The Self-Employed The Self-Employed ActuaryActuary

Julie Curry, FSA, MAAAJulie Curry, FSA, MAAA

Curry Actuarial Consulting LLCCurry Actuarial Consulting LLC

(770) 630-4354(770) 630-4354

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Outline of Outline of PresentationPresentation Risks and rewards of self-employmentRisks and rewards of self-employment Career path toward self-employmentCareer path toward self-employment Profile of a successful small business Profile of a successful small business

ownerowner Steps to starting a businessSteps to starting a business Running a small business: administrative Running a small business: administrative

issuesissues Case StudiesCase Studies Question & AnswerQuestion & Answer

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My BackgroundMy Background

Life Insurance Company - 8 yearsLife Insurance Company - 8 years– Financial reporting expertiseFinancial reporting expertise

Ernst & Young Consultant – 6 yearsErnst & Young Consultant – 6 years– Consulting (M&A, financial reporting, etc)Consulting (M&A, financial reporting, etc)– Audit support (Statutory, GAAP)Audit support (Statutory, GAAP)– State Ins Dept examination supportState Ins Dept examination support

Independent Consultant – 13 yearsIndependent Consultant – 13 years– Life insurance company financial reportingLife insurance company financial reporting– Financial reporting systems Financial reporting systems

implementationimplementation– Audit support (audit firms, dept of ins)Audit support (audit firms, dept of ins)

44

Types of Actuarial JobsTypes of Actuarial Jobs

Insurance/Reinsurance Co (Life, Health, Insurance/Reinsurance Co (Life, Health, PC)PC)

Pension/Benefits ActuaryPension/Benefits Actuary EducatorEducator ConsultingConsulting

– Actuarial consulting firmActuarial consulting firm– Pension/benefits consulting firmPension/benefits consulting firm

Regulatory (Dept Ins, Fed Govt, other)Regulatory (Dept Ins, Fed Govt, other) Other (banks, etc)Other (banks, etc)

55

How to Decide PathHow to Decide Path

Interest and aptitude based on Interest and aptitude based on college course work college course work

Perceived advancement Perceived advancement opportunitiesopportunities

Strength in interpersonal skillsStrength in interpersonal skills Ability of various jobs to offer Ability of various jobs to offer

actuarial students study timeactuarial students study time Geographic limitationsGeographic limitations

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First Job: First Job: My Decision ProcessMy Decision Process Summer internship at life insurance companySummer internship at life insurance company Interviews through college placement office Interviews through college placement office

were all insurance companieswere all insurance companies Looked for company with actuarial study Looked for company with actuarial study

program and rotation programprogram and rotation program Goal of staying close to home (Columbus OH)Goal of staying close to home (Columbus OH) Ended up at Capital Holding (Life Ins Co) in Ended up at Capital Holding (Life Ins Co) in

Louisville KYLouisville KY Company assigned me to financial reportingCompany assigned me to financial reporting 25+ years later, I’m still in financial 25+ years later, I’m still in financial

reporting!reporting!

77

Factors in Job ChangesFactors in Job Changes

External FactorsExternal Factors– Position eliminatedPosition eliminated– Spouse transferredSpouse transferred

Internal FactorsInternal Factors– Perception of better opportunity or lower Perception of better opportunity or lower

stress elsewherestress elsewhere– Desire to increase compensationDesire to increase compensation– Interest in changing career tracksInterest in changing career tracks

Ins co to consulting or vice versaIns co to consulting or vice versa Desire to move to teaching position or regulatory Desire to move to teaching position or regulatory

jobjob

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Becoming a Becoming a Self-Employed ActuarySelf-Employed Actuary It’s not the first step in a career path!It’s not the first step in a career path! If this is your ultimate goal, each step in If this is your ultimate goal, each step in

career path should keep this goal in career path should keep this goal in mindmind

Typical career path might be:Typical career path might be:– Insurance co Insurance co insurance consulting firm insurance consulting firm

establish own consulting firmestablish own consulting firm– Pension consulting firm Pension consulting firm establish own establish own

pension consulting firmpension consulting firm– Insurance Dept Insurance Dept establish regulatory establish regulatory

services consulting firmservices consulting firm

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Do you want a job Do you want a job with:with: No paid vacation?No paid vacation? No pension plan?No pension plan? No health insurance benefits?No health insurance benefits? No guaranteed income?No guaranteed income? Five bosses, each of whom wants Five bosses, each of whom wants

something something NOW?NOW? The potential to earn much more than The potential to earn much more than

you’re currently earning?you’re currently earning? Then self-employment might be the Then self-employment might be the

answer!answer!

1010

Advantages of Self-Advantages of Self-EmploymentEmployment Be your own bossBe your own boss Work at home/no commute timeWork at home/no commute time

– Casual dressCasual dress Flexible hoursFlexible hours Good hourly rateGood hourly rate Work from any locationWork from any location

– Home is where the laptop isHome is where the laptop is

1111

Disadvantages of Self-Disadvantages of Self-EmploymentEmployment You may not like your bossYou may not like your boss ““Work at home/no commute time” Work at home/no commute time”

– Distractions at homeDistractions at home– No social interaction with peersNo social interaction with peers– No ability to learn from co-workersNo ability to learn from co-workers– Travel time to client locationTravel time to client location

““Flexible hours”Flexible hours”– Often chosen by client – you’re “on call”Often chosen by client – you’re “on call”– May be 18 hours per day during a big project (no May be 18 hours per day during a big project (no

employees!)employees!) Good hourly rate – but no guaranteed hoursGood hourly rate – but no guaranteed hours

1212

Disadvantages of Self-Disadvantages of Self-EmploymentEmployment No employee benefitsNo employee benefits

– No paid vacationNo paid vacation– No paid sick timeNo paid sick time– No pension planNo pension plan– No health insuranceNo health insurance

Fixed expenses but variable incomeFixed expenses but variable income No employees to help with the work No employees to help with the work

loadload Liability risksLiability risks

1313

Characteristics of Characteristics of Successful Self-Employed Successful Self-Employed ActuariesActuaries Self-MotivatedSelf-Motivated Defined Market NicheDefined Market Niche Strong Technical SkillsStrong Technical Skills Good Communication SkillsGood Communication Skills Strong Sales SkillsStrong Sales Skills Broad Range of Industry ContactsBroad Range of Industry Contacts Financially Prepared for Self-EmploymentFinancially Prepared for Self-Employment Financially DisciplinedFinancially Disciplined

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Self-MotivatedSelf-Motivated

Personal ExamplePersonal Example– Atlanta Olympics in 1996Atlanta Olympics in 1996– Office closed, worked at homeOffice closed, worked at home

My Solution:My Solution:– Separate Office Separate Office – Defined Office HoursDefined Office Hours– Dedicated Phone Line (Cell?)Dedicated Phone Line (Cell?)

