Actuary vs Accountant: What’s the Difference?

When financial needs arise or tax season’s on the horizon it’s common to seek out help from a finance pro. Most of us are pretty familiar with accountants, but do a quick online search for “accountants” and you may very well find another type of financial guru suggested at the top of your results page: an actuary.  Actuary vs accountant… what’s the difference? The main difference between an actuary and an accountant is that actuaries are focused on predicting the financial impact of events that could potentially occur in the future, whereas accountants are primarily concerned with the financial reality of events that have already happened. Both fields of actuary science and accounting are focused on crunching numbers, however there are several specific differences between an actuary and accountant.

What is an actuary?

An actuary is defined as “a business professional who analyzes the financial consequences of risk.” Actuaries’ tools of the trade are mathematics, statistics, and financial theory. They use these in order to create a financial roadmap to help navigate around the uncertainty of future events, and help make decisions around insurance, pension programs and protecting high-risk assets. Actuaries deal with tons and tons of data, perhaps more than almost any other profession, and at their core actuaries are true statisticians. Because actuaries understand how to take diverse sets of data and condense it into an easy-to-understand statistic for individuals and companies alike make them highly sought after professionals — especially those entities with insurable products.

A day-in-the-life of an actuary

Aside from working with individuals looking to assess their retirement options, actuaries also apply specific mathematical models to financial data to help companies and corporate businesses identify particular risks and opportunities that could affect the products and services that they offer. As a result, actuaries commonly work in the field of risk management. If you’ve ever seen the movie Along Came Polly with Ben Stiller and Jennifer Aniston, you may remember that Ben Stiller’s character is an actuary specializing in risk analysis for life insurance companies and attempts to protect his heart by assessing the risk of falling for Polly. Other specifics an actuary may be responsible include:
  • Predicting financial pay outs for insurance companies to cover damages from floods or forest fires.
  • Developing and pricing insurance products.
  • Using medical records, geological information and other miscellaneous data to predict how long a customer will live.
One of the most famous real-life actuaries is John Dewan. Using his passion for statistics he created STATS, Inc. which provides content to multimedia platforms, television broadcasters, as well as leagues and teams, fantasy providers, and players. Now, Dewan works with Major League Baseball teams and helps track player performance and determine strategy.

How to become an actuary

While becoming an actuary can be a lucrative career and is often listed among the top business jobs, it’s also quite challenging to obtain an official actuarial certification. In order to get professional actuary status you’ll need to go through one of two organizations: The Society of Actuaries (SOA) or The Casualty Actuarial Society (CAS). The former is for those who want to work in insurance, investment and finances while the latter is for those who want to specialize in casualty, malpractice and worker’s compensation.  All in all, it can take between four to seven years in  order to achieve an SOA or CAS certifications. wooden blocks say actuary Actuaries can work independently as consultants or contractors; however, establishing yourself in the profession often requires putting in some time with a corporate entity. Insurance companies often demand that actuary applicants can prove a strong backgrounds in the area of not only actuarial science, but mathematics, economics and computer science. Prior to certification, an actuary-in-training must also complete coursework in applied statistics and corporate finance.

What is an accountant?

We’ve covered what an actuary does, so let’s switch gears. The official definition of an accountant is “a practitioner of accounting or accountancy, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources.” The business accounting field offers a pretty diverse range of roles for certified CPAs, including but not limited to:
  • Internal audits
  • Forensic accounting
  • Managerial accounting
  • Environment accounts
  • Taxes
However, in all these job types, accountants are responsible for compiling and comparing financial records and ultimately reporting financial conditions with a balance sheet. Like actuaries, accountants may service not only individuals, but businesses and government entities as well to help ensure that everything is in good form on the financial front. They not only guarantee accuracy, but accountants also ensure legality and are responsible for reporting financial data so that it complies with both national  or international accounting standards.

A day-in-the-life of an accountant

Most people think of accountants primarily as those responsible for preparing taxes. And while some certified CPAs do specialize in tax accounting, most accountant roles require a range of other skills and responsibilities such as:
  • Overseeing budgetary accounting and income statements
  • Preparing and maintaining financial budgets alongside good accounting principles
  • Maintaining all accounting records
  • Conducting internal audits and testing audits to verify the validity and accuracy of accounting records and reports
Above all, accountants must be organized, detailed oriented and have a solid foundation around general accounting principles  in order to be successful. For accountants specializing in management, it’s also crucial that they are able to apply both economic and statistical concepts to their data prep.

How to become an accountant

In order to earn the title of Certified Public Accountant, or CPA, aspiring accountants must pass four CPA exams. Without passing these exams it is not possible to practice as an accountant. The exams are the same regardless of what specialty an accountant chooses to enter and requires a rigorous amount of preparation. Typically, the course of study demands 20-30 hours of study per week for anywhere between four and six months. State requirements vary, but usually an accountant-in-training will also need a bachelor’s degree and  at least 150 semester hours of instruction before taking the CPA exams.

Differences Between an Actuary and an Account

So now that we’ve reviewed let’s quickly recap the differences between the two job roles. Accounts are primarily focused on job duties such as:
  • Determining payroll requirements
  • Completing company audits
  • Issuing invoices
  • Explaining accounting policies
  • Preparing profit and loss statements
  • Understanding of regulatory procedures
Actuaries are responsible for:
  • Creating financial solutions
  • Analysis and risk management
  • Developing research data
  • Helping develop strategies to benefit policyholders
It’s also important to mention that because accountants are required to have deep knowledge and understanding of laws and regulations as it relates to business and finance, an accountant holds a special kind of moral responsibility towards those who come to them seeking counsel as well as to the regulatory authorities and the rules of their state, country and other related entities. Accountants are sometimes called “the watchman of economy and treasure,” which requires that they maintain a high level of diligence and ethical responsibility. While certain job duties of management accountants overlap those of actuaries, these career fields remain largely independent of one another. However, actuaries and accountants are both career options that remain in demand. As the complexity of the U.S. economy and regulatory initiatives continues to grow, these professions become increasingly essential for individuals, businesses, and government institutions alike to ensure they are operating responsibly. In the US there are much fewer actuaries than accountants. While both positions have the potential to be high earning, actuaries often spend the first half of their career earning much less than most accountants because the range of educational requirements and the actuarial exams themselves take so much longer to complete. A bachelor’s degree in accounting, mathematics or economics is a great benefit for anyone considering a career as either an actuary or an accountant. And because schooling for actuaries in particular is so arduous, most actuaries and accountants begin their careers in entry-level positions either accounting firms or insurance companies. The Bureau of Labor Statistics (BLS) reported that the median annual salary for an actuary in the United States in 2018 was approximately $102,880 per year or around $49.46 per hour.  As for accountants, the salary range is a bit wider depending on the specialty. A newly minted accountant might earn less than $40,000; an auditor might earn around $70,500  per year, and a financial manager for a large business can earn between $150 and $200,000 a year. According to the BLS, the average salary is around $75,000 for most accountants. In general, both accountants and actuaries typically have a more balanced work-life schedules compared to most other positions in the financial industry. Of course tax accountants definitely get crunched during tax season, which spans from February to April, and may see 40-plus hour weeks.