Most employers require that financial professionals who want to work in actuary roles be members of professional associations like the Society of Actuaries (SOA), and these employees must pass financial mathematics (FM) competency tests such as the SOA Exam FM to qualify for membership.
Actuaries are risk managers who use quantifiable data and analysis to identify opportunities and threats to the business operations of the organizations for which they work. They also perform financial data modeling efforts that help managers to generate solutions that mitigate identified risks or reduce their likelihood of occurrence.
Here are some of the topics covered on the SOA FM exam, the test’s format, academic majors and courses that prepare business professionals for actuarial exams and the employment outlook of actuaries who have passed the necessary tests.
Financial Mathematics Test Content
The FM Exam covers in depth topics pertaining to interest theory and financial economics. Actuary candidates are expected to understand the meaning of financial terms like simple interest, compound interest, interest period of time, future value of money, inflation and present value of money. For example, they demonstrate the knowledge that a dollar today is likely worth more than a dollar tomorrow because of inflation.
Subsequent test questions require that actuary candidates use mathematical formulas to determine unknown interest, rate of interest or the value of money when they are given certain variables.
Actuaries also demonstrate their knowledge of financial investment vehicles like derivatives, forward contracts and futures contracts, and they must explain how these investment tools are used to manage corporate financial risk.
Test Timing and Format
SOA offers membership to North American actuaries once they have successfully completed the competency exams and membership applications. Most SOA tests like the FM Exam are computer based, and they are offered throughout the year.
Actuarial candidates contact SOA to set up appointments to take their tests and reserve their seats at proctored test centers that are located throughout the continent. Tests are administered manually in a few areas that do not have computer based testing facilities.
The FM Exam consists of 35 multiple choice questions, and the exam’s total allotted time is three hours. However, the exam is broken out over a few days to lessen the strain on test takers.
Academic Majors and Courses for Actuaries
There are a number of academic majors that can help to jump start aspiring actuaries’ careers, and some of them include applied mathematics, economics, finance, business, operations management and even physics. Some universities offer the actuary science major as part of their line up of majors.
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When this specialized major is not offered, the courses within finance degree programs are perhaps the best at preparing actuary candidates for the FM Exam and professional careers in the actuary field. Some course topics that actuary candidates usually take are probability, statistics and calculus.
Employment Outlook for Actuaries
Actuaries most often work in the insurance industry, but some are employed with other financial service organizations or government agencies. According to the Bureau of Labor Statistics, jobs for actuaries are expected to grow through 2024 at a rate that is much faster than the average for all jobs surveyed. In 2014, these financial professionals made median annual salaries of $96,700.
While it used to be that senior leaders were lauded for their killer instincts when it came to business decision making, today’s executives rely on solid quantitative data to boost their credibility with company stakeholders. This data is nearly always supported by the research and predictive analyses of corporate actuaries who have successfully passed the SOA Exam FM.