Not everybody's had a horrible year.

The financial system might be in disarray, but candy makers, for instance, are reportedly doing very well as people salve the pain of global economic contraction with sugar. And just as sweet are some inverse funds that bet double against the Dow and S&P, going through the roof to eye-popping 60% returns in 2008.

Nor has it necessarily been a bad ride for all financial advisors, especially independents, who have seen a huge number of potential new clients in play. Despite the hit they've taken to their assets under management, several advisors say the last few months have been positively rosy for new business. Their assets may be down, but they've (almost) made up for the market-induced damage by courting new clients, attracting new assets, and harvesting more money from their current clientele.

The end of 2008 was a glum time for a lot of people, financial advisors included. But it was also a time to distinguish yourself as a holistic planner who sees the big picture, rather than just as an investment whiz, and perhaps turn the market downturn to your advantage and make it bear some fruit.

E.W. "Woody" Young of Quest Capital Management, says that since the beginning of the year his firm has snagged about 12 new clients with a total net worth of more than $100 million. One of them is a big fish-a client worth $50 million who has already cannibalized about $6 million of his investable assets and moved them to Quest.

"I've never seen so many people proactively looking for and asking for help ever in my life," Young says. The firm has just under around $550 million in assets it manages directly custodied at Raymond James, while it has much more that it indirectly advises in the form of 401(k)s, annuities, etc.

It's not just that they can't get their advisors on the phone; in many cases, the clients are moving because they feel their previous brokers or advisors didn't understand the big picture items, either the broad economic trends or even something like tax-loss harvesting. Many aren't even looking at tax returns. And that became a huge planning opportunity at the end of the year for those who do holistic planning and can help staunch the losses.

"If your advisor wasn't helping you manage what we call harvesting tax losses last year for your personal portfolio, which is subject to taxes, then they were really missing the beat," says Young. "And a broker-just a pure broker-doesn't have that knowledge or experience."

Young says one of the ways his firm has won client prospects over is by ramping up seminars (one in late March had 200 attendees show up, many of whom the firm didn't have existing relationships with). Another advisor doing seminars, and converting client prospects into gold in the process, is Steven L. Sanders, chairman and CEO of First Genesis Financial Group in Newton Square, Pa. Sanders says his firm collected some $200 million in new assets under management in 2008, bringing the firm's AUM to just over $400 million by the end of the year. That figure was starting to tip toward the $545 million mark by the end of the first quarter of 2009, he says.

This new influx of assets is hitting financial advisors from multiple directions. Many obviously are coming over from dissatisfied clients of the brokerage houses and wirehouse channels. These clients are more willing to move, say advisors, because they simply can't get their old financial counsel on the phone.

"With the movements and the consolidations that have occurred in the wirehouses and the Bear Stearns and the WaMus and the Merrills, that uncertainty has really trickled down to the individual client," Young says. "One new client said 'I wasn't expecting a lot [from the previous advisor], but I thought they could have at least shown some TLC.'"

In fact, some independent advisors voice amazement at how giant brokerages left their clients hanging with virtually no communication. "A lot of advisors made the mistake of just freezing in the face of the bear and not communicating with their clients," Sanders says. And even if they were, he says, they were not communicating effectively. "That was the result of just constantly having the strategy of buy and hold only."

Robert Fragasso, president of Fragasso Financial Advisors, says his firm has also been picking up new clients with educational seminars, aggressive advertising and his employees' high profiles in the firm's hometown of Pittsburgh. He says his clients aren't just coming because the brokerages and wirehouses are shedding clients left and right. Money is also coming in from reformed do-it-yourself investors, whose undiversified strategies during the crash brought them plummeting to Earth with melted wings.

"Investors mistake the bull market for their own brilliance; in bear markets, they realize the flaws in their methodology," says Fragasso. In other words, he says, there were many investors who were chasing hot stocks, they weren't balanced, and the cracks in their methodology ruptured into giant fault lines when the financial system collapsed. He notes that some 50 new potential clients beat down his door in November and December, a huge increase over the three or four prospects that usually darken the threshold every month.

Barry Taylor, a portfolio manager at Bingham, Osborn & Scarborough LLC, says that his firm has also seen an influx of new assets. Yet he thinks the really big surge has yet to come, because many people have simply sidelined their money, stockpiling them in cash at firms like Fidelity and Schwab, where they are waiting to go back into the market when skies turn blue again.

Why Your Firm?
It's not any one type of firm that's picking up assets. It could be that clients want to be nestled in the bosom of something like, say, a stalwart local accounting concern. Alan Goldfarb works at just such a place-Weaver Tidwell Wealth Management in Dallas, the wealth management arm of the half-century-old Texas independent accounting outfit Weaver and Tidwell LLP. Goldfarb's unit has snared 49 new clients in the last six months-without an advertising campaign.