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Defined Market NicheDefined Market Niche

What “product” will you sell?What “product” will you sell? Hard to find work as a “generalist”Hard to find work as a “generalist” ““Specialists” find work assisting Specialists” find work assisting

with special productswith special products– Special projects may have fundingSpecial projects may have funding

Underselling the competition Underselling the competition doesn’t necessarily workdoesn’t necessarily work

1616

My Market NicheMy Market Niche

““Life Insurance Financial Reporting”Life Insurance Financial Reporting”– That’s too generalThat’s too general

Examples of specific “products” I sell:Examples of specific “products” I sell:– Assistance with development, review, and assessment Assistance with development, review, and assessment

of effectiveness of controls in USGAAP financial of effectiveness of controls in USGAAP financial reporting processesreporting processes

– Implementation of financial reporting valuation Implementation of financial reporting valuation systemssystems

– Building and enhancing source of earnings analyses on Building and enhancing source of earnings analyses on universal life and annuity blocks of businessuniversal life and annuity blocks of business

– Actuarial audit support work to assist audit firms, state Actuarial audit support work to assist audit firms, state insurance departments, internal audit departmentsinsurance departments, internal audit departments

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Strong Technical SkillsStrong Technical Skills

Expertise in subject matterExpertise in subject matter– SpecializeSpecialize

Good computer skills are a mustGood computer skills are a must– They don’t sell a project, but they’re They don’t sell a project, but they’re

necessary to complete the projectnecessary to complete the project– Microsoft products: Excel, Access, Microsoft products: Excel, Access,

Powerpoint, Visual Basic, WordPowerpoint, Visual Basic, Word– Actuarial software – hands-on skillsActuarial software – hands-on skills

1818

Communication SkillsCommunication Skills

Necessary for sales presentationsNecessary for sales presentations Required for verbal Required for verbal

communications during a projectcommunications during a project Critical when writing reports to Critical when writing reports to

document findingsdocument findings Start Start todaytoday to fine-tune your skills: to fine-tune your skills:

grammar and spelling matter! grammar and spelling matter!

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Sales SkillsSales Skills

The best sales skills won’t help if you don’t The best sales skills won’t help if you don’t have a good product to sellhave a good product to sell

The best product won’t sell if you don’t have The best product won’t sell if you don’t have good sales skillsgood sales skills

Step one is to get in the door (the door of the Step one is to get in the door (the door of the decision maker) decision maker)

Many resources on effective sales techniques Many resources on effective sales techniques – read books now and develop sales skills– read books now and develop sales skills

Even if you are never self-employed, sales Even if you are never self-employed, sales skills help you sell yourself and your ideas in skills help you sell yourself and your ideas in any jobany job

2020

Industry ContactsIndustry Contacts

Former Co-WorkersFormer Co-Workers Actuarial MeetingsActuarial Meetings Actuarial Committees Actuarial Committees

(SOA/CAS/AAA)(SOA/CAS/AAA) Former ClientsFormer Clients Cold CallsCold Calls

2121

Financial PreparationFinancial Preparation

Expect Low Income First Few YearsExpect Low Income First Few Years Significant Fluctuations in Cash FlowSignificant Fluctuations in Cash Flow Start-Up Costs Start-Up Costs

– ComputerComputer– Software (including Actuarial software)Software (including Actuarial software)– Office EquipmentOffice Equipment– Office FurnitureOffice Furniture– Legal Fees to Establish Business (Costs of Legal Fees to Establish Business (Costs of

Incorporation)Incorporation)– WebsiteWebsite– Marketing LiteratureMarketing Literature– Office Rental (Optional)Office Rental (Optional)

2222

Financial PreparationFinancial Preparation

Fixed CostsFixed Costs– Insurance: Insurance:

Professional Liability & Business InsuranceProfessional Liability & Business Insurance Medical, Disability & Life InsuranceMedical, Disability & Life Insurance

– PhonePhone– InternetInternet– Actuarial softwareActuarial software– Actuarial Organization Membership FeesActuarial Organization Membership Fees– Continuing Education CostsContinuing Education Costs

Other costsOther costs– Travel costs for sales callsTravel costs for sales calls– Travel costs for on-site workTravel costs for on-site work– Pension fundingPension funding

2323

Business Expenses: Business Expenses: InsuranceInsurance Professional Liability InsuranceProfessional Liability Insurance

– $5,000+ per million coverage per year$5,000+ per million coverage per year– Large companies often require consultants to carry Large companies often require consultants to carry

coveragecoverage Business Owners InsuranceBusiness Owners Insurance

– $1,000 - $2,000 per year$1,000 - $2,000 per year– Large companies often require consultants to carry Large companies often require consultants to carry

coveragecoverage Medical InsuranceMedical Insurance

– Likely to be individual coverageLikely to be individual coverage– Requires underwritingRequires underwriting– Rates vary with age/sex/heath/otherRates vary with age/sex/heath/other– May be $10,000+ per yearMay be $10,000+ per year

2424

Business Expenses: Business Expenses: OtherOther Actuarial software license (optional)Actuarial software license (optional)

– ~ $20,000 per year~ $20,000 per year Society of Actuaries Dues (~$1,000)Society of Actuaries Dues (~$1,000) Academy of Actuaries Dues (~$1,000)Academy of Actuaries Dues (~$1,000) Continuing EducationContinuing Education

– Meeting fee (~ $1,000)Meeting fee (~ $1,000)– Travel expenses (~ $1,000)Travel expenses (~ $1,000)

Pension PlanPension Plan– Various options availableVarious options available– Simplified Employee Pension (SEP) IRASimplified Employee Pension (SEP) IRA– Solo 401KSolo 401K

Subscriptions to literature (acctg, tax, law)Subscriptions to literature (acctg, tax, law)

2525

Test: Test: Financially Prepared?Financially Prepared? Are you a good money manager?Are you a good money manager?

– Do you balance your checkbook?Do you balance your checkbook? Are you a detailed-oriented bookkeeper?Are you a detailed-oriented bookkeeper? Do you have a budget which shows in detail Do you have a budget which shows in detail

what you make and what you spend?what you make and what you spend? Do you have other sources of funds with Do you have other sources of funds with

which to support yourself in the early years which to support yourself in the early years of your new business?of your new business?– Spouse’s incomeSpouse’s income– SavingsSavings– Other ways to generate income (tutoring math, Other ways to generate income (tutoring math,

work for actuarial or finance temp agencies, other)work for actuarial or finance temp agencies, other)

2626

Test: Test: Financially Financially Disciplined?Disciplined? You find that your checking account You find that your checking account

balance is up to $20,000. You are balance is up to $20,000. You are most likely to:most likely to:– A. Spend itA. Spend it– B. Project the amount needed to cover B. Project the amount needed to cover

future cash flow requirements (estimate future cash flow requirements (estimate taxes, etc.) and spend the rest.taxes, etc.) and spend the rest.

