Savvy financial advisors, citing market fears and investor dissatisfaction with brokers and money managers, are gaining new business.

RegentAtlantic Capital in Chatham, N.J., for example, added 98 new clients last year, and 28 in the first quarter of this year, says the company's investment committee chair, Brian Kazanchy. Assets under management, despite a slight dip in March, ballooned from $1.51 billion at year-end 2006 to $1.89 billion as of April 30.

One catalyst besides performance: Existing clients are invited to bring friends to as many as three seminars annually. Its office size limits attendance to 50 persons. But its January seminar-on asset allocation-was repeated seven times! "We'll have a bigger office next year," Kazanchy says.

Other seminars have focused on baby boomer retirement, endowment investing and nonprofit investing. RegentAtlantic Capital sends a blast e-mail to members of the media on a relevant topic every month. One example: How high-yield bonds perform in different market environments. "About a month ago, we moved 10% of our bond allocation out of inflation-protected bonds into high-yield bonds," Kazanchy explains. "There was clearly an opportunity created by the credit crunch."

The amount lower-quality companies must pay above Treasurys rose dramatically-from a low point of 2.7% above Treasurys toward the end of 2007 to more than 8% over Treasurys at the high. Kazanchy attributes the company's 90% average client retention rate over the last few years to performance, which clients see on quarterly statements. In May, the firm was keeping 20% of client portfolios in alternatives-7% were in commodities, 10% were in hedging strategies and 2% were in real estate. For commodities, RegentAtlantic uses vehicles that track a commodity index, which includes some gold, but has a heavier weighting in energy and agriculture. In 2007, it gained additional flexibility by adding structured notes in different asset classes.

Although prospective clients get a presentation, there's no heavy marketing. Rather, the firm's wealth managers concentrate on knowing the client's goals and objectives. Client portfolios get a target for each asset class. The goal is to review it daily-which likely is a lot more frequently than many advisors do it, Kazanchy says.

Say a portfolio has a 10% target for hedging strategies. RegentAtlantic Capital will set its software to a range of 8% to 12%. "If it goes above 12%, our software gives us a recommended trade to bring it back to the 10% target. If it falls below 8%, it gets reviewed by us. It's a built-in philosophy to sell things when they're high in value and buy when low." The company has avoided problematic auction-rate securities and mortgage securities.

Smaller advisory firms, meanwhile, are reporting that they may have actually benefited from the recent turmoil, in which the market dropped nearly 20% from the last quarter of 2007 through the first quarter of 2008. These firms have been busy networking, seeking referrals and building relationships with investors who have become dissatisfied with their stockbrokers. New money materialized from shaken clients fearful of going it alone in tough economic times. And a new emphasis on succession planning has been drawing additional relationships as well.

If you did a spot-check with financial advisors, you'd find that they had lost little business except for the slight dip they suffered during the market decline and liquidity crunch earlier this year. Instead, several reported growth-amid reports that brokers were pressuring clients to take margin loans to bridge liquidity gaps.

"There was a presumption of liquidity in the marketplace for a lot of different investments-mortgage-backed securities and regular corporate bonds," says Peter Wernau, president of Wernau Asset Management Inc. in Boston. "We didn't invest in any of those for our clients' cash. We've been using money market funds."

In the meantime, he says, the firm has been adding clients because of its value approach. "For those who are value investors, this is the time we earn our money. A lot of what we do is income-based. The environment for income investing has improved."

Wernau, who has $22 million under management, says that the new clients have come in even though the firm's assets were marginally down in the first quarter. He cites word-of-mouth from existing clients and business networking meetings.

Wernau admits that financial advisors may not be out of the woods. If CD interest rates rise, a client could decide to move all his assets to a bank for a higher yield.

To keep this from happening, he has turned to education-carefully discussing risks with his clients. He also has access to CDs through his relationship with Fidelity. For now, he says, he can get a straight triple-A municipal bond at 4.8%. "Why would I invest in a taxable CD?"

