Chapter 1 - Actuarial Advice Flashcards

1
Q

Who do actuaries advise in the private vs public sector ?

A

Private sector advising to :
- Banks
- Insurance Company
- Shareholders
- Pension Scheme Trustees
- Pension Scheme Sponsors
- Employees
- Policyholders
- Board of Directors
- Investment fund managers
- Members of investment schemes

Public sector advising to :
- Government agencies
- Reserve Bank
- Central Bank (eg. SARB )
- Regulatory Bodies ( eg. FSB , FSCA .. )

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2
Q

How are stakeholders other than the client affected by Actuarial advice ?

A
  • All stakeholders must be considered when giving advice , not only those who seek ( and pay for ) the advice
  • Retain a sense of proportion when considering who else may be affected by advice given
  • Consider vulnerable stakeholders such as
    • people earning below threshold
    • people living with AIDS/HIV
    • elderly
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3
Q

Explain why and how certain factual information should be sought before giving advice ?

A
  • Thorough research on client to find relevant information available in the public domain
  • Preproject meeting to fully understand client position ( eg. meeting we had with TaiAscends )
  • Be cognisant of conflict on interests ( eg. potential coi’s with Miway and if we did business for similar company before )
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4
Q

Why are subjective attitudes of clients and other stakeholders - especially towards risk - relevant to giving advice ?

A
  • There are subjective pieces of information regarding a client we need to focus on such as client background , ethical position , culture , etc . eg. giving investment advice to an animal charity means not recommending investment in companies who test products on animals
  • Corporate bodies have a risk appetite , driven by their stakeholders , particularly owners and their appetite is frequently described in their annual / published statements
  • Also be aware of the general style and culture of the client
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5
Q

Types of Advice

A
  1. Indicative - giving opinion without fully investigating issues such as responding to an oral question
  2. Factual - based on research of facts , eg. legislation
  3. Recommendations - research and modelled forecasts , alternatives weighted , peer reviewed work ….
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6
Q

Distinguish between responsibility for giving advice and responsibility for taking decisions

A
  • Actuary will make specific assumptions in giving advice and recommendations
  • Reasons for assumptions will be given and implications of alternative assumptions / solutions that may have been considered and not recommended will be disclosed
  • Final decision on solution is up to the client
  • eg. From the blink ga data , we conclude and recommend that the optimal marketing budget needed for adequate scaling is R10 mil per month but final decision is decided by the board of directors
  • Should the actuary be in a position to make decisions ( eg. occupy an executive role ) then there is the danger that they will make decisions based on their own conclusions only and they therefore should :
  • seek further advice
  • conduct peer review
  • ensure rationale behind decisions is documented including documentation of considered alternatives
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7
Q

Professional & Technical Standards applying to actuarial advice

A

Six main principles of actuaries code:
1. Integrity
2. Competence and Care
3. Impartiality
4. Compliance
5. Speaking Up
6. Communication

  • SAP’s must be adhered to by all members of ASSA
  • APN’s are designed to guide actuaries in their relevant practice area and departure from this guidance should be disclosed and adequately justified
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