In a perfect world, planners could wave a magic wand and restore their clients' portfolios and home values to the pristine heights of past years. Sadly, that's not possible, as planners can attest after enduring yelling, crying and panicking clients over the last six months. No client has the right to be verbally abusive, of course, but clients do have a right to expect planners to get busy-very busy-in three major areas. As the markets start to recover, advisors need to calm clients, stabilize their portfolios, and take advantage of the upside.

TALK THEM DOWN

Clients who loved the market on the way up often hate it on the way down; they may still be unhappy enough to want to exit it entirely at every bump. "When things were going well, everyone thought things would continue to go well," says Tom Fisher, president of Fisher Financial Strategies in Cambridge, Mass. "Now that things aren't going so well, many people want to keep their money in cash."

Some clients are entertaining doomsday scenarios. At Olson Wealth Management in Bloomington, Minn., President Sharon Olson says some clients worry that "the stock market will go to zero and the economy will collapse." She tries to calm them and has even discussed possible survivalist techniques.

"I say, let's say you're right," Olson says. "What tools can you use to protect yourself? Do you have land where you can grow your own food? Can you hunt or trap for meat? From a financial perspective, can you buy gold bullion or coins and keep them in your house?"

Some clients have bought gold, Olson says, "to build confidence in what they forecast could be an ugly future." Others have moved money into cash or Treasuries, reasoning that a tiny return is better than losing money. Olson has tried to sell their stock positions with limited orders, hoping to profit from a recovery or from short-term rallies. "We want a slow sale, not a fire sale," she says.

Even the most fearful clients have responded to Olson's gentle nudging to keep some equity investments. "I ask if there's any way they could leave some money in the market, just in case it does go up," she says. "Most often they agree to leave it there."

GET SOME MONEY BACK

Advisors can talk all they want about tax harvesting and estate planning, but it doesn't mean much if clients have lost more money than they can handle. Planners say it's their job to sstabilize portfolios, perhaps using investment techniques that went out of favor for some during the recent bull market.

"From 2003 to 2007, holistic wealth management took root," says Matthew Tuttle, president of Tuttle Wealth Management in Stamford, Conn. "You can provide all the services you want, but if you've lost 40% and clients are scared, they're not tied to you anymore."

Instead, Tuttle says, planners who want to keep existing clients may need to abandon the buy-and-hold philosophy that has served them well in the past and move to actively managed portfolios. "You're getting paid to have a rational, active, tactical approach to the market, and that's harder than buy and hold or picking a few good mutual funds," Tuttle says. "If you can't do it, you need to outsource to someone who can."

P. J. Sacchetta, president of CFIG Wealth Management in Westport, Conn., agrees that many clients need a new asset allocation. He suggests a focus on large-cap U.S. stocks that have restructured and will recover when the economy does, as well as some small-cap stocks, insurance and gold. Most of all, he advocates "a solid position in managed futures, the one area that has done well in this market environment."

New investment strategies involve adding asset classes, says Olson, who likes unconstrained and eclectic funds. "Eclectic managers aren't as constrained by a specific objective. They can move to cash, diversify among different size companies or use a long/short strategy to mitigate risk," she says. "These strategies have often enhanced returns in volatile markets, in contrast to buy and hold."

Olson is also using this market to implement cushioning strategies. "When bonds were doing nothing, people didn't want them. Now clients are more willing to abandon top return possibilities in favor of increased safety."

MAKE LEMONADE

Some clients are interested in taking advantage of any upside they can. "We've used loss harvesting as a big opportunity to rebalance," says John Buller, a principal at Soundmark Wealth Management in Kirkland, Wash. Transferring fixed-income investments to IRAs and moving equities into taxable accounts have also helped Buller's clients use tax rules to their advantage.