After a traumatic four years marked by a recession, a war on terrorism and a market decline, many advisors are rethinking their retirement planning strategies.

The heightened threat of terrorism, war and one of the most dramatic riches-to-rags collapses in Wall Street history are plenty of reasons to feel anxious about the future. But when you're a financial advisor-and your job is to enable clients to weather unforeseen turmoil from now until their dying day-there's even more cause for reflection.

So it is that many advisors are looking back on the events of the past four years, weighing what went right and what went wrong in the strategies they used to guide their clients into a financially sound retirement, and deciding whether or not changes are needed.

For some advisors, the trauma of the past few years has led to a new conservatism. Others have just tweaked their approaches, while some are standing their ground with the conviction that their methods handily withstood all the adversity.

Yet there are few advisors who would deny that things have changed. For one thing, they say, hardly any of their clients take retirement for granted anymore.

It's also the case that retirement planning is no longer just a matter of configuring dollars and cents on a spreadsheet. The world's too complicated for that to be the case any more, says Joel Ticknor, owner of Ticknor Financial Inc. in Reston, Va. "I find that even clients who are patently able to support any lifestyle they wish still worry about retirement," Ticknor says. "They just want psychological assurance they can do it. I think it's more a question of dealing with uncertainty at a time when the world has arguably gotten more complex."

That, in the end, is a positive development because it leads to stronger relationships between advisors and their clients, Ticknor says.

In his firm, for example, Ticknor says the events of the last few years have underscored the need to align clients with the proper amount of risk they're able to endure. "The key role that we advisors play with our clients is to control their risk," he says. "By that I mean deciding how much returns they need to meet their retirement expectations and controlling the risk without the portfolio blowing up on them."

This, coupled with forecasts of modest market returns for the near future, has resulted in Ticknor becoming more inclined to devote a larger portion of his clients' portfolios to low-risk vehicles with a real rate of return. TIPS (Treasury Inflation-Protected Securities) have often been used in this role. So have dividend-paying assets-Ticknor likes preferred stocks-and other equities with a tilt toward value.

On average, his portfolios have gone from an 80%-20% equity-to-fixed ratio, to 75%-25%. The greater emphasis on low-risk, fixed-income vehicles has come at the expense of growth equities. "I want to make sure they have enough things in their portfolio that are going to keep them whole and on track," he says.

Ticknor's clients have an average net worth of about $2 million, but he also does pro bono work for a local credit union and finds that the majority of workers-those not working with advisors and who manage their own 401ks-have a tougher road ahead. "The real problem here is that as we went away from defined benefits, we basically said to each worker, 'You are now in charge of your future,'" he says. "The vast majority haven't the faintest idea of what to do."

Another planner who feels recent events point to the need for a more conservative approach is Andy Berg, a partner with Homrich & Berg Inc. advisors in Atlanta. Berg says he has always used 7% or 8% as a pretax returns assumption in building retirement plans. Yet he argues it was too common to see retirement plans configured with assumptions of 10% or more. "That needs to be ratcheted down," he says.

Berg says he's been bearish with client portfolios through all types of market conditions, and made good use of REITs and alternative investments such as hedge funds during the bear market. During the three-year downturn, he says, his firm's clients were down about 4% overall.

Hedge funds, most of them market-neutral, make up about 20% of the average client portfolio, he says. Private equity and commodities, through the use of the MLM Index Fund, are also used for a small portion of assets, he says.

Rebalancing is ongoing, he says, noting that the firm has brought its REIT holdings down to almost zero because of what he fears are poor fundamentals in that sector. "We're looking at REITs trading above net book value," he says. "A little bit of that money went to hedge funds, a little went to commodities."

There are other ways in which planners need to be more conservative, Berg believes. The notion that people require less income in retirement is shaky, he says. Most clients, he finds, spend more than they say they will. That's why the firm usually tacks an extra 10% to 15% on what clients project as their required income.

Another reason to overestimate income needs: health care costs.

