In today's low interest-rate, high-market-volatility climate, most financial advisors are recommending nontraditional investments to diversify their clients' portfolios, according to a recent survey by OppenheimerFunds Inc.

The investment management company survey showed the majority of advisors are likely to recommend dividend-paying equities (84%) and emerging market bonds or funds (76%) rather than U.S. equities (48%) or municipal bonds (31%).

At the same time, 59% of the advisors surveyed say their clients are more risk averse than they were a year ago.

The survey was taken of 107 financial advisors, mostly RIAs (67%), at the 2012 Morningstar Investment Conference in Chicago in June and released this week.

"Advisors are reacting to their clients' being uncomfortable with the volatility of the market and are looking at other ways to generate more income. They are recognizing emerging markets are a potential asset class and that emerging markets are not as risky as they once were," says Lori Heinel, OppenheimerFunds chief investment strategist.

Half of the advisors say the best way to get exposure to equities in emerging markets is to invest directly in companies in those markets. Another 21% say investing in large global multinational U.S. companies is the best way.

"We believe that emerging economies are the engines for future growth, and portfolios that are positioned to take advantage of that potential growth will likely benefit greatly," says Heinel.

"There are many ways to tap global potential, whether through funds that invest in U.S. companies with significant sales opportunities in new markets or through companies based directly on the ground in countries outside the U.S., but either way an advisor that finds portfolio managers with a global mindset and the ability to pick good companies will find potential for great growth," she says.

At the same time the European financial crisis is making advisors shy away from investments in those countries. Fifty-nine percent of advisors cite it as the most important issue impacting their financial advice to clients. The U.S. presidential election was the second biggest issue with 26% of respondents citing it.

Protecting clients from the downside of a volatile market is the greatest challenge today, 52% of advisors say. However, clients are losing money if they are sitting in cash when inflation is figured in, Heinel says. "The key is to get them to think beyond the current headlines. Many investments offer good value to long term investors."

-Karen DeMasters