Considering a new venture? Investing in IT can give you a head start.

by Brian Spence   •  
Blog
The thought of starting up a new actuarial consultancy has probably crossed the minds of quite a few actuaries over the years. However, taking the next step and developing a successful business is the real challenge. New ventures (as compared to an established consultancy) have to have much greater focus on developing new clients. Working with a small team means that all key personnel will inevitably have to take a major role in generating new business. This can be quite alien to many actuaries who have spent their working lives providing services to clients who have been "delivered" to them. There are many hurdles to overcome and existing acumen needs probably to be enhanced with not only new business skills but also new resources in order to make a success of a new start up. Most actuaries will be used to having support services from the IT, finance and HR departments. In the early days of a new business, as well as client responsibilities you may well have to additionally perform as the IT department, the finance department or heaven forbid the HR Department! In relation to professional support, having peer review resource and the opportunity to discuss issues with another actuary are vital. This makes working in partnership preferable to acting as a sole practitioner. In terms of recruitment, staff flexibility and ethos are key and it's important to try to put together a team with as broad a range of experience across a range of disciplines as early in the establishment process as possible. It is also crucially important to identify all the strengths of each of the key staff and try to ensure that they focus their time in these areas as much as possible. This requires careful integration and also makes communication key, although in a small business this is likely to be considerably easier that in a larger firm. Given all this people will tend to have much less clearly defined "roles" and a less bureaucratic management structure is likely to evolve. Like any new business the risk of failure in the first few years is relatively high. Set up costs, including professional fees, IT, professional indemnity insurance and office fit-out all need to be taken into account. With ongoing rent and salaries to pay well in advance of receipt of fee income, cost control and managing the billing cycle are key in the first few years. An essential focus of the new business has to be on generating income and ensuring that clients pay their bills promptly. Attracting new clients may well necessitate the provision of a wider range of services than purely core actuarial consulting. Trustees of pension schemes sponsored by companies in the SME sector require an integrated service incorporating actuarial services, administration and investment advice. If the business is to provide administration services then it will need to invest both time and money in a pensions administration system and in developing quality procedures. In a similar vein the onerous compliance requirements of providing investment advice can add a considerable burden in relation to non-fee generating time. On the brighter side, IT developments over recent years and the falling costs in real terms of hardware and software can often allow a new start up business to take advantage of technological advances more easily than a larger established business. The benefits of being able to purchase the latest systems and integrate them in to the business should not be underestimated. Within a new business you have the opportunity to buy the latest technology and implement it consistently across the whole business, the important point is that you decide what your requirements are and where any compromises are made. In a new business, restrictive systems access is less of an issue than with a larger organisation. In addition, broadband connectivity enables staff to work partly from home if this suits the business and the individual. Such flexibility can be attractive to staff as well as potentially reducing the amount of office space required. Consultancies can generate vast amounts of paper, however this is another area in which a new business is likely to have an advantage. Documents can be scanned and held electronically and with the connectivity of broadband accessed by all staff, including those who work remotely. It is definitely the case that moving to a position where all documents are scanned becomes more difficult as the amount of paperwork already generated increases. A real challenge for a small consultancy is to ensure that consultants are kept fully up-to-date with legislative changes, products and trends. Even ten years ago this would have required substantial investment in time. However nowadays, expert pensions information providers exist who provide such information electronically. Spence & Partners, after much research, chose to work with one of the leading suppliers in this field, Pendragon, who publish Perspective, perhaps the single most comprehensive electronic information service for the Pensions industry. Perspective provides access to a wealth of information that would have required a substantial research department to maintain ten years ago. Being able to track changes in legislation and cross-reference Acts of Parliament, Statutory Instruments and Professional Guidance Notes means that there is no longer a requirement to always put a cold towel over your head and peer at volumes of documents to get a clear understanding of the impact of new legislation. However the legislators' ability to continually swamp us with new regulation will ensure that the towel will never be too far out of reach. With effective - information support, it is possible to concentrate on building the business and servicing the clients so that the new venture can develop and thrive. The bottom line is that it makes complete business sense to let the information experts do the leg work so that you can concentrate on selling the service in which you have the expertise! ENDS Published in "The Actuary Magazine" October 2004

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