WHY Y2K WASN'T A DISASTER by Edwin P. Morrow ChFC, CFP, RFC You can still profit from Y2K - by recognizing why the world failed to come crashing to an end, fueled by thirty-year old computer code. The dire predictions about Y2K debacles failed to materialize. Even those who were early doubters of the millennium bug breathed a sign of relief. One has to wonder about the motives or the research of some prognosticators, such as Edward Yardeni who predicted "a 60% chance of global meltdown." Now some of the water and food supply hoarders and those with barrels of independent fuel storage for their home generating systems can become occupied in how to dispose of the excess - hopefully by donation to worthy causes. However, I am convinced that the Y2K problem has fostered five important benefits. 1. Financial advisors have reviewed all their compliance and computer systems - generally upgrading both hardware and software. They are now more conscious of the need for backups - and this will serve them well when some real failure occurs. 2. Another benefit will be felt during the next 2-4 years. A great many organizations have rebuilt their systems to avoid Y2K problems. This investment in new software and hardware will make them efficient and more profitable in the future. Capital investment generally results in higher productivity and the multiple is greater for computerization than in more traditional machinery or buildings. 3. The publicity for Y2K has increased interest in software careers and caused many employed persons to accelerate their education or technical re-education. Knowledge is a capital asset that does not appear on the balance sheet of society, but eventually makes its mark. 4. Because the United States took Y2K more seriously than many parts of the world, we will achieve the greater benefits. While this Y2K dividend will not be measurable or separable from general economic growth, it will act as a stimulant to the US economy and a few others areas as well, such as Australia, Canada and Britain. 5. Many companies recognized that old programming that was mainframe based could be transferred to the Internet where old embedded chips weren't a problem, and all new code would avoid Y2K glitches by never using double-digit years in the first place. This has caused a flight to the Web - more so in the US than elsewhere. The result is another stimulus to the US leadership in capitalizing on the Internet. Conclusion:The strong US economy versus most of the rest of the world will be benefited by this Y2K dividend, which will translate into continued economic growth. The Time Warner/AOL merger will draw continued interest to the Internet expansion and the increase in web-based economy. You know it is getting big when the states are fighting on how to tax it. Apparently, they are concerned that most organizations selling on the Internet do not collect and remit sales taxes - except in those jurisdictions where they have physical locations. This is the same exclusion used by the direct mail outfits, and it is attracting great opposition from companies like Wal-Mart - who collect and pay taxes everywhere. Web commerce is about price, convenience and delivery - but the greatest of these is price. Sales taxes of 5 to 8 percent are a sufficient motive to shop for an Internet- based purchase from an entity that has no location in your state. Since there are different sales tax structures in all jurisdictions, with some states like Ohio having local option taxes that change with each county, look for this to fuel a national sales tax, which would naturally be at a greater rate. The continued expansion of companies oriented to web-based commerce is contributing to the consumer expectation that their vendors (and that includes financial advisors of all types) be web-enabled. Obviously the readers of Financial Services Journal, the first Internet "e-zine" for the financial services industry, are web connected. But are you using the web in a proactive fashion? Do you have a website? Does it welcome your target new client? Does it offer interesting information? Is the copy refreshed weekly? Does it distinguish you from your competitors? Are you driving new prospects to your website? Are you effectively following up with your new visitors? Since the public is being conditioned to expect web-enabled service and information, if you can't answer yes to al the above questions, then you had better do some serious planning - now - for your own Millennium situation. Otherwise, you are being measured for a dinosaur suit.... Ed Morrow is the author of Computerizing your Financial Planning Practice, the Complete Millennium Preparation Guide for Financial Advisors . He is also developer of the Text Library System used by 3,000 planning firms. He is a frequent speaker on practice management and technology to such organizations as the IAFP, ICFP, MDRT, IARFC and Society of Financial Service Professionals. For further information you may contact him at Financial Planning Consultants, Financial Planning Building, Box 42430, Middletown, OH 45042-0430, phone 800-666-1656 or email to: edm@financialsoftware.com