– C. Save enough to cover future cash flow C. Save enough to cover future cash flow requirements and save the rest to cover requirements and save the rest to cover future periods of lower cash in-flow.future periods of lower cash in-flow.

2727

Test:Test:Financially DisciplinedFinancially Disciplined A. Likely to end up with IRS A. Likely to end up with IRS

problemsproblems B. On the right track, but need to B. On the right track, but need to

keep in mind that there are keep in mind that there are periods of “feast” and “famine”.periods of “feast” and “famine”.

C. Likely to succeed in the C. Likely to succeed in the financial aspects of running a financial aspects of running a small business.small business.

2828

RecommendationsRecommendations

Segregate business funds from personal Segregate business funds from personal funds:funds:– Separate checking accountSeparate checking account– Separate credit cardSeparate credit card

Reconcile business accounts monthlyReconcile business accounts monthly Bill clients monthlyBill clients monthly Never delay payment of estimate taxesNever delay payment of estimate taxes Determine how to pay yourself:Determine how to pay yourself:

– A percentage of gross receipts?A percentage of gross receipts?– A fixed amount per week or month?A fixed amount per week or month?

2929

Monthly Cash FlowMonthly Cash Flow

Even if income is fairly regular, Even if income is fairly regular, outflows are not.outflows are not.

Insert graph here showing Insert graph here showing monthly cash inflows and monthly cash inflows and outflows for CACoutflows for CAC

3030

SBASBA

Small Business Association Small Business Association provides counseling, mentoring provides counseling, mentoring and training, and loansand training, and loans

www.sba.gov

3131

Ten Steps to Starting a Ten Steps to Starting a Business Business (per SBA.gov)(per SBA.gov)

1.1. Write a business planWrite a business plan2.2. Get business assistance and trainingGet business assistance and training3.3. Choose a business locationChoose a business location4.4. Finance your businessFinance your business5.5. Determine legal structureDetermine legal structure

Sole proprietorshipSole proprietorship PartnershipPartnership Limited Liability Corporate (LLC)Limited Liability Corporate (LLC) CorporationCorporation S CorpS Corp

3232

Ten Steps to Starting a Ten Steps to Starting a Business Business (per SBA.gov)(per SBA.gov)

6.6. Register a business name with state Register a business name with state governmentgovernment

7.7. Get a tax ID numberGet a tax ID number8.8. Register for state and local taxesRegister for state and local taxes

State Tax ID NumberState Tax ID Number Workers’ compensationWorkers’ compensation Unemployment and disability insuranceUnemployment and disability insurance

9.9. Obtain business licenses and permitsObtain business licenses and permits Federal, state and local licenses and permitsFederal, state and local licenses and permits

10.10. Understand employer responsibilitiesUnderstand employer responsibilities Legal steps you need to take to hire employeesLegal steps you need to take to hire employees

http://www.sba.gov/sba-direct/article/2815http://www.sba.gov/sba-direct/article/2815

3333

Other SBA ResourcesOther SBA Resources

Articles on self-employed and Articles on self-employed and independent contractorsindependent contractors

Articles on minority-owned Articles on minority-owned businessesbusinesses

Articles on woman-owned Articles on woman-owned businessesbusinesses

Articles on veteran-owned Articles on veteran-owned businessesbusinesses

3434

Women and MinoritiesWomen and Minorities

A number of larger companies have A number of larger companies have guidelines in place which require guidelines in place which require them to use minorities and women them to use minorities and women for 10% of their contract workfor 10% of their contract work

Typically accomplished by requiring Typically accomplished by requiring vendors to subcontract at least vendors to subcontract at least 10% of their work to woman-owned 10% of their work to woman-owned or minority owned businessesor minority owned businesses

3535

Minority-Owned Minority-Owned BusinessBusiness Sample contract from large bank: Sample contract from large bank: A “Minority-Owned Business” is a A “Minority-Owned Business” is a

business that is at least 51 percent business that is at least 51 percent owned, and whose management and owned, and whose management and daily business operations are daily business operations are controlled, by one or more members of controlled, by one or more members of a socially and economically a socially and economically disadvantaged minority group — disadvantaged minority group — namely, U.S. citizens who are Black namely, U.S. citizens who are Black Americans, Hispanic Americans, Native Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, or Americans, Asian-Pacific Americans, or Asian-Indian Americans.Asian-Indian Americans.

3636

Woman-Owned Woman-Owned BusinessBusiness Sample contract from large bank:Sample contract from large bank: A “Woman-Owned Business” is a A “Woman-Owned Business” is a

business that is at least 51 percent business that is at least 51 percent owned by a woman (or women) who is owned by a woman (or women) who is a U.S citizen, controls the business by a U.S citizen, controls the business by exercising the power to make policy exercising the power to make policy decisions, and operates the business decisions, and operates the business by being actively involved in its day-to-by being actively involved in its day-to-day management. day management.

3737

Woman/Minority Woman/Minority BusinessesBusinesses To qualify as a Minority or Woman-Owned To qualify as a Minority or Woman-Owned

Business, the Business must be certified by Business, the Business must be certified by an official certification agency acceptable to an official certification agency acceptable to Company X. Vendor shall supply to Company Company X. Vendor shall supply to Company X’s Vendor Diversity Group copies of official X’s Vendor Diversity Group copies of official certification documentation.certification documentation.

Vendor’s goal is to subcontract a minimum of Vendor’s goal is to subcontract a minimum of 10% of the total dollar amount of this 10% of the total dollar amount of this Agreement to Minority and Woman-Owned Agreement to Minority and Woman-Owned Businesses annually (the “Goal”). In order to Businesses annually (the “Goal”). In order to balance Company X’s overall spending, the balance Company X’s overall spending, the preferred allocation of the Goal is 7% to preferred allocation of the Goal is 7% to Minority Businesses and 3% to Woman-Minority Businesses and 3% to Woman-Owned Businesses. Owned Businesses.

3838

Preparing to be a Self-Preparing to be a Self-Employed ActuaryEmployed Actuary Pass actuarial examsPass actuarial exams Develop technical expertiseDevelop technical expertise Identify market nicheIdentify market niche Make industry contactsMake industry contacts Develop sales and marketing skillsDevelop sales and marketing skills Work for a consulting firmWork for a consulting firm Pay off personal debtsPay off personal debts Save moneySave money

3939

Getting Started as a Getting Started as a Self-Employed ActuarySelf-Employed Actuary Work for a consulting firm to learn the Work for a consulting firm to learn the

business:business:– Client developmentClient development– BillingBilling– Dispute resolutionDispute resolution– Bidding projectsBidding projects– Develop base of contactsDevelop base of contacts

THEN:THEN: Buy a business orBuy a business or Start a business (self or partnership?)Start a business (self or partnership?)

