I recently got this frequently asked question by email:
This will be my first exam on the ILA track. I’m debating taking LP or LFV. I know the SOA recommends LP first, but I wanted to know if you had any insight into whether taking LFV first would be a bad idea. I need all the study time I can get! Thanks!
I usually recommend taking LP first for people with a typical background because LP gives you a broader foundation in the underlying products, which can make a lot of the reserving concepts on LFV more meaningful and easier to digest. However, if you already have general valuation knowledge and have a decent conceptual foundation in life and annuity products, there’s no reason you can’t succeed taking LFV first, especially if you are planning to start early for the fall sitting.
We have also added some background information in certain LFV lessons to help make sense of products like indexed annuities (EIAs) since the LFV syllabus material doesn’t really give background on those more complex product designs before diving into the valuation concepts.
But again, all else equal, I think LP is the logical place too start. Not only does LP’s foundational product knowledge make it easier to digest material on LFV, LP has a good balance of verbal and calculation material that I think a lot of people find more manageable on their first attempt.
What about LRM and ERM?
And since I also get asked about taking LRM or ERM first a lot, I will add that I think what I said above is even more true for those. LRM, in particular, has a lot of concepts like asset-liability management that sit “on top” of LP and LFV concepts, so to speak. LRM is a relatively short exam, and there are several topics like market-consistent embedded value (MCEV) that LRM implicitly assumes knowledge in. I think people who study LFV topics like MCEV and reinsurance on LFV before taking LRM have a big advantage over those that do not.
In other words, I think people who take LRM first will, on average, spend more time trying to get their mind around certain syllabus topics than people who come into LRM having passed LP and LFV first. Similar comments for ERM, which does not get as “foundational” with product-specific knowledge and also certain reinsurance topics. I’ve seen students struggle to rationalize the underlying concepts associated with those topics. And I’ve also heard from students who took those exams first, and wished they hadn’t (even though they passed!)
In summary
So in summary, any order is allowed, and people certainly take the exams in all kinds of orders, but I think the most ideal order is:
- LP
- LFV
- LRM or ERM
I think overall, for the typical person, this order is the most time-efficient and allows each exam to build on the previous.