"Lengthening lifespans and the increasing cost of health care are potentially a double-edged sword," he says.

Some planners have adopted other methods to add some security to their clients' portfolios. Paul S. Seibert Jr., president of AMA Asset Management Associates in Sandwich, Mass., started integrating more fixed annuities into portfolios a couple of years ago. "For people who don't have pensions, it's like buying a pension or a partial pension," he says.

He notes the strategy isn't for everyone, particularly those who have one or more pensions supporting their retirement income stream. But for many clients it is an alternative to Treasury bonds, which currently provide lower yields for identical cash outlays. "It also has another impact that is somewhat desirable: It allows you to deploy the remainder of the portfolio in a somewhat more aggressive fashion," he says.

Not all advisors feel a low-return environment demands a more conservative approach. Eric Linger, owner of Sherwood Investment Services in Redwood, Wash., feels the soundest retirement planning is one driven by client objectives rather than age. "The rule of thumb is your strategy gets more conservative as you get older," he says. "I don't agree with that." Linger also prefers dividend-paying stocks as opposed to bonds, reasoning they provide a better return in the long term.

Eric Tashlein, managing partner with Connecticut Capital Management Group LLC in Milford, Conn., has addressed risk in client portfolio by shifting to a more value-centric strategy. While equity allocations used to be an equal mix of value and growth, the value portion has grown to the 70% to 75% level over the last three years.

Tashlein notes that value has historically displayed better performance in down markets, and thinks this provides clients with at least some sense of security. Dividend-paying value stocks, he adds, are a sound addition with the recent cuts in dividend taxes. "I think everyone is generally running scared. We still see people who are afraid to be in the markets," he says. "Some people are petrified of anything but a CD."

Diane Pearson, director of financial planning with Legend Financial Advisors in Pittsburgh, say the firm has been well served through the use of low-volatility portfolios it started using eight years ago.

The portfolios consist of a diversified mix of mutual funds with low correlation to the broader market. The funds include the Merger Fund, the Arbitrage Fund and the Market Opportunity Fund, which uses long-short strategies. "We're looking at the portfolio to provide bond-like volatility with standard deviation of 4 to 7, but still give equity-like returns in the high single digits or low double digits," Pearson says.

William Cafero, senior manager of wealth management solutions with Ernst & Young, worries that even with the traumatic events of the past few years, there's another hidden danger lurking for retirees: inflation.

"People forget that inflation risk has just a devastating impact on market results," he says. "Right now, people have been sort of lulled into a false sense of security."

This highlights the need for a mixed and balanced portfolio, and also is why TIPS may become a more popular investment vehicle as time goes on. Cafero also notes that real estate has provided some comfort to investors. He says many retirees are downsizing their homes and tapping into the extra equity without having to borrow against it. As an added bonus, they're tapping into historically low interest rates on their new mortgages. "That is a bonanza from a retiree's perspective," he says.

Bernie Kiely, owner of Kiely Capital Management Inc. in Morristown, N.J., isn't changing his approach despite the turbulence of recent years. But then his approach was always somewhat more conservative than most advisors. Kiely's typical client portfolio is equally split between a mix of equity and fixed income. The allocations include 10% in international stocks and 5% in REITs.

The average client had a gain of 22% last year, after losses of 4% in 2000, 3% in 2001 and 10% in 2002, Kiely says. "During the bear market we constantly rebalanced," he says. "People are now calling and saying, 'Thank you.'"

The bear market served to remind people just how dangerous equities can be, Kiely says, and that the stock market is "not a do-it-yourself proposition." He notes that if someone close to retirement had invested $1 million into large-cap growth stocks in 1999, they would have lost 45% of their money as of the middle of 2003. "That has to be scary, and it happened to millions of people," he says.

Of course, when a mega-bull market is followed by a mega-bear market, there's always the danger that advisors and their clients learn their lessons a little too well and overreact. Right now, no one seems to be worrying about that potential problem-which is likely to surface sooner or later.