Dumais is similarly tuned into the investment side of the house.  These days, he's asking around for beaten-down assets that can satisfy clients' wealth-transfer needs.  "The whole trick in estate and gift planning is valuation," he says. "Anomalies in the markets create an opportunity to shift assets between generations at an incredibly low tax cost."

Grantor retained annuity trusts are among the estate planning tools that are a "phenomenal vehicle" under the present market conditions. "It's the horrible silver lining to all this, and it's part of the message we are getting out to clients."

A Fundamental Investment Approach
Fundamental research guides the core styles handled in-house: fixed income, small-cap growth and large-cap growth and value.  Prior to visiting a company, Research Director Paul Chew and his 20 analysts-most of whom are CFAs with experience in the industries they cover and with salaries comparable to a portfolio manager-project three years of financial statements under various scenarios.

"That can be a lot of work," Chew admits.  But it helps pinpoint the drivers of success for the stock and whether it's margin expansion or top-line growth-vital insights to carry into a meeting with a company. "Corporate managers today attend classes to learn how to talk to investors like us.  We try to change the conversation from them pitching us to us grilling them for the information we want."

The analysts continue their research by tapping a carefully cultivated, national network of contacts that includes business-oriented clients and venture capitalists.  With so much data readily available these days, Chew seeks "a differentiated information source."  The firm's nexus of connections helps build out the mosaic on a company and has paid off in the small-company space in particular, he says.

Whenever a security is purchased, the strategy for selling it is immediately plotted, shaped by the pro forma financials.  "We set an upside target and, equally important, a downside target," Chew says.  "If we are wrong, we want to know where things can go wrong, and how badly."

The Message To Clients
As they have done successfully during previous downturns, Brown Advisory's portfolio managers are spreading money across more positions to reduce company-specific risk. For example, the flexible value portfolio holds 45 stocks today, up from the usual 30 to 40.  Although buying when the market is sinking carries risks, Brown Advisory sees plenty of investment opportunities, says Rick Bernstein, the firm's large-cap value manager.

Bernstein likes innovative global companies that have strong balance sheets and markets with barriers to entry, such as industrials 3M and Dover Electrical Works, tech giants Microsoft, Dell, Cisco, Intel and Nokia and consumer staples Unilever and Procter & Gamble.  "You can buy many of these at a single-digit multiple and they will pay you a nice dividend while you wait out this nasty market," he says.

What lies ahead? The credit crunch, rising unemployment and dwindling consumer demand will turn 2009 into a "sloppy year," Bernstein says.  "We expect the profit cycle to slow considerably. In 2005 through 2007, easy money supported a lot of lower-quality companies' performance. 

With that gone, it's back to investing in high-quality companies with solid managements and proven franchises.  I'd be surprised if that isn't an obvious theme in the markets this coming year."