4040

Buying an Actuarial Buying an Actuarial Consulting FirmConsulting Firm Pay based on expected future Pay based on expected future

revenues from existing clientsrevenues from existing clients– How to finance?How to finance?

Advantage is that there are Advantage is that there are existing clientsexisting clients

Disadvantage is that clients may Disadvantage is that clients may choose a different firm at salechoose a different firm at sale

Requires careful transitionRequires careful transition

4141

Starting an Actuarial Starting an Actuarial Consulting BusinessConsulting Business Advantage is no cash outflow to Advantage is no cash outflow to

purchase businesspurchase business Disadvantage is that there are no Disadvantage is that there are no

clients initiallyclients initially

4242

How to Set Billing RateHow to Set Billing Rate

Convert former salary into hourly rateConvert former salary into hourly rate– may be lower boundmay be lower bound

Consider rates charged by larger Consider rates charged by larger consulting firms consulting firms – May be upper boundMay be upper bound

Consider risks inherent in the projectConsider risks inherent in the project May accept lower rate on larger projectsMay accept lower rate on larger projects Rate may vary seasonally Rate may vary seasonally

(supply/demand)(supply/demand)– Audit firm rates higher January - MarchAudit firm rates higher January - March

4343

Billing IssuesBilling Issues

Fixed fee engagements can be Fixed fee engagements can be big riskbig risk– How to estimate hoursHow to estimate hours– Double your initial estimate? Double your initial estimate? – ““The devil’s in the data”The devil’s in the data”

How to handle billing disputesHow to handle billing disputes Safer to bill periodically (monthly) Safer to bill periodically (monthly)

rather than at project completionrather than at project completion

4444

Billing FilesBilling Files

Maintain detailed records for Maintain detailed records for personal recordspersonal records

Time “clocked in” and “clocked Time “clocked in” and “clocked out” in 15 minute intervalsout” in 15 minute intervals

Task performed in each intervalTask performed in each interval Cumulative hours per monthCumulative hours per month Summarized statement sent to Summarized statement sent to

clientclient

4545

Unbillable TimeUnbillable Time

MarketingMarketing– Sales callsSales calls– Website maintenanceWebsite maintenance– BrochuresBrochures– Writing articles, preparing presentations, brochures etcWriting articles, preparing presentations, brochures etc

AdministrativeAdministrative– Negotiating contracts Negotiating contracts – Drafting engagement lettersDrafting engagement letters– Preparation of proposals in response to government Preparation of proposals in response to government

“RFP”“RFP”– Insurance applications and updatesInsurance applications and updates– Computer issuesComputer issues– Monthly billing and bookkeepingMonthly billing and bookkeeping– Estimate tax paymentsEstimate tax payments

4646

More Unbillable TimeMore Unbillable Time

Travel timeTravel time Continuing education meetingsContinuing education meetings Some actuaries adjust hours billed:Some actuaries adjust hours billed:

– Factor adjustment when performing work Factor adjustment when performing work for which the actuary is overqualified (e.g., for which the actuary is overqualified (e.g., adjust from FSA rate to ASA rate)adjust from FSA rate to ASA rate)

– May not bill for “re-do” of workMay not bill for “re-do” of work– May bill less after x hours per dayMay bill less after x hours per day– Very judgmentalVery judgmental

4747

Running a Small Running a Small BusinessBusiness Consider need for clerical supportConsider need for clerical support May require tax or other May require tax or other

accounting supportaccounting support May require technology supportMay require technology support May require legal supportMay require legal support

4848

Technology SupportTechnology Support

Computer issues – Computer issues – – You are the help deskYou are the help desk– Need good back-up systemsNeed good back-up systems– Need multiple computersNeed multiple computers– Need secure systemsNeed secure systems

Phone issues – cell phone as business Phone issues – cell phone as business phone, quality issues?phone, quality issues?

Internet issues – have a backup planInternet issues – have a backup plan Can some of this be outsourced?Can some of this be outsourced?

4949

Tax/Accounting Tax/Accounting SupportSupport Consider engaging a tax accountant to Consider engaging a tax accountant to

assist with tax issuesassist with tax issues– LLC or partnership => likely to file multiple LLC or partnership => likely to file multiple

state tax returnsstate tax returns– Partnership => special partnership tax formsPartnership => special partnership tax forms– Self-Employment TaxSelf-Employment Tax– Quarterly Tax EstimatesQuarterly Tax Estimates

Consider engaging an accountant to assist Consider engaging an accountant to assist with general bookkeeping (billing etc)with general bookkeeping (billing etc)

5050

Legal SupportLegal Support

Consider engaging an attorney to Consider engaging an attorney to assist with:assist with:– Establishment of business Establishment of business

(incorporation etc)(incorporation etc)– Drafting of engagement lettersDrafting of engagement letters– Review of marketing materialsReview of marketing materials– Review of contractsReview of contracts

5151

Liability RisksLiability Risks

Risk of LitigationRisk of Litigation– Mispriced insurance productMispriced insurance product– Products priced with tax issues (IRC 7702)Products priced with tax issues (IRC 7702)– Perceived poor advice related to acquisitionPerceived poor advice related to acquisition– Violations of confidentiality agreementsViolations of confidentiality agreements– Issues related to assumptions in pension Issues related to assumptions in pension

valuationsvaluations Professional liability insurance amounts Professional liability insurance amounts

may not be adequate to cover a may not be adequate to cover a judgmentjudgment

Liability insurance may not cover sub-Liability insurance may not cover sub-contractorscontractors

5252

Employees vs Employees vs Sub-Contractors?Sub-Contractors? Employees typically require guaranteed income Employees typically require guaranteed income

and benefitsand benefits Employees create administrative burdens Employees create administrative burdens

(benefits, workers’ comp, unemployment (benefits, workers’ comp, unemployment insurance)insurance)

Subcontractors are paid only for hours workedSubcontractors are paid only for hours worked Different subcontract can be selected for each Different subcontract can be selected for each

project based on expertise requiredproject based on expertise required How to structure subcontractor agreementHow to structure subcontractor agreement

– ““Subcontractor” has separate contract with client?Subcontractor” has separate contract with client?– Subcontractor gets x% of amounts billed to client?Subcontractor gets x% of amounts billed to client?– Subcontractor not paid until you are paid?Subcontractor not paid until you are paid?

