The Self-Employed Actuary Julie Curry, FSA, MAAA Curry Actuarial Consulting LLC (770) 630-4354

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<ul><li>Slide 1</li></ul><p>The Self-Employed Actuary Julie Curry, FSA, MAAA Curry Actuarial Consulting LLC (770) 630-4354 Slide 2 2 Outline of Presentation Risks and rewards of self-employment Risks and rewards of self-employment Career path toward self-employment Career path toward self-employment Profile of a successful small business owner Profile of a successful small business owner Steps to starting a business Steps to starting a business Running a small business: administrative issues Running a small business: administrative issues Case Studies Case Studies Question &amp; Answer Question &amp; Answer Slide 3 3 My Background Life Insurance Company - 8 years Life Insurance Company - 8 years Financial reporting expertise Ernst &amp; Young Consultant 6 years Ernst &amp; Young Consultant 6 years Consulting (M&amp;A, financial reporting, etc) Audit support (Statutory, GAAP) State Ins Dept examination support Independent Consultant 13 years Independent Consultant 13 years Life insurance company financial reporting Financial reporting systems implementation Audit support (audit firms, dept of ins) Slide 4 4 Types of Actuarial Jobs Insurance/Reinsurance Co (Life, Health, PC) Insurance/Reinsurance Co (Life, Health, PC) Pension/Benefits Actuary Pension/Benefits Actuary Educator Educator Consulting Consulting Actuarial consulting firm Pension/benefits consulting firm Regulatory (Dept Ins, Fed Govt, other) Regulatory (Dept Ins, Fed Govt, other) Other (banks, etc) Other (banks, etc) Slide 5 5 How to Decide Path Interest and aptitude based on college course work Interest and aptitude based on college course work Perceived advancement opportunities Perceived advancement opportunities Strength in interpersonal skills Strength in interpersonal skills Ability of various jobs to offer actuarial students study time Ability of various jobs to offer actuarial students study time Geographic limitations Geographic limitations Slide 6 6 First Job: My Decision Process Summer internship at life insurance company Summer internship at life insurance company Interviews through college placement office were all insurance companies Interviews through college placement office were all insurance companies Looked for company with actuarial study program and rotation program Looked for company with actuarial study program 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 Louisville KY Ended up at Capital Holding (Life Ins Co) in Louisville KY Company assigned me to financial reporting Company assigned me to financial reporting 25+ years later, Im still in financial reporting! 25+ years later, Im still in financial reporting! Slide 7 7 Factors in Job Changes External Factors External Factors Position eliminated Spouse transferred Internal Factors Internal Factors Perception of better opportunity or lower stress elsewhere Desire to increase compensation Interest in changing career tracks Ins co to consulting or vice versa Ins co to consulting or vice versa Desire to move to teaching position or regulatory job Desire to move to teaching position or regulatory job Slide 8 8 Becoming a Self-Employed Actuary Its not the first step in a career path! Its not the first step in a career path! If this is your ultimate goal, each step in career path should keep this goal in mind If this is your ultimate goal, each step in career path should keep this goal in mind Typical career path might be: Typical career path might be: Insurance co insurance consulting firm establish own consulting firm Pension consulting firm establish own pension consulting firm Insurance Dept establish regulatory services consulting firm Slide 9 9 Do you want a job 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 something NOW? Five bosses, each of whom wants something NOW? The potential to earn much more than youre currently earning? The potential to earn much more than youre currently earning? Then self-employment might be the answer! Then self-employment might be the answer! Slide 10 10 Advantages of Self- Employment Be your own boss Be your own boss Work at home/no commute time Work at home/no commute time Casual dress Flexible hours Flexible hours Good hourly rate Good hourly rate Work from any location Work from any location Home is where the laptop is Slide 11 11 Disadvantages of Self- Employment You may not like your boss You may not like your boss Work at home/no commute time Work at home/no commute time Distractions at home No social interaction with peers No ability to learn from co-workers Travel time to client location Flexible hours Flexible hours Often chosen by client youre on call May be 18 hours per day during a big project (no employees!) Good hourly rate but no