6 new Finance and Investment Working Parties

The Finance and Investment Practice Executive Committee and sub-committees are currently overseeing the formation of  5 new member-led research working parties:-

1.   "Designing Investment Vehicles to Mitigate Agency Risk" Working Party   

• Acknowledgment that current investment structures in both retail and institutional space present agency issues. 
• Issues include governance and fee structures which could result in needs of investment managers not being aligned with those of the ultimate beneficiaries. 
• Shortcomings in current structures could be analysed with proposals for alternatives to mitigate agency risk. 
• Alternative ideas include mutual structures where beneficiaries are also owners.

2.   "Disintermediation: likely rise of Peer-to-Peer investing and Alternative Financing Models" Working Party  

• Improvements in technology and the internet are likely to support increasing disintermediation in the world of investments, already visible in the development of peer-to-peer lending and savings as well as micro-finance/philanthropy (e.g. kiva.org).
• Research could focus on how this market may emerge, what challenges it may face and what tools could be put in place to address these.
• Trust will be a key requirement to convince consumers to invest peer-to-peer and research could explore how social-networking and related tools (like 'crowd-sourced' reliability ratings) could be used to differentiate between investment opportunities. 
• Related to this is the idea of firms raising capital directly from consumers rather than via intermediaries like investment banks/IFAs (e.g. Hotel Chocolat's bond issue to their loyalty club which paid coupons in kind as boxes of chocolates).
• Research could focus on whether this type of alternative financing model is likely to be scalable and again on how trust issues could be dealt with.

3.   "How and Why to Get Actuaries into the Wider Fields - especially Education" Working Party

• Actuaries could be adding value in a much wider range of fields than is the case today.
• This research could focus on why it would be of benefit to individuals, the IFoA and wider society for actuaries to do so.
• Research could include case studies of actuaries working in wider fields and their stories as to how they got there + how they add value.
• Recommendations could include how existing syllabi could be revised to promote this.
• A good model is "TeachFirst", the highly successful organisation which takes top graduates from across the UK to work as teachers in underperforming schools before starting their professional career http://www.teachfirst.org.uk
• Recommendations could also include how to make a career in actuarial education attractive to highly performing individuals.

4.   "Social Finance & Impact Investing - measuring non-financial returns" Working Party

• The nascent Social Finance and especially "Impact Investing" market involves pursing outcomes other than simply maximising return for a given level of risk.
• Much work is needed to measure these non-financial outcomes arising from this type of investments - e.g. reduction in re-offending rates, reduction in poverty, decreases in infant mortality, other healthcare improvements, etc.
• Actuaries are well placed to apply our skill set to evolving current work in this space and leading on developing new and standardising existing metrics.
• Related research could include the role of Social Finance/Impact Investing as an asset class in institutional/retail client portfolios.
• Actuaries can also add value both in promoting these allocations and developing due diligence procedures to identify initiatives which give the most effective use of capital (using both financial and non-financial measures).
• This work could be extended to consider how social finance investments and related philanthropic allocation of capital could be benchmarked.

5.   "Why Retire? Alternative models to pensions" Working Party

• The concept of pensions can be seen as outmoded in current times of increased longevity and paltry annuity rates.
• Research could focus on alternatives building on the existing notion of 'drawdown' pensions for those with large pension pots and considering what could be done for other consumers.
• Ideas could also include moving away from the notion of an individual to that of family or other groups supporting each other inter-generationally.
• Research could consider what sorts of investment ideas / vehicles could support alternative models, including possibly resurrecting ideals like mutual associations. 

6.  "Accounting for Intangible Assets" Working Party  

• Intangible assets, such as patents and brand names, make up a significant portion of the balance sheet for many corporates.
• They allow an entity to take credit for elements of its business that make it more valuable than a similar company would be without these elements.
• The International Accounting Standards and US GAAP describe the rules for the recognition of these assets and for carrying them forward from year to year.
• Valuing them requires expertise. One important method is to determine the future economic benefits under different scenarios, clearly something that actuaries have relevant experience in.
• A rigorous reporting process, which may include professional guidelines, could enhance the credibility of the methods used.

Research could address the following:

• What are the key economic considerations an entity should be aware of when deciding whether to recognise an intangible asset?
• Are there good reasons for actuaries to play a role in valuing intangible assets, and/or good reasons not to?
• Are there skills or qualifications required, or recommended, that actuaries do not necessarily have?
• Are there ways for the Profession to provide centralised support?

Time Commitment:   For each of these working parties, volunteers will be asked to attend between 8 – 12 meetings per annum and follow up on actions between meetings.  Meetings are held in London, at Staple Inn, and usually last for 2 hours.  Please note that there is flexibility regarding your attendance at meetings and members can attend by conference call as necessary.

How to get involved:  If you would like to offer your support and consider volunteering for one or more of these working parties, please contact Debbie Atkins, Head of Volunteer Engagement.  When contacting Debbie, please indicate which of these working parties you are interested in being part of and please provide brief details of your relevant experience and your reason for wishing to become involved.  A note of your ARN would also be helpful. 

All members who offer their support will be invited to attend an initial scoping workshop / meeting to be held in mid September at Staple Inn Hall, London, and attendance can either be in person or by conference call. At this initial meeting, which will be chaired by the sponsor of the research topic and a member of the Finance and Investment PEC / sub-committee, interested members will discuss the intended scope of the project, confirm that they still wish to be involved, and discuss whether a Chair is needed, in addition to members, in order to drive each of the working parties forward.