Liability issues associated with subcontractorsLiability issues associated with subcontractors

5353

Case Study ACase Study A

Background: Background: – Several insurance Several insurance

company jobscompany jobs– Consultant at Consultant at

accounting firmaccounting firm YrsYrs in industry in industry

prior to starting prior to starting firm: ~15firm: ~15

Market niche:Market niche:– Financial reportingFinancial reporting– Audit supportAudit support

Easing transition to Easing transition to consulting:consulting:– Spouse incomeSpouse income– Prior consulting Prior consulting

experienceexperience Initial contacts:Initial contacts:

– ExtensiveExtensive Yrs as independent Yrs as independent

consultant: 10+consultant: 10+ Current position: Current position:

– Self-employed Self-employed actuaryactuary

5454

Words of Wisdom from Words of Wisdom from AA ““Poor planning on your part doesn’t Poor planning on your part doesn’t

constitute an emergency on mine.”constitute an emergency on mine.”– Except that as a self-employed Except that as a self-employed

actuary, it does!!!actuary, it does!!! A fail-proof “Get Rich Slow” scheme: A fail-proof “Get Rich Slow” scheme:

“Spend less than you make.”“Spend less than you make.” My marketing strategy: “wait for My marketing strategy: “wait for

the phone to ring”the phone to ring”

5555

Gross Revenue Percent Gross Revenue Percent per Month (2008 – per Month (2008 – 2011)2011)

0%

2%

4%

6%

8%

10%

12%

14%

Jan Mar May Jul Sep Nov

Revenue

5656

Bus Exp/Tax: Percent Bus Exp/Tax: Percent per Month (2008 – per Month (2008 – 2011)2011)

0%

5%

10%

15%

20%

25%

30%

Jan Mar May Jul Sep Nov

Expense

5757

Net Income: Percent Net Income: Percent per Month (2008 – per Month (2008 – 2011)2011)

-15%

-10%

-5%

0%

5%

10%

15%

20%

Jan Mar May Jul Sep Nov

Net Income

5858

Case Study BCase Study B

Background: Background: – Trained in Systems/IT Trained in Systems/IT

before entering before entering actuarial professionactuarial profession

– Several insurance Several insurance company jobscompany jobs

YrsYrs in industry prior in industry prior to starting firm: ~10to starting firm: ~10

Market niche:Market niche:– Systems conversionsSystems conversions– Experience studiesExperience studies

Easing transition to Easing transition to consulting:consulting:– Spouse incomeSpouse income

Initial contacts:Initial contacts:– LimitedLimited

Yrs as independent Yrs as independent consultant: 10+consultant: 10+

Current position: Current position: – Self-employed Self-employed

actuaryactuary

5959

Words of Wisdom from Words of Wisdom from `B`B Represent yourself exactly as you Represent yourself exactly as you

are (good and bad both) are (good and bad both) Stay out of office politics Stay out of office politics

6060

Case Study CCase Study C

Background: Background: – CFO of large insurance CFO of large insurance

companycompany– Partner in accounting Partner in accounting

firmfirm YrsYrs in industry prior in industry prior

to starting firm: 20+to starting firm: 20+ Market niche: Market niche:

– Group health Group health insuranceinsurance

– Litigation supportLitigation support– Specialist in “Patient Specialist in “Patient

Protection and Protection and Affordable Care Act”Affordable Care Act”

Easing transition to Easing transition to consulting:consulting:– Prior consulting Prior consulting

experienceexperience– Savings & retirement Savings & retirement

plans plans Initial contacts:Initial contacts:

– ExtensiveExtensive Yrs as independent Yrs as independent

consultant: ~10consultant: ~10 Current position: Current position:

– Self-employed Self-employed actuaryactuary

6161

Words of Wisdom from Words of Wisdom from CC Financial (personal):Financial (personal):

– Financial planners generally suggest an emergency fund of 6 to 12 Financial planners generally suggest an emergency fund of 6 to 12 months. Suggest at least double that for a self-employed actuary (or, months. Suggest at least double that for a self-employed actuary (or, a working spouse)a working spouse)

– Suggest minimal fixed costs (especially housing and debt) since Suggest minimal fixed costs (especially housing and debt) since income will almost certainly be very variable income will almost certainly be very variable

Bookkeeping:Bookkeeping:– Need QuickBooks are some other business softwareNeed QuickBooks are some other business software– Keep accurate records and separate personal from business expensesKeep accurate records and separate personal from business expenses– Be prepared for payroll processing complications – even if you pay Be prepared for payroll processing complications – even if you pay

someone to process the forms. someone to process the forms.

Incorporating/professional liability:Incorporating/professional liability:– Will probably want to form a companyWill probably want to form a company– But cannot avoid professional liabilityBut cannot avoid professional liability– Choose between LLC, S-Corp, or C-Corp (advantages and Choose between LLC, S-Corp, or C-Corp (advantages and

disadvantages of each)disadvantages of each)– Probably want to purchase professional liability insuranceProbably want to purchase professional liability insurance– Hiring one person is a game changerHiring one person is a game changer

6262

Words of Wisdom from Words of Wisdom from CC Pricing your servicesPricing your services

– Should try to find hourly rates that peers and large consulting firms are charging Should try to find hourly rates that peers and large consulting firms are charging for type of consulting being consideredfor type of consulting being considered

– New jobs almost always take substantially more hours than you estimate but most New jobs almost always take substantially more hours than you estimate but most companies will not give you a blank check (i.e. hourly rate without estimated companies will not give you a blank check (i.e. hourly rate without estimated hours)hours)

– ““Annuity” type engagements (i.e. repetitive) are nice but rare for most actuarial Annuity” type engagements (i.e. repetitive) are nice but rare for most actuarial consulting services. Also most price competitiveconsulting services. Also most price competitive

– Responding to RFPs very time consuming and competitiveResponding to RFPs very time consuming and competitive

MarketingMarketing– Very personal/individual as to what works, if anything (i.e. almost certain that word Very personal/individual as to what works, if anything (i.e. almost certain that word

of mouth is best and requires having/getting a reputation)of mouth is best and requires having/getting a reputation)– A website, no matter how amateurish, is probably a mustA website, no matter how amateurish, is probably a must– Attending professional meetings is generally helpful. Opportunity to speak, Attending professional meetings is generally helpful. Opportunity to speak,

network, and just let others know you are alive.network, and just let others know you are alive.– Referrals may be reciprocatedReferrals may be reciprocated

