MOM-AND-POPS SEEN LAGGING IN READINESS: PAST TIME TO GET WITH IT ON Y2K

As 2000 rapidly approaches, some technology consultants say that independent financial advisers are procrastinating when it comes to preparing their computers for the next millennium.

Of course, these consultants are trying to drum up business. Still, advisers who work out of their houses or their own offices don’t have compliance officers breathing down their necks or big companies doing the work for them. Consultants say that when they talk to advisers they get little more than yawns.

It’s hard to quantify how many advisers have Y2K-proofed their computers. Indeed, a recent poll by the Securities and Exchange Commission found that 93% of investment advisers have plans in place. But the poll likely included many money managers, and those registered with the SEC, who are advisers who manage or supervise $25 million or more. Plenty of advisers oversee less.

One recent study suggests that small businesses haven’t done the best job of upgrading computers. The study by the Federation of Independent Business, a 600,000-member small-business lobbying group in Washington,drew upon an earlierGallup survey of 500 small businesses. More than half said they use devices that could be affected by the date bug, but hadn’t yet done anything about it.

Consultants say they’re getting brushed off by financial advisers who want to wait until the fourth quarter, because they don’t think they need to do much or they want to wait and see if their computers actually crash.

“Fourth quarter, you’d better be talking to your clients, or you are not going to be in business next year,” says Dusty Huxford, president of Financial Computer Support Inc. in Oakland, Md.

Carol Grosvenor, a Los Angeles-based consultant who specializes in business systems, predicts that come the fall, the media are going to unleash Y2K hysteria stories that will have investors calling their advisers non-stop making sure their portfolios are OK. “Do it now,” she says.

Dealing with the problem too late could be costly.

William J. Dennis, senior research fellow at the independent business federation’s education foundation, says most members of his organization are spending less than $1,000, so it’s cheaper than many think.

Observers of the independent financial adviser market guess that many probably don’t fully understand how the Y2K bug might affect them. Peter Mangan, executive vice president at Waterhouse Institutional Services, the brokerage’s customer-service division, in San Diego, suggests advisers make sure that software and their vendors are Y2K-compliant.

“And sometimes they need to do that inventory twice,” says Mr. Mangan, the second time looking for Y2K-sensitive programs that are unobtrusively running in the background.

Hardware isn’t likely to be a problem, Mr. Huxford says. “As long as you purchased a machine after mid-1997,” he says, “in general you’re going to be okay.”

Software is more complicated. Although most software makers have fixes available on their websites or elsewhere, the Gartner Group a Stamford, Conn., information-technology research consultant, estimates that 81% of packaged software programs still have Y2K problems, only slightly better than the 88% of six months before.

Proprietary disaster

Worse, however, may be the situation with firms that have relied, in some cases for decades, on spreadsheets and other programs that they created themselves. “It’s these home-grown solutions that I’m most concerned about,” says Mr. Huxford. “And almost every planner has a home-grown solution.”

In fact, according to Gartner, 5% of expected failures have already occurred, since disaster can strike whenever the year 2000 is part of a computer’s calculation not just on Jan. 1 of next year.

On the whole, investment services, banking and insurance companies are in the best shape of all sectors, according to the Senate Special Committee on the Year 2000 Technology Problem.

Financial advisers who need to get their act together can find help on the Internet, including the web pages of the Small Business Administration (www.sba.gov), the SEC (www.sec.gov) and the International Association for Financial Planning (www.iafp.org).

Financial Planning Consultants, based in Middletown, Ohio, sells a popular if pricey tome called “The Complete Millennium Preparation Guide,” which has become a favorite among financial planners.

Financial services software is industry specific, so only a limited number of technicians can fix such programs. By the fall, they are going to be rare birds.