Actuarial careers in banking: Dick Rae

Actuarial careers in banking: Dick Rae Chair of the IFoA Banking Member Interest Group (MIG), Dick Rae, looks back on a 15 year career in investment banking and explains where he now plans to take his career using the knowledge and skills he gained working in the banking sector.

Tell us a bit about your role and background

I’m currently Chair of the Banking MIG. I’ve just finished my executive career and am hoping to find a role that will enable me to continue playing a role within the financial services industry. My career spanned 22 years in life insurance and reinsurance before spending 15 memorable and enjoyable years in investment banking. I spent the last five years of my career in asset management.

What made you choose banking as a career path?

While I was at Swiss Re I developed a taste for capital markets. At that time Swiss Re established what I think of as a boutique, quasi-investment banking division called Swiss Re New Markets. This division looked at the overlap between insurance and the capital markets in order to transfer risk through catastrophe bonds, as well as exploring the role reinsurance could play within the financial markets.

At that time JP Morgan was looking to hire an actuary who could help their Debt Capital Markets and Derivative Sales desks engage better with the insurance industry. This was back in 1997, when the UK insurance industry was just waking up to the role of hybrid capital and the potential that derivatives offered in terms of market risk management. As such, there were very few actuaries in banking and not many opportunities either. The prospect of giving this role a go was too strong for me to pass up. I took the plunge and never looked back.

How did the actuarial skill set equip you for a career in banking?

I knew nothing about banking and just enough about capital markets. Fortunately, JP Morgan wanted me for my actuarial knowledge of the insurance industry and its regulatory regime. Over time, I was able to acquire the banking and capital markets knowledge that I needed to understand how banking products could best meet the needs of insurance company clients.

What were some of the biggest challenges of moving into investment banking?

The major shock was the change of culture. Being an actuary meant nothing other than the fact that I understood the language that insurance companies and actuaries spoke. Otherwise my FIA qualification was not considered special. It was just the skill set that I needed to do my job.

In those days, the investment banking work ethic was faster moving and harder work than I had experienced working for insurance companies. The change in work/life balance needed getting used to. These days I don’t sense that banks are quite so frenetic and investment banks are more conscious of the need to address the work/life balance.

Other cultural differences included getting used to communicating clearly and concisely. On the trading floor the sense that time is money is palpable. There’s no time to weigh up pros and cons. You need to anticipate what you may be asked and think through the potential arguments in advance. I remember developing my ‘lift talk’ so that I could tell senior management what I was doing (ie how I was adding value) between the ground floor and third floor.

What were some of the most interesting discoveries you made while working in banking?

For me it was the diverse range of people I worked with. Investment banks pick exceptionally bright individuals and it was an absolute pleasure to work with such talented people.

Investment banks also have a global mindset. They recruit from across the world and it’s fascinating to work with a range of people from different nationalities and cultures. In many ways it opened my eyes more to the fact that there is a not so large and diverse world out there. It also made me aware of my lack of linguistic skills.

Finally, it’s the drive and energy that you experience. The mindset in investment banking is very much a ‘can do’ one and there’s an urgency around getting things done. That may not suit everyone but it suited me.

Tell us about the most interesting time in your career

The most fascinating time in my banking career was the financial crisis, during which I watched how perilously close the whole financial system came to melting down. The financial system pre-crisis was fuelled by debt. Hedge funds used debt to leverage their trading positions. Banks used debt to fund large trading books and so on. The whole system was predicated on finance being readily available. When banks and other investors didn’t know who to trust the availability of funding just dried up, forcing many hedge funds, banks and other investors reliant on debt to sell assets regardless of price, causing markets around the globe to crash. The fallacies of the pre-crisis financial system became all too apparent and governments did a good job of stepping in to stop a total collapse of the system.

What were some of your most powerful learning moments from your time in investment banking?

I think this would be the power of the deal team. Whenever an opportunity arises, deal teams naturally form. These bring together the appropriate people from a range of disciplines within the bank. The synergies within these teams enable them to deliver incredibly well-thought-through solutions. My observation of being involved in these teams is that they work best when everyone is aligned and focused on the goal – when the team play as a team.

Where would you like to progress to next?

My executive career is over and I’m now looking for suitable roles as an independent non-executive director (NED). I feel it would be a waste not to continue to use the depth of experience I have gained over the years. My hope is that there are two or three organisations out there that would see a benefit in tapping into this.

How will you use what you have learned in the future?

My career has spanned three industries (insurance/reinsurance, investment banking and asset management). I have had the privilege of working on a broad set of projects and deals throughout my career, each bringing with it its own experiences and lessons. I have also had the privilege of working with a lot of senior executives in many companies. Each had their own style and character. What goes around comes around and I feel that my accumulated experiences can continue to be of value to the right companies or organisations.

You can find out about more about career paths in banking, as well as a range of support and resources on our Banking Lifelong Learning web page.

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