Job performanceJob performance– Client satisfaction a must – go the extra mileClient satisfaction a must – go the extra mile– Review Code of Professional Conduct and know what ASOP’s apply (see Review Code of Professional Conduct and know what ASOP’s apply (see

professional liability)professional liability)– Every new job has enough wrinkles to make you uncomfortable (but must balance Every new job has enough wrinkles to make you uncomfortable (but must balance

against being “too uncomfortable”)against being “too uncomfortable”)

6363

Case Study DCase Study D

Background: Background: – Several insurance Several insurance

company jobscompany jobs– Consultant at Consultant at

accounting firmaccounting firm YrsYrs in industry in industry

prior to starting prior to starting firm: ~10firm: ~10

Market niche: Market niche: – PricingPricing– Financial reportingFinancial reporting– Audit supportAudit support

Easing transition to Easing transition to consulting:consulting:– Spouse income Spouse income

Initial contacts:Initial contacts:– ModerateModerate

Yrs as independent Yrs as independent consultant: ~5consultant: ~5

Current position: Current position: – Larger consulting Larger consulting

firmfirm

6464

Case Study ECase Study E

Background:Background:– Valuation Actuary at Valuation Actuary at

large insurance large insurance companycompany

YrsYrs in industry in industry prior to starting prior to starting firm: ~20firm: ~20

Market niche: Market niche: – Financial reporting Financial reporting

for variable annuitiesfor variable annuities

Easing transition to Easing transition to consulting:consulting:– Separation package Separation package

from prior employerfrom prior employer Initial contacts:Initial contacts:

– LimitedLimited Yrs as independent Yrs as independent

consultant: < 5consultant: < 5 Current position: Current position:

– Insurance CompanyInsurance Company

6565

Case Study FCase Study F

Background:Background:– Several insurance Several insurance

company jobs company jobs including one start-including one start-up companyup company

YrsYrs in industry in industry prior to starting prior to starting firm: ~10firm: ~10

Market niche: Market niche: – Financial reportingFinancial reporting– ReinsuranceReinsurance

Easing transition to Easing transition to consulting:consulting:– NoneNone

Initial contacts:Initial contacts:– ModerateModerate

Yrs as consultant: < Yrs as consultant: < 55

Current position:Current position:– Consulting firmConsulting firm

6666

Case Study G:Case Study G:

Background:Background:– AVP of Product AVP of Product

Development for life Development for life insurance companyinsurance company

YrsYrs in industry in industry prior to starting prior to starting firm: 9firm: 9

Market niche:Market niche:– Initially: New Initially: New

product development product development for small companiesfor small companies

– Now: Mix of product Now: Mix of product development & development & financial reportingfinancial reporting

Easing transition to Easing transition to consulting:consulting:– Revenue from Revenue from

insurance salesinsurance sales– Revenue from Revenue from

pension TPApension TPA Initial contacts:Initial contacts:

– LimitedLimited Yrs as consultant: Yrs as consultant:

30+30+ Current position:Current position:

– Owner of mid-sized Owner of mid-sized consulting firmconsulting firm

6767

Words of Wisdom from Words of Wisdom from GG Be fully committed to making it Be fully committed to making it

workwork Put a lot aside for a rainy dayPut a lot aside for a rainy day Learn sales and prospecting skillsLearn sales and prospecting skills

– ““G” worked with a group of agents G” worked with a group of agents while starting his consulting firm, while starting his consulting firm, allowing him to develop his sales allowing him to develop his sales skillsskills

6868

Case Study HCase Study H

Background:Background:– Jobs at two life Jobs at two life

insurance companies: insurance companies: product development product development and financial reportingand financial reporting

YrsYrs in industry prior in industry prior to starting firm: 10to starting firm: 10

Market niche:Market niche:– Initially: small to Initially: small to

medium size medium size companies looking for companies looking for good service at a low good service at a low costcost

– Actuarial temp servicesActuarial temp services– Regulatory servicesRegulatory services

Easing transition to Easing transition to consulting:consulting:– Hired by former Hired by former

employer as consultantemployer as consultant Initial contacts:Initial contacts:

– Fairly LimitedFairly Limited Yrs as consultant: Yrs as consultant:

~25~25 Current position:Current position:

– Self-Employed ActuarySelf-Employed Actuary Grew consulting Grew consulting

business to point that business to point that a larger firm bought a larger firm bought them outthem out

Once again a self-Once again a self-employed actuaryemployed actuary

6969

Words of Wisdom from Words of Wisdom from HH During period of prosperity, keep on During period of prosperity, keep on

marketing.marketing. Service is your best asset.Service is your best asset. There is no better marketing than word of There is no better marketing than word of

mouth testimony from your existing mouth testimony from your existing clients.clients.

Do not do work if you are not comfortable Do not do work if you are not comfortable – either with your expertise or ability to do – either with your expertise or ability to do the work the right way or with your client.the work the right way or with your client.

7070

Other Comments from Other Comments from HH ““I should have never succeeded, I should have never succeeded,

but I was too young to know that.”but I was too young to know that.” ““Even as the firm grew, there were Even as the firm grew, there were

periods of famine.  There were periods of famine.  There were several months where my partner several months where my partner and I did not take a salary to make and I did not take a salary to make sure that there was sufficient cash sure that there was sufficient cash to pay all the employees.”to pay all the employees.”

7171

Case Study I:Case Study I:

Background:Background:– Pension consultant Pension consultant

two yearstwo years– Joined existing Joined existing

insurance consulting insurance consulting firmfirm

– Became Partner, then Became Partner, then Owner, of firmOwner, of firm

Market niche:Market niche:– Actuarial services for Actuarial services for

small life ins small life ins companies (pricing, companies (pricing, valuation)valuation)

– Migrated to third party Migrated to third party administration workadministration work

Easing transition to Easing transition to consulting:consulting:– Joined firm as Joined firm as

employeeemployee Initial contacts:Initial contacts:

– Firm’s existing Firm’s existing clientsclients

Yrs as consultant: Yrs as consultant: 3030

Current position: Current position: – Owns consulting/TPA Owns consulting/TPA

firmfirm

7272

Words of Wisdom from Words of Wisdom from II ““Words of wisdom are hard to come by.”Words of wisdom are hard to come by.” ““I have not done anything particularly I have not done anything particularly

brilliant, but have been presented with brilliant, but have been presented with some decent opportunities and not some decent opportunities and not screwed them up.”screwed them up.”

““It seems today you would have to start It seems today you would have to start out with a larger consulting firm or out with a larger consulting firm or company, learn the ropes and take your company, learn the ropes and take your shot when you see the chance.”shot when you see the chance.”

““Maintaining a consistent and broad Maintaining a consistent and broad base of clients is very difficult.”base of clients is very difficult.”

