Rising financial literacy levels among both clients and the public at large has been a subject most financial advisors would prefer to avoid. In today's world, that's not longer possible. 

  Bombarded with multiple cable channels, nearly a dozen personal finance magazines and thousands of books, a new generation of investors suddenly is giving migraine headaches to many advisors who started building their practices in an era when the public's lack of knowledge about investing was rivaled only by its lack of interest in it. Advisors suddenly find themselves more worried about losing clients to CNBC than to another advisor or brokerage firm. 

  Given the lackluster returns from equities so far this year, clients' obsession with investing may wane from its feverish pace of the past few years. But it's not going to disappear. The new investor class, now more than 100 million strong, is going to continue to demand involvement in its investment decisions, and advisors who refuse to accept it are going to watch their universe of potential clients shrink steadily. 

  It's a very different world today, and advisors like Judy Shine of Shine Investment Advisory in Englewood, Colo., are already adopting an investment consulting process that allows for far more client participation. ''Twelve years ago, people came to us because we owned the information, and you didn't have to be that wise, because the public had no access to the information,'' she explains. ''Today they come because they have too much information.'' 

  The information advantage that existed a decade ago enabled that generation of advisors to assume an attitude toward their clients that today strikes many advisors as patronizing. ''It worked for them and it was what many clients wanted at the time,'' she recalls. ''People didn't make a ton of money in stocks, and they didn't view the stock market as a place that was interesting or fun.'' 

  Like a growing number of advisors with clients who are executives at high-growth companies, Shine is forging client relationships in which education is a two-way street. ''My clients in technology, telecommunications and biotech have educated me,'' she says, with no trace of embarrassment. Needless to say, these clients, executives at companies like Sun Microsystems, Lucent Technologies and Medtronics whom she calls ''middle-class millionaires,'' are playing with full decks. 

  Working with clients from Microsoft and America Online, Greg Sullivan of Sullivan, Bruyette, Speros & Blayney in McLean, Va., is experiencing a similar evolution in his relationships with clients. ''We have very smart clients, and it's a mistake to think they can't figure out things themselves,'' Sullivan says. ''They are sharp and perceptive. But they need and want to simplify their lives and to rely upon and trust someone. That's why you have to be comfortable in your competencies and be confident you can add value.'' 

  In a world in which millions of individuals are now conversant in financial lingo, it's not always easy to tell which clients are truly intelligent about financial subjects. After all, information doesn't always translate into knowledge. 

  Shine finds several indicators are useful in helping her discern how sophisticated a client really is, including the type of information they focus on and their level of emotional detachment. One obvious sign of clients' financial intelligence is how they view what has happened in the stock market between 1995 and 1999. If they don't recognize that five years of returns exceeding 20% are an aberration, a red flag should go off. 

  Truly smart, informed clients possess a lot more knowledge about investing than someone can get from CNBC or from personal finance magazines on the newsstand. ''Someone who is really knowledgeable about finance needs to have read books about the stock market, not just periodicals,'' Shine argues. ''They should be able to see the flaws in Harry Dent's arguments and know that when a stock or mutual fund goes up, 25% it can go down 25% just as easily.'' 

  Conversely, there are clear signs that a client can't process the avalanche of information confronting him. They include an absurdly short-term focus and an inability to prevent emotions and momentum from influencing their decisions. Other symptoms, such as succumbing to the Qualcomm syndrome and no understanding of risk, probably are familiar to most advisors. 

  Another litmus test is whether a client understands how quickly the differential between long-term and short-term capital gains becomes an exponential gap. But advisors themselves have to watch the signals they send clients. When the asset-management boom took off in the early '90s, advisors expended painstaking efforts to design meticulous quarterly performance statements. ''We put out reports that focus on the exact things (short-term performance) we tell clients to ignore,'' Shine notes. 

  How quickly individuals grasp the concept of diversification and asset allocation is also a yardstick that sheds light on their financial IQ. ''Asset allocation is the only thing that works in the long term, but you will never be at the top,'' Shine says. ''Of course, you'll never be at the bottom, either.'' 

  Of course, smart clients must be able to recognize what they know and what they don't know and make sure they convey this to their advisors. Sharp individuals tend to gravitate towards the parts of the financial planning process that are sexy or intellectually intriguing and gloss over the nuts and bolts. So it's not surprising that Shine finds many of her clients are sophisticated about investments and expect to participate in both stock and mutual fund selection processes, but recognize they need help with taxes and insurance. 

  What many advisors find so disconcerting about clients' rising financial intelligence is the implications for their own survival. Shine is convinced their paranoia is misplaced. ''Many of us (advisors) think clients get up in the morning, and the first thing they think about is, 'How can I reduce my financial planning fees?' '' she laughs. 

  Research conducted several years ago by Charles Schwab & Co., the top brokerage for self-directed investors, has concluded that, despite investors' torrid and, possibly brief, love affair with online trading, only about 10% of them are true do-it-yourselfers. The remainder are split fairly evenly between delegators and semi-delegators. However, the baby boom generation, which accounts for nearly 90% of the asset growth in the last five years, falls heavily into the semi-delegator group, so advisors looking to grow their practices must address their desire for involvement. 

  Ultimately, Shine is convinced clients need or want advisors a lot more than many of her colleagues think. She discovered this several years ago when she set up a sideline business to do written financial plans without taking on asset management, a throwback to her early days as a 26-year-old salaried advisor at New England Financial Advisors in the '80s. She was stunned when 11 of 12 clients showed up the next year to become full-service, investment advisory clients. 

  ''Many clients know what they're doing, but investing keeps getting more and more complex, and they are going to have to get deeper into a lot of issues over the next 20 years,'' she says. ''It becomes more and more anxiety-provoking. I'm not sure that's ultimately what they're going to want to do. Many retirees spend a lot more time on their investments during the first year of retirement than they do in the third or fourth year of retirement.'' 

  The ultimate sign of a smart client is one who keeps money in its proper perspective. ''If a savvy client hits it big in a stock, it doesn't change their lifestyle, except in charities," she says. "Their money is not who they are. Deep down, I don't think money is that important.''