Today, advisors spend much of their time working with clients, whether talking them down from the ledge or defending their long-term strategy amid double-digit losses. Some clients have become as difficult to deal with as the plunging market. But in these overwhelming times, many advisors forget that all clients aren't the same.Some younger clients—that is, age 22 to 45—have decades before retirement and don't have such obligations as children or mortgages. Some may be seeking out new growth opportunities in today's distressed assets. Others have young families and worry about losing one of their two much-needed incomes. Knowing how these young clients are reacting to today's troubled environment could make the difference between locking in high-potential clients once the dust settles and losing them in the storm.

INVESTMENT TRAUMA

The first thing to realize about investors who are members of Generation X (born between 1965 and 1982) and Generation Y, aka the Millennials (born between 1983 and 2002), is the role the stock market has played in their lives. Gen Y has been in the workforce as long as 10 years. If you look at that period, the stock market is off almost 50%. "When they started working, the S&P 500 was at 1,500 and now it's at 800," says Michael Kitces, director of financial planning at Pinnacle Advisory Group in Columbia, Md. Kitces points out that the way the stock market performs during your first years of investing will affect your preferences going forward. Boomers saw the stock market double. "These young investors have never seen the stock market make them money, never even seen it break even-and that's a powerful statement," he observes.

"All the experience these younger generations had with the stock market during their adult life was pretty poor, so this generation should behave in a more risk-averse fashion than young people did in the late 1990s," says Stefan Nagel, a professor at the graduate school of business at Stanford University and co-author of a paper exploring the idea that one's risk attitudes are shaped by lifetime experiences. The question is, then, for how long: Do your experiences at 25 have a strong influence on what you do at 75? "That's not the case," Nagel says. "Something you experienced 10 years ago still has a strong effect on you, but 30 to 40 years later it starts to wear off."

THE EFFECTS SO FAR

All the evidence points to these young investors growing increasingly averse to risk and equities. But are they really pulling back? Jude Boudreaux, director of financial planning at Bellingrath Wealth Management in New Orleans, is seeing just the opposite. "Our younger clients have grown up with more of an idea of investing than our older clients, so they seem to be much more comfortable that this downturn is part of the deal," Boudreaux says. "They know they've got another 20 to 30 years until they need this money. For them, the focus isn't 'how do I stop the bleeding' but 'what can I do now.' We've been working with them to rebalance their accounts and buy some stocks low." Boudreaux, who is under 40 himself, is also using this market as an opportunity for his young clients to refinance their mortgages and create additional cash flow.

A THRIFTY GENERATION

But that's not to say that recent market tribulations haven't changed this generation's views toward money. While we have yet to see a large retreat from risk, youngsters have become thriftier. In a survey conducted for the Boomer Project, a marketing service for advisors, 40% of investors from Gen X and Gen Y say they intend to save more in the next five years as a result of the economic crisis, compared with only 35% of boomers.

"The people I'm working with aren't afraid of investing, but they're becoming much more conservative with their spending and tolerance for debt," says Joe Pitzl, a CFP who works with young investors at Mindful Asset Planning in Minneapolis. They're also pulling back on larger purchases. From new homes to second honeymoons, long-awaited goals are being put on hold until brighter days. "People will have the money to make the purchase, but because of the uncertainty about their jobs and the economy they're not doing it," says Eric Kies, vice president and COO at The Planning Center in Davenport, Iowa. "One couple was going to buy bedroom furniture. They've had the money sitting in a savings account for four to six months, but they're not doing it. Another young couple was going to go to Jamaica and just cancelled their trip because they're worried about potential job cutbacks."