7373

What One “Big Four” Audit What One “Big Four” Audit Partner Liked About a Large Partner Liked About a Large FirmFirm Other actuaries and accountants  to talk toOther actuaries and accountants  to talk to Quality controlQuality control

– always someone to check/challenge what you're always someone to check/challenge what you're doingdoing

Range of expertiseRange of expertise Variety of projectsVariety of projects Ability to have large clients, internationallyAbility to have large clients, internationally Clients on the forefront of issuesClients on the forefront of issues

– always interesting and challengingalways interesting and challenging Ability to invest in development of service Ability to invest in development of service

capabilitiescapabilities

7474

What One “Big Four” Audit What One “Big Four” Audit Partner Liked About a Large Partner Liked About a Large FirmFirm

Established infrastructure for:Established infrastructure for:– SpaceSpace– Administrative supportAdministrative support– GraphicsGraphics– Liability insuranceLiability insurance– Human resourcesHuman resources– BenefitsBenefits– TechnologyTechnology– LegalLegal

7575

One Audit Partner’s One Audit Partner’s View: Large vs Small View: Large vs Small FirmFirm Benefits over small firm are:Benefits over small firm are:

– Ability to do big projects for big Ability to do big projects for big clients in multiple, international clients in multiple, international locationslocations

– Integration with accounting and tax Integration with accounting and tax expertiseexpertise

Disadvantage is: Disadvantage is: – Cost (higher billing rates)Cost (higher billing rates)

7676

Character Traits of Character Traits of Successful Small Successful Small Business OwnersBusiness Ownershttp://sbinformation.about.com/od/startingabusiness/tp/Character-http://sbinformation.about.com/od/startingabusiness/tp/Character-Traits-Of-Successful-Small-Business-Owners.htmTraits-Of-Successful-Small-Business-Owners.htm

1.1. DrivenDriven

2.2. Goal-OrientedGoal-Oriented

3.3. ConfidentConfident

4.4. PassionatePassionate

5.5. Budget-MindedBudget-Minded

6.6. Self-ReliantSelf-Reliant

7.7. HumbleHumble

8.8. ResilientResilient

9.9. FocusedFocused

10.10. Open-MindedOpen-Minded

7777

Ten Traits Small Ten Traits Small Business Owners Need Business Owners Need to Succeedto Succeedhttp://ezinearticles.com/?Small-Business---Ten-Traits-All-Small-http://ezinearticles.com/?Small-Business---Ten-Traits-All-Small-Business-Owners-Must-Have-To-Be-Successful&id=380025Business-Owners-Must-Have-To-Be-Successful&id=3800251.1. Know Your Know Your

PurposePurpose2.2. Have a Desire To Have a Desire To

SucceedSucceed3.3. Have Faith that Have Faith that

you can achieve you can achieve what you wantwhat you want

4.4. Have a Clear PlanHave a Clear Plan5.5. Have the Have the

KnowledgeKnowledge

6.6. Be Prepared to Co-Be Prepared to Co-operateoperate

7.7. Have the Will-Power Have the Will-Power to Go Onto Go On

8.8. Be habitual in all Be habitual in all you need to doyou need to do

9.9. Maintain the QualityMaintain the Quality10.10. Be 100% PersistentBe 100% Persistent

7878

Five Traits of a Five Traits of a Successful Small Successful Small BusinessBusinesshttp://www.investopedia.com/financial-edge/0910/6-Traits-Of-A-http://www.investopedia.com/financial-edge/0910/6-Traits-Of-A-Successful-Small-Business.aspx#axzz203xccWR1Successful-Small-Business.aspx#axzz203xccWR1

Cater to a Niche MarketCater to a Niche Market Get Cozy with CustomersGet Cozy with Customers Be FlexibleBe Flexible Focus on SkillsFocus on Skills Get LuckyGet Lucky

7979

Top Ten Reasons Small Top Ten Reasons Small Businesses FailBusinesses Failhttp://boss.blogs.nytimes.com/2011/01/05/top-10-reasons-small-http://boss.blogs.nytimes.com/2011/01/05/top-10-reasons-small-businesses-fail/businesses-fail/

1.1. The math just doesn’t work The math just doesn’t work – Not enough demand at a price that Not enough demand at a price that

will be profitablewill be profitable

2.2. Owners who cannot get out of Owners who cannot get out of their own way their own way

3.3. Out-of-control growthOut-of-control growth4.4. Poor accountingPoor accounting5.5. Lack of a cash cushionLack of a cash cushion

8080

Top Ten Reasons Small Top Ten Reasons Small Businesses Fail Businesses Fail (Continued)(Continued)

6.6. Operational mediocrityOperational mediocrity

7.7. Operational inefficiencies Operational inefficiencies Expenses too highExpenses too high

8.8. Dysfunctional managementDysfunctional management

9.9. Lack of a succession planLack of a succession plan

10.10. A declining marketA declining market

8181

Question & Answer Question & Answer TimeTime

8282

ResourcesResources

Smaller Consulting Section of SOASmaller Consulting Section of SOA– 600 Members, mostly pension600 Members, mostly pension– Helps independent actuaries get Helps independent actuaries get

resources from SOAresources from SOA– Provides training in presentations, etc.Provides training in presentations, etc.

Small Business Association – sba.orgSmall Business Association – sba.org SCORE (Service Core of Retired SCORE (Service Core of Retired

Executives) – score.orgExecutives) – score.org

8383

ProfessionalismProfessionalism

Self-employed actuaries need to Self-employed actuaries need to understand and follow understand and follow professionalism guidance issued professionalism guidance issued by various actuarial bodiesby various actuarial bodies

8484

ProfessionalismProfessionalism

Revised Qualifications StandardsRevised Qualifications Standards Continuing Education Requirement for Continuing Education Requirement for

Professionalism TopicsProfessionalism Topics Professionalism Topics Incorporated into Professionalism Topics Incorporated into

Actuarial MeetingsActuarial Meetings Web-Based Professionalism PresentationsWeb-Based Professionalism Presentations Life & Health Qualification SeminarLife & Health Qualification Seminar Contingencies Articles on ProfessionalismContingencies Articles on Professionalism

8585

US Hierarchy of Professional US Hierarchy of Professional StdsStds

Code of Professional ConductCode of Professional Conduct Actuarial Standards of Practice Actuarial Standards of Practice

(ASOPs)(ASOPs) Applicability GuidelinesApplicability Guidelines

– For various tasks routinely performed by For various tasks routinely performed by actuaries, which ASOPs normally applyactuaries, which ASOPs normally apply

– Organized by Specialty (Casualty, Health, Organized by Specialty (Casualty, Health, Life, Pension)Life, Pension)

Practice NotesPractice Notes Discussion PapersDiscussion Papers

8686

Code of Professional Code of Professional ConductConduct

Effective January 1, 2001Effective January 1, 2001 Applies to all Academy MembersApplies to all Academy Members Identifies responsibilities actuaries have Identifies responsibilities actuaries have

to:to:– The publicThe public– Their clients and employersTheir clients and employers– The actuarial professionThe actuarial profession

Practice Only When QualifiedPractice Only When Qualified Divided into various “Precepts”Divided into various “Precepts” Full text at http://www.actuary.org/pdf/prof/code_of_conduct.pdfFull text at http://www.actuary.org/pdf/prof/code_of_conduct.pdf

8787

Precept 1: Precept 1: Professional IntegrityProfessional Integrity

““An actuary shall act honestly, An actuary shall act honestly, with integrity and competence, with integrity and competence, and in a manner to fulfill the and in a manner to fulfill the profession’s responsibility to the profession’s responsibility to the public and to uphold the public and to uphold the reputation of the actuarial reputation of the actuarial profession.”profession.”

