The distress in the stock market is testing clients' nerves and sending the anguished to their planners' offices for white-knuckle conferences. "There's a high level of anxiety," says Judith A. McGee, CEO of McGee Financial in Bend, Ore. "We don't have panic yet, but things are getting there."

As scenes of distraught clients waving shrunken statements play out in advisory offices from Bangor to La Jolla, planners are wrestling with classic bear market practice management questions: What should I tell my clients? How can I best deal with them in their time of emotional need? Is there any way to boost their spirits without unrealistically increasing their expectations?

Of course, dealing with unhappy clients is art rather than science; there's no panacea. Yet there are some client relations points that adept planners try to keep in mind during tough times. While saying the right thing is paramount—however conditional and qualified those statements might be—what's far more important is what the client says. "It's about listening," says Ross Levin, president of Accredited Investors in Edina, Minn. "This is really a hard period that we're going through; there's a lot of emotional upheaval. You can call on your experience and say, 'We've been through this before,' but the client will still feel bad."

Making any statements to clients that might be viewed as a patronizing attempt to lift them out of their funk isn't a good idea, Levin says, because this might invalidate their feelings. "Never say, 'Don't feel the way you're feeling.' Never imply that they shouldn't feel what they feel," he says, adding that clients need to vent their emotions and have the practitioner accept them.

Scott Leonard, founder and owner of Leonard Wealth Management in Redondo Beach, Calif., agrees. "I'm letting clients know that it's okay for them not to feel good," he says. Leonard believes that this can help prevent bitterness that might develop into a bad attitude toward financial professionals in general.

Michael Kitces, director of financial planning at Pinnacle Advisory Group in Columbia, Md., believes that trying to condition clients to be less emotional is futile. "I just don't think it's realistic to think in terms of training clients to not be emotional beings," Kitces says. "We do a lot of work to educate them and make them aware and prepare them for information that they might hear. But it's not the bad news per se that scares them. It's the implication that the bad news could continue and become worse, and they don't understand why. If the market is down 200 points today and they don't understand why, they fear it may happen again tomorrow. So a large component of how they feel is what's unknowable, and they can't be educated on this."

Proactive Phoning

Some planners are taking what, for them, is the unusual step of initiating phone conversations—and possible follow-up sessions in person outside of any regularly scheduled meetings—solely to discuss clients' feelings about the market and its effect on their portfolios. For example, Leonard and a colleague are calling each of the firm's 45 clients (with an average account size of more than $2 million). "The week after 9/11 was the last time and, I think, the only [other] time we have called due to market conditions," he says.

Clients whom Levin good-naturedly calls "catastrophists" tend to contact his firm during market doldrums. But, he says, there are many other clients who, though not as nervous or vocal, are nonetheless concerned because of the extent of the current market decline, and they need some phone time. "We're being proactive," Levin says. For example, Levin's firm recently made a check-in call to a client who came to the practice after "a disastrous 2002. He knows intellectually that he's fine, but emotionally, he needs support."

Not So Fine

Less well-heeled clients aren't so fine—emotionally or otherwise. For these individuals, a fallen market means prospects far more dire than postponing the purchase of a new car or kitchen. For them, the issue may be whether their kids can attend the colleges of their choice or whether they'll be able to retire on schedule-or in the style they'd planned. These clients may need far more than validation. "Sometimes, they need you to take action," McGee says.

Action may mean restructuring investments to generate enough cash to get them through the down market. One of McGee's clients, a real estate agent who's also heavily invested in real estate, bought a home at the top of the market and is struggling to hold on to another. She's paying debt service on a line of credit against one of the homes and her income is unlikely to rise anytime soon. "With a client like this," McGee says, "you have to get practical about how to get through this tough time." The plan is to look through the portfolio and find the least damaging ways to generate some cash flow. "The idea is to get her through the next two years," McGee says.