Since I began following the stockmarket around 1965, I've lived through my fair share of downturns, 500-point drops and utter collapses, as we had in October 2008. Since entering the financial advice game, I've heard the same refrain from successful advisors every time: "Our clients don't call because they know what to expect when markets decline. We've managed their expectations."

Well, as the man said, everyone's got their price. If the market falls fast enough and far enough, clients panic and call—period. And the October collapse was just that kind of market. Most advisors were inundated with calls from clients who used to weather a market drop with equanimity.

"This is the worst I've ever seen," says Dan Danford of the Family Investment Center in St. Joseph, Mo. "We've actually had several portfolio liquidations for the first time since 1983, where multiple people have overruled my best advice. I look around and ask, 'What's different this time?' As best I can tell, it's a panic mentality in the press and media. Every channel, newspaper, magazine and website are dominated by tales of doom and gloom."

Clearly the Dow's drop from 14,000-plus in October 2007 to a flirtation with the 8,000 in October 2008 was downright terrifying to many advisors as well as their clients, enough so that even some prominent members of the financial services community questioned the investment strategies that kept them on this sinking ship. At the 2008 Schwab Impact Conference in late September, Charles Goldman, executive vice president of Schwab Institutional, told a Financial Planning editor, "In the past three months, my wife and I have discussed our portfolio three or four times. What's normal for that time period? Zero. I've only looked at my first- and second-quarter statements. I can look at my portfolio on the web, but I don't—it's too aggravating. In all seriousness, we're wondering whether we should maintain our diversified approach or try a barbell strategy that's very conservative on one end."

If Goldman is questioning his approach, how about advisors? As you might expect, most are still drinking their own Kool-Aid. But not all. Perhaps we can learn something from the rethinking these other advisors have done about their practices and their own investing.

Short-Term Moves

Some adjustments are temporal—a one-time response to a one-time calamity. Says Jim Ludwick of Mainstreet Financial Planning in Washington, D.C., "I'm currently buying Ultra S&P 500 ProShares in my IRA, Roth IRA, my wife's IRA and the family trust fund. Every time the S&P 500 is down 5% or more, I'm a buyer. Not huge amounts, but over time it's mounting up." Ultra S&P 500 ProShares, which trades on the Amex as SSO, is one of a number of Ultra ETFs that use leverage in an attempt to double their benchmarks' return—a not-unreasonable strategy if you're willing to bet that the market's near its bottom.

Similarly, Newton, Mass.-based CFP Bob Pajak says, "I try to increase contributions to my accounts when we are going through one of these periods, even if slightly. My portfolio rebalancing continues at the same interval, which for myself, has been annually."

Seeking Liquidity

How about more fundamental investment strategy changes? Michelle Goldstein of Goldstein Financial Future in Dallas is questioning the education funding strategy she and her husband have heretofore used, along with liquidity needs in general. "My husband and I use my son's trust to help pay his education expenses. As I remind all my clients, I have the amount I will need this year in cash, but I have not taken my own advice past that point. I will need to access most of the funds in the trust in the next three years, yet most of the money is invested in the market. This is way too risky for money I need to access in such a short time horizon and that's now lost 30% of its value."

Goldstein says she'll go to bonds of short maturity when and if the market recovers in November. Her experience, though, raises the issue of what's enough liquidity? Liquidity requirements will vary from one client to the next, of course, but whereas advisors might have counseled clients to maintain a year's liquidity before this crash, many advisors are now talking three years. As a practical matter, that will force most moderate-net-worth clients into a balanced portfolio even if a high-growth strategy might have been employed prior to current market circumstances.