8888

Precept 2: Precept 2: Qualification Qualification StandardsStandards

““An Actuary shall perform actuarial An Actuary shall perform actuarial services only when the Actuary is qualified services only when the Actuary is qualified to do so on the basis of basic and to do so on the basis of basic and continuing education and experience, and continuing education and experience, and only when the actuary satisfies applicable only when the actuary satisfies applicable qualification standards.”qualification standards.”– Refer to “Qualification Standards for Actuaries Refer to “Qualification Standards for Actuaries

Issuing Statements of Actuarial Opinion in the Issuing Statements of Actuarial Opinion in the United States”, effective January 1, 2008United States”, effective January 1, 2008

– Can result in expulsion, suspension, reprimandCan result in expulsion, suspension, reprimand

8989

Precept 3: Precept 3: Standards of PracticeStandards of Practice

““An Actuary shall ensure that An Actuary shall ensure that Actuarial Services performed by Actuarial Services performed by or under the direction of the or under the direction of the Actuary satisfy applicable Actuary satisfy applicable standards of practice.”standards of practice.”– Homework: Read all current and Homework: Read all current and

proposed ASOPs at proposed ASOPs at “http://www.actuarialstandardsboard.org/a“http://www.actuarialstandardsboard.org/asops.asp”sops.asp”

9090

Actuarial Standards of Actuarial Standards of PracticePractice(ASOPs)(ASOPs) Provides Framework for performing Provides Framework for performing

actuarial assignmentsactuarial assignments Offers guidance on relevant issues; Offers guidance on relevant issues;

captures acceptable practices, captures acceptable practices, documentation, and disclosuredocumentation, and disclosure

Plenty of room for actuarial Plenty of room for actuarial judgment; not narrowly prescriptivejudgment; not narrowly prescriptive

9191

Actuarial Standards of Actuarial Standards of PracticePractice(ASOPs)(ASOPs) 45 ASOPs45 ASOPs Most recent is #45: “The Use of Health Most recent is #45: “The Use of Health

Status Based Rish Adjustment Status Based Rish Adjustment Methodologies”Methodologies”

Widely Applicable:Widely Applicable:– #23 Data Quality#23 Data Quality– #41 Actuarial Communications#41 Actuarial Communications

Exposure DraftsExposure Drafts Discussion Drafts (precede exposure Discussion Drafts (precede exposure

drafts)drafts)

9292

Precept 4: Precept 4: Communication and Communication and DisclosureDisclosure

“An Actuary who issues an Actuarial Communication shall take appropriate steps to ensure that the Actuarial Communication is clear and appropriate to the circumstances and its intended audience, and satisfies applicable standards of practice.”

9393

Precept 5: Precept 5: Communication and Communication and DisclosureDisclosure

“An Actuary who issues an Actuarial Communication shall, as appropriate, identify the Principal(s) for whom the Actuarial Communication is issued and describe the capacity in which the Actuary serves.”

9494

Precept 6:Precept 6:Communication and Communication and DisclosureDisclosure

““An Actuary shall make appropriate and timely disclosure to a present or prospective Principal of the sources of all direct and indirect material compensation that the Actuary or the Actuary’s firm has received, or may receive, from another party in relation to an assignment for which the Actuary has provided, or will provide, Actuarial Services for that Principal. The disclosure of sources of material compensation that the Actuary’s firm has received, or may receive, is limited to those sources known to, or reasonably ascertainable by, the Actuary.”

9595

Precept 7: Precept 7: Conflict of InterestConflict of Interest

“An Actuary shall not knowingly perform Actuarial Services involving an actual or potential conflict of interest unless:

(a) the Actuary’s ability to act fairly is unimpaired;

(b) there has been disclosure of the conflict to all present and known prospective Principals whose interests would be affected by the conflict; and

(c) all such Principals have expressly agreed to the performance of the Actuarial Services by the Actuary.”

9696

Precept 8: Precept 8: Control of Work Control of Work ProductProduct“An Actuary who performs Actuarial

Services shall take reasonable steps to ensure that such services are not used to mislead other parties.”

9797

Precept 9: Precept 9: ConfidentialityConfidentiality

“An Actuary shall not disclose to another party any Confidential Information unless authorized to do so by the Principal or required to do so by Law.”

9898

Precept 10: Precept 10: Courtesy and Courtesy and CooperationCooperation

“An Actuary shall perform Actuarial Services with courtesy and professional respect and shall cooperate with others in the Principal’s interest.”

9999

Precept 11: Precept 11: AdvertisingAdvertising

“An Actuary shall not engage in any advertising or business solicitation activities with respect to Actuarial Services that the Actuary knows or should know are false or misleading.”

100100

Precept 12: Precept 12: Titles and Titles and DesignationsDesignations

“An Actuary shall make use of membership titles and designations of a Recognized Actuarial Organization only in a manner that conforms to the practices authorized by that organization.”

101101

Precept 13: Violations of the Precept 13: Violations of the Code of Professional ConductCode of Professional Conduct

“An Actuary with knowledge of an apparent, unresolved, material violation of the Code by another Actuary should consider discussing the situation with the other Actuary and attempt to resolve the apparent violation. If such discussion is not attempted or is not successful, the Actuary shall disclose such violation to the appropriate counseling and discipline body of the profession, except where the disclosure would be contrary to Law or would divulge Confidential Information.”

102102

Precept 14: Violations of the Precept 14: Violations of the Code of Professional ConductCode of Professional Conduct

“An Actuary shall respond promptly, truthfully, and fully to any request for information by, and cooperate fully with, an appropriate counseling and disciplinary body of the profession in connection with any disciplinary, counseling, or other proceeding of such body relating to the Code. The Actuary’s responsibility to respond shall be subject to applicable restrictions on Confidential Information and those imposed by Law.”