Microsoft’s Vista hits advisers in their pocketbooks

SAN FRANCISCO — The biggest software company in the world may be forcing financial advisers to purchase expensive hardware in the wake of its recent upgrade. Advisers are coughing up tens of thousands of dollars — or at least adding the money to their budgets — to buy servers or personal computers to make it feasible to run Vista, the operating system that Microsoft Corp. rolled out last month, and Office 2007, the Redmond, Wash.-based company’s application package that goes hand in hand with it, observers say. “It really is going to take some serious upgrades — video cards, RAM. You might as well just buy new machines,” said Jim Starcev, managing principal of Etelligent Consulting Inc., an Overland Park, Kan., software consulting firm for advisers. “Advisers may need to purchase additional hardware beyond the basic Microsoft system requirements,” said Dan Skiles, the Denver-based vice president of client technology for Schwab Institutional of San Francisco. “We are advising our clients to take those costs into account.” This is an expense that may be unforeseen by many advisers, according to Douglas Kreps, managing director of Fort Pitt Capital Group Inc. of Pittsburgh, which manages $1.1 billion. “Firms calculating their [information technology] budgets are probably dramatically understating what they’ll need,” he said. “These are purchases that a lot of firms are ignoring.” Indeed, registered investment advisers have been quiet about Vista, according to John Iachello, chief operating officer of Pershing Advisor Solutions LLC of Jersey City, N.J. “I know of one broker-dealer and no RIAs who have asked about it,” he said. But we’ve been testing it, so when they do, we’re ready.” To bring Vista and Office 2007 into Fort Pitt’s information technology realm, its principals are planning to purchase four servers by yearend, which could cost as much as $5,000 apiece before including expenses related to implementation, which can double the cost, Mr. Kreps said. But that isn’t all, he added. “Vista will not run [fast enough] on a 32-bit platform,” Mr. Kreps said. “It will run on 64 bits, but then you need a second one, and that’s something most advisers are not thinking about.” The second server is needed to meet requirements imposed by the Securities and Exchange Commission related to disaster recovery in 24 to 48 hours, Mr. Kreps said. Using a backup server of lesser computing power to the primary one is unworkable. “They might have backup tapes, but if they think they can do a tape backup to a two-year-old server with a new one, they are fooling themselves; it won’t happen,” Mr. Kreps added. But Chris Cordaro, chief investment officer of RegentAtlantic Capital LLC of Chatham, N.J., doesn’t think that the more powerful 64-bit server is absolutely necessary. “You can do it on 32 [bits],” he said. “It’s just to take advantage of the full richness of Vista that you need 64 [bits].” Yet there is a simple solution to this quandary — one that scores of advisers are using — which simply is not to upgrade from Microsoft XP. Not only would this eliminate the cost of new servers, it would allow time for Microsoft to get the bugs out of the new system on somebody else’s dime and time, advisers and technology consultants said. Short-term fix But that still is only a short-term fix, according to Eric Clarke, president of Orion Advisor Services LLC of Omaha, Neb. Orion’s software manages $11 billion in assets for 125 advisers. “I definitely think you should upgrade, but six to eight months from now would be the opportune time,” Mr. Clarke said. “Make somebody else be the guinea pig.” Another solution for advisers is to outsource. “With our [web-based] portfolio management system, advisers don’t need to invest in that infrastructure,” Mr. Clarke said. However, advisers will need to switch to Vista if they use desktop software from a company such as Advent Software Inc. of San Francisco, because the company will stop supporting legacy Microsoft operating systems eventually, Mr. Starcev said. “As with all new releases of Microsoft platforms, we will announce support and compatibility with each of our products as we complete comprehensive quality-assurance testing,” Bill Penny, director of product marketing for Advent, said in a statement.