guaranteed hours Good hourly rate but no guaranteed hours Slide 12 12 Disadvantages of Self- Employment No employee benefits No employee benefits No paid vacation No paid sick time No pension plan No health insurance Fixed expenses but variable income Fixed expenses but variable income No employees to help with the work load No employees to help with the work load Liability risks Liability risks Slide 13 13 Characteristics of Successful Self-Employed Actuaries Self-Motivated Self-Motivated Defined Market Niche Defined Market Niche Strong Technical Skills Strong Technical Skills Good Communication Skills Good Communication Skills Strong Sales Skills Strong Sales Skills Broad Range of Industry Contacts Broad Range of Industry Contacts Financially Prepared for Self-Employment Financially Prepared for Self-Employment Financially Disciplined Financially Disciplined Slide 14 14 Self-Motivated Personal Example Personal Example Atlanta Olympics in 1996 Office closed, worked at home My Solution: My Solution: Separate Office Defined Office Hours Dedicated Phone Line (Cell?) Slide 15 15 Defined 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 with special products Specialists find work assisting with special products Special projects may have funding Underselling the competition doesnt necessarily work Underselling the competition doesnt necessarily work Slide 16 16 My Market Niche Life Insurance Financial Reporting Life Insurance Financial Reporting Thats too general Examples of specific products I sell: Examples of specific products I sell: Assistance with development, review, and assessment of effectiveness of controls in USGAAP financial reporting processes Implementation of financial reporting valuation systems Building and enhancing source of earnings analyses on universal life and annuity blocks of business Actuarial audit support work to assist audit firms, state insurance departments, internal audit departments Slide 17 17 Strong Technical Skills Expertise in subject matter Expertise in subject matter Specialize Good computer skills are a must Good computer skills are a must They dont sell a project, but theyre necessary to complete the project Microsoft products: Excel, Access, Powerpoint, Visual Basic, Word Actuarial software hands-on skills Slide 18 18 Communication Skills Necessary for sales presentations Necessary for sales presentations Required for verbal communications during a project Required for verbal communications during a project Critical when writing reports to document findings Critical when writing reports to document findings Start today to fine-tune your skills: grammar and spelling matter! Start today to fine-tune your skills: grammar and spelling matter! Slide 19 19 Sales Skills The best sales skills wont help if you dont have a good product to sell The best sales skills wont help if you dont have a good product to sell The best product wont sell if you dont have good sales skills The best product wont sell if you dont have good sales skills Step one is to get in the door (the door of the decision maker) Step one is to get in the door (the door of the decision maker) Many resources on effective sales techniques read books now and develop sales skills Many resources on effective sales techniques read books now and develop sales skills Even if you are never self-employed, sales skills help you sell yourself and your ideas in any job Even if you are never self-employed, sales skills help you sell yourself and your ideas in any job Slide 20 20 Industry Contacts Former Co-Workers Former Co-Workers Actuarial Meetings Actuarial Meetings Actuarial Committees (SOA/CAS/AAA) Actuarial Committees (SOA/CAS/AAA) Former Clients Former Clients Cold Calls Cold Calls Slide 21 21 Financial Preparation Expect Low Income First Few Years Expect Low Income First Few Years Significant Fluctuations in Cash Flow Significant Fluctuations in Cash Flow Start-Up Costs Start-Up Costs Computer Software (including Actuarial software) Office Equipment Office Furniture Legal Fees to Establish Business (Costs of Incorporation) Website Marketing Literature Office Rental (Optional) Slide 22 22 Financial Preparation Fixed Costs Fixed Costs Insurance: Professional Liability &amp; Business Insurance Professional Liability &amp; Business Insurance Medical, Disability &amp; Life Insurance Medical, Disability &amp; Life Insurance Phone Internet Actuarial software Actuarial Organization Membership Fees Continuing Education Costs Other costs Other costs Travel costs for sales calls Travel costs for on-site work Pension funding Slide 23 23 Business Expenses: Insurance Professional Liability Insurance Professional Liability Insurance $5,000+ per million coverage per year Large companies often require consultants to carry coverage Business Owners Insurance Business Owners Insurance $1,000 - $2,000 per year Large companies often require consultants to carry coverage Medical Insurance Medical Insurance Likely to be individual coverage Requires underwriting Rates vary with age/sex/heath/other May be $10,000+ per year Slide 24 24 Business Expenses: Other Actuarial software license (optional) Actuarial software license (optional) ~ $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 Education Continuing Education Meeting fee (~ $1,000) Travel expenses (~ $1,000) Pension Plan Pension Plan Various options available Simplified Employee Pension (SEP) IRA Solo 401K Subscriptions to literature (acctg, tax, law) Subscriptions to literature (acctg, tax, law) Slide 25 25 Test: Financially Prepared? Are you a good money manager? Are you a good money manager? 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 what you make and what you spend? Do you have a budget which shows in detail what you make and what you spend? Do you have other sources of funds with which to support yourself in the early years of your new business? Do you have other sources of funds with which to support yourself in the early years of your new business? Spouses income Savings Other ways to generate income (tutoring math, work for actuarial or finance temp agencies, other) Slide 26 26 Test: Financially Disciplined? You find that your checking account balance is up to $20,000. You are most likely to: You find that your checking account balance is up to $20,000. You are most likely to: A. Spend it B. Project the amount needed to cover future cash flow requirements (estimate taxes, etc.) and spend the rest. C. Save enough to cover future cash flow requirements and save the rest to cover future periods of lower cash in-flow. Slide 27 27 Test: Financially Disciplined A. Likely to end up with IRS problems A. Likely to end up with IRS problems B. On the right track, but need to keep in mind that there are periods of feast and famine. B. On the right track, but need to keep in mind that there are periods of feast and famine. C. Likely to succeed in the financial aspects of running a small business. C. Likely to succeed in the financial aspects of running a small business. Slide 28 28 Recommendations Segregate business funds from personal funds: Segregate business funds from personal funds: Separate checking account Separate credit card Reconcile business accounts monthly Reconcile business accounts monthly Bill clients monthly Bill clients monthly Never delay payment of estimate taxes Never delay payment of estimate taxes Determine how to pay yourself: Determine how to pay yourself: A percentage of gross receipts? A fixed amount per week or month? Slide 29 29 Monthly Cash Flow Even if income is fairly regular, outflows are not. Even if income is fairly regular, outflows are not. Insert graph here showing monthly cash inflows and outflows for CAC Insert graph here showing monthly cash inflows and outflows for CAC Slide 30 30 SBA Small Business Association provides counseling, mentoring and training, and loans Small Business Association provides counseling, mentoring and training, and loans www.sba.gov www.sba.gov www.sba.gov Slide 31 31 Ten Steps to Starting a Business (per SBA.gov) 1. Write a business plan 2. Get business assistance and training 3. Choose a business location 4. Finance your business 5. Determine legal structure Sole proprietorship Sole proprietorship Partnership Partnership Limited Liability Corporate (LLC) Limited Liability Corporate (LLC) Corporation Corporation S Corp S Corp Slide 32 32 Ten Steps to Starting a Business (per SBA.gov) 6. Register a business name with state government 7. Get a tax ID number 8. Register for state and local taxes State Tax ID Number State Tax ID Number Workers compensation Workers compensation Unemployment and disability insurance Unemployment and disability insurance 9. Obtain business licenses and permits Federal, state and local licenses and permits Federal, state and local licenses and permits 10. Understand employer responsibilities Legal steps you need to take to hire employees Legal steps you need to take to hire employeeshttp://www.sba.gov/sba-direct/article/2815 Slide 33 33 Other SBA Resources Articles on self-employed and independent contractors Articles on self-employed and independent contractors Articles on minority-owned businesses Articles on minority-owned businesses Articles on woman-owned businesses Articles on woman-owned businesses Articles on veteran-owned businesses Articles on veteran-owned businesses Slide 34 34 Women and Minorities A number of larger companies have guidelines in place which require them to use minorities and women for 10% of their contract work A number of larger companies have guidelines in place which require them to use minorities and women for 10% of their contract work Typically accomplished by req...</p>