fault of the actuarial profession as a whole.'

(Photograph omitted)

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