The wealth management unit joined Weaver Tidwell only a few years ago, in 2001, and originally the accounting culture there didn't know what to make of his team. But they've warmed up, he says, and now they are sending more of their accounting clients to the wealth managers in their midst because they realized the wealth management arm had a place in helping them develop client relationships. When these accountants started asking clients the question: "Are you happy with your financial advice," it turned out many of them weren't. And these people jumped at the chance to meet with the firm's financial advisory arm in the last year and get a second opinion when their portfolios started to turn sour.

"That's where about half of the 50 came from," says Goldfarb, referring to the in-house referrals. "The other half came from direct relationships with attorneys and other people we knew. In other words, we didn't do a mail solicitation or anything."

Other firms are benefiting from their accounting relationships as well, especially around tax time. Meanwhile, firms like Schwab and Fidelity have set up advisor referral programs which send clients to independent advisors who need more sophisticated advice.

"Clients have been building retail assets at these firms because of people coming in and opening accounts," Taylor says. "People are basically closing their accounts with their brokers and parking it. I've had some referrals from Fidelity where they feel that people need to do more than just park their cash. So we'll get a referral [at Bingham Osborn] to approach it more from a planning standpoint, because our services are broader than what you'd get at Fidelity. They are not as likely to be offering planning to higher-net-worth individuals."

New Firms, New Investment Philosophies
Who says it is a bad time to start an advisory firm? One beneficiary of Fidelity's program is King Lip, a portfolio manager who last year bolted giant Bingham Osborn to rejoin an old Credit Suisse colleague, Simon Baker, at his independent firm Baker Avenue Asset Management. The advisory has accumulated $70 million in new assets since March of 2008, Lip says, and is flourishing because of an aggressive strategy that dictates they go to cash in down markets as a defensive measure.

"Obviously that's been very good for us because there are not too many advisors that would do that," he says. "It tends to be more of a proactive solution versus more of a buy-and-hold strategy, and unfortunately a lot of people got hurt during this downturn."

He says that the model gathers decades of market data to measure market sentiment and then uses moving averages to gauge the market's overall risk. "We are big users of moving averages," he says. "What we've found is that, in negative markets, when the majority of stocks are below the 15-week moving average, that means it's really not a good environment to be owning equities. We've found that there is much higher risk in owning stocks."

When market behavior goes to extremes, some like Lip believe technical analysis has a place. If market sentiment is penalizing risk, the firm goes to cash; if it suddenly becomes more tolerant of risk, the firm goes back into equities.

Lip concedes that the strategy could raise hackles among some, who might call foul for market timing and also see in it a subtle appeal to investor emotion. But on the other hand, he says, this is a spotlight moment for such a strategy, when entrenched notions about buying and holding are no longer pieties among investors and no longer graven in the Biblical tablets. "A lot of people who are big believers in the whole buy-and-hold strategy are really questioning that now, especially since, in the last 10 years, investors who have subscribed to [that] strategy have really not made any money, or in fact have actually lost money. So clients are starting to see what we see and are looking for different solutions and are looking for managers who may be proactive."

Sanders echoes the sentiment. First Genesis first positioned itself as an African-American owned concern that serves the needs of the African-American community, deploys new wealth, and tackles smaller accounts with as little as $25,000 (which it does through its alliance with holding company Creative Financial Group and the bench strength of its broker-dealer and custodian, New England Securities). But after the market meltdown, the firm's absolute return strategy has become more of a major marketing point in and of itself, especially since that model allowed Sanders' firm, like Lip's, to shed stocks last August.

"Around August, September we were significantly underweight in stocks," he says. "We look at stocks, bonds, cash currency, commodities, international and real estate. We only use a pure ETF strategy. That helped us avoid the 40% rundown that a lot of advisors experienced in their assets."

The firm takes a global thematic approach, he says, tracking some 64 indicators, including inflation, unemployment, manufacturing, consumer spending, GDP and the LIBOR to OIS spread (which points to the willingness of banks to lend). In August, he says, "consumer confidence was beginning to wane, retail sales were slowing and unemployment was starting to tip up. And the real big one, bank lending, was starting to slow down."

Sanders believes that the reason more clients are at play is less about fees and commissions and more about expertise and economic analysis. "It's almost good to see sort of this change in the industry," he says. "That's going to call upon all of us to step our game up a few more levels so at the end of the day when it's all said and done, the industry will have a much better grade of investment advisor or registered rep out here. Those that survive will be a lot smarter, a lot stronger, much more prepared and able to handle clients and have a better understanding of economic fundamentals and market concepts."