Stamping out the bug: Planning firms scuttle into action – and count costs – over Y2K

With 1999 already tipped as the year of the millennium bug, companies around the world are scrambling to get ahead of the problem. And some Australian financial planning firms have already begun totting up the costs of getting their Y2K compliance systems in place, reports Anna Fenech.

Financial planning firms have joined the race to beat the 'millennium bug', the computer problem brought about by the inability of some hardware and software to recognise January 1, 2000 and the Year 2000 leap year.

The problem, which stems from computer programmers' efforts decades ago to conserve early computers' limited storage capacity, has sparked worldwide concern.

It could mean, for example, that a Government computer program distributing social security benefits to people born 65 years before might reclassify those people as negative 35 years old on January 1, 2000 - too young to be collecting retirement benefits.

Financial planning firms and their parent companies in Australia have just begun adding up the costs of their Y2K troubleshooting programs.

For Mercantile Mutual, owner of RetireInvest, which has around 80 advisers, it's estimated the bill will run to $1m. For Lend Lease, owner of Garvan Financial Planning, with 330 advisers, it will be over than $500,000. AMP, owner of Hillross and AMP Financial Planning, with 1300 advisers, would not disclose what it will spend to assist advisers to become Y2K compliant but said it would be "substantial".

And these do not even include sums that advisers have to fork out to replace dud computers or software.

Costs aside, financial planning networks are at different stages in their Y2K damage control.

"Our first step started this month when we wrote to advisers and told them why they needed to be concerned about the Y2K issue and to also let them know that AMP is engaging in a process to identify Y2K risks," says AMP's adviser technical manager, Ian White.

White, who is co-ordinating the Y2K effort for Hillross and AMP Financial Planning, says AMP is using a combination of British and Australian Standards for the Y2K problem. "But it should be pointed out that compliance means different things to different people," he says

AMP's letter to advisers includes a survey on how many computers they have in their business. AMP will then provide two computer disks: one to audit the computers to check if they are Y2K compliant and the other to scan all the applications. This information then will be sent back to AMP to be compared against an inventory. "For some software packages, we will simply have to say 'we don't know' because we can't possibly know every package worldwide", White said.

The survey will also cover other 'business systems' such as the humble photocopier. "Some firms might use a date stamp for documents, but advisers have to decide whether it is important for their photocopier to do this," White said.

After inventory matching, advisers will be issued with a report containing recommendations. White says these could vary from 'throw away the computer' to 'upgrade to the latest version', but AMP then leaves the financial planning firms to do the necessary replacements or repairs. He says planners who use AMP's rental laptops will keep costs down, but many prefer to have their own desktop computers.

In mid-1999 AMP will audit a sample of financial advisory firms to check on compliance. "We have already piloted 30 NSW advisers and found a range of answers," he said.

Advisers are also being told to be aware of their 'supply chain' - companies they deal with that are important to their business - where business failures may affect the planner's own businesses. AMP will provide sample letters for advisers to make inquiries to these firms.

RetireInvest is well advanced on its Y2K strategy, according to Greg Lee, information technology manager at Australian Portfolio Managers. The dealer group is due to be Year 2000 compliant by the first quarter of 1999, after commencing its project last year. The effort is being assisted by parent company Mercantile Mutual at an estimated cost to RetireInvest of $1m.

Lee said the company's standard is based on four rules compiled by the British Standards Institution, including:

that date-based functionality behave consistently for dates prior to and after Year 2000; and

that Year 2000 be recognised as a leap year.

Lee emphasised the importance of testing afterwards to see whether systems could cope with specific dates. The project will encompass internal fund management systems and other business systems that RetireInvest advisers use in their offices.

Lend Lease Financial Planning and chartered accountancy firm William Buck will provide Lend Lease's advisers with a detailed Y2K assistance kit, plus nation-wide briefings and seminars on Y2K issues.

"While the responsibility for achieving compliance will remain with the individual advisers, Lend Lease Financial Planning believes the assistance it is providing may give advisers a significant head start", says Rory Mooney, chairman of Lend Lease Financial Planning Board of Advice.

Greg Thompson of Muswellbrook-based Thompsons Financial Services, an authorised representative of Garvan Financial Planning, estimates his firm will have spent $20,000 by January 1, 1999.

He says this sum will be spent on "identifying potential Y2K problems, replacing hardware, fixing software, raising awareness among suppliers and educating staff."