Continued from previous...
Thus, he recommends that planners advise their clients to 'keep hard copy or
get hard copy verification of their financial records prior to January 1 -
not 2000, but January 1, 1999.' Whether they are records of investments,
mortgages, bank accounts, commodities or anything else people put money into,
'they need to know exactly, and be able to prove exactly, what they had
before the period in which the computer systems might be affected.'
It would be wise, he says, for clients to obtain records again in January or
February 1999 and compare them to the late 1998 documents. That process
should then be repeated for 2000.
Woodward also believes financial planners ought to look at the Y2K strategies
of the companies in which their clients' assets are invested. 'If companies
don't solve this problem in time, it will have a significant impact on share
prices,' he says. 'If I were planning a portfolio for someone, certainly in
my mind would be the question of whether those underlying investments had
taken care of the year 2000 problem or were going to be affected either by an
impact on their profitability or - because of [diminished] customer
confidence - a loss of business.'
Solvency, he says, may be an issue for some companies. But supposing a
non-compliant company survives: 'If your computer systems don't work,' asks
Woodward, 'how profitable can you be if you have to replace your computer
systems with human beings doing the same thing? The opportunity cost of
fixing year 2000 instead of working on more strategic initiatives for your
business is also going to have an impact, both competitively and probably
financially.'
Higgins agrees that a financial planner needs to understand the potential
effect of the millennium bug on various industries as well as individual
companies within those industries. In advising clients on investments, he
says, a planner should 'determine possible financial impacts on companies
that are addressing the problem and also those that are not addressing the
problem.' For clients with global investments, he warns that corporations in
other parts of the world - Europe and the Far East, for instance - lag behind
American companies in meeting the Y2K challenge.
The necessary due diligence may be easier to recommend than to accomplish,
since many companies are reluctant to address the problem publicly.
Nonetheless, Higgins advises planners to begin now, by contacting companies,
perusing annual reports and generally informing themselves about the
millennium bug so that they - and their clients - are as well-prepared as
possible for the arrival of the 21st century. FP
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