More people have been getting fed up with their advisors not giving them any service, he says. "Advisors are asleep at the wheel by never returning phone calls."

It was a heart-thumping St. Patrick's Day this year when the market dipped close to 20% from its October peak, recalls Bart Schannep of Tucson, Ariz., whose firm Schannep Investment Advisors manages assets of a couple hundred million dollars.

But, like a number of other registered investment advisors, Schannep viewed the market dip and blaring headlines about the worsening economy as a business-builder. "When the market is strong, nobody needs us because everybody can be brilliant," he says. "When we start getting new accounts is when the market has difficulty."

Schannep, a former brokerage branch manager, took to the phones in March to reassure clients. The average bear market drops only 33%, he told them, and the market around St. Patrick's Day was down less than that. "We can't see the future. Neither can they. Until then, we need to count on this being an average bear market. We were trying to manage expectations then," he says.

Amid the turmoil, Schannep recently obtained his certified wealth strategist certification, offered by the Cannon Financial Institute in Athens, Ga. It's particularly worthwhile for financial advisors dealing with older clients, he says, because it emphasizes estate planning more than the CFP designation.
Both clients and assets rose after the drop. "We were just amused that we brought in almost $1 million of new money yesterday from four different clients-unsolicited!" he reported on May 13. "It was money that would have been at E*Trade."

After getting statements at the end of March, clients who already had money with him brought more. All that money should have been discovered in the initial client interview, Schannep acknowledges. But it's a common phenomenon. Many wealthy clients simply don't want to put all their eggs in one basket. So even when they're asked, they don't immediately acknowledge all the money they have.

Schannep Investment Advisors runs radio ads and also distributes a monthly newsletter. But these are not quite personal enough, and so using the telephone helped during those tough days, he says.

His certified wealth strategist certification has become an important relationship-builder. "It's amazing when you start talking to people," he says. "Some say, 'Yeah, I don't have a will. I don't have anything.'"

In one case, a client had a trust. But then Schannep discovered that the brokerage account the client had opened with him three years before was omitted from that trust. It needed to be retitled. Schannep's next question: "Who's the successor trustee?" "My son," was the response. "Does he know that?" Schannep asked. "No."

So Schannep suggested bringing in the son to start working with his parents' business. Not only would it be a way to familiarize the son with his future responsibilities, but it could also be a carrot to get the son's assets under Schannep's management. Plus, it would help Schannep set the
stage for a new relationship when the transfer of wealth finally occurred.

An attractive next step is to probe client charitable giving, he says, which means: "Then, you start getting close to the heart. It marries the customer more heavily to you."

Greg Phelps, president of Red Rock Private Wealth Consulting LLC of Las Vegas, was preparing to feel a pinch earlier this year with his upper-middle class-retirement-oriented client base, since he had some clients in those infamous illiquid auction-rate securities.

Nevertheless, "my assets are up from October-probably about $8 million," he says, because of a change in focus to wealthier clients. "I brought in a few large clients. The activity I've seen for new clients is down, but I believe it's because I raised the minimum portfolio size." He now takes clients with portfolios of $1 million and up. It makes for fewer accounts and better profit margins.

One large client brought some auction-rate securities to him that were still illiquid, he says. "They were definitely pitched and presented as a money market alternative." Another client had been getting more than 5% tax-free on a Florida auction-rate security.

He says most of his clients' auction-rate securities have already become liquid or were paid off. Though illiquidity definitely poses a short-term challenge, over the next six to 12 months he expects those securities to "wash out." Phelps says that his saving grace was that he never looked at those securities as a money market alternative, but rather, as a longer-term holding with a one-and-a-half-year time horizon.

Still, he adds these weren't the types of situations in which, say a $1 million client was purchasing $200,000 in auction-rate securities. Those that had them have a net worth of $5 million to $10 million.

Phelps says that over the last year, his clients have been dollar-cost-averaging more than ever. "That has served me very, very well." His MoneyGuidePro software, the Internet-based financial planning software offered by PIE Technologies in Midlothian, Va., is "off the charts," he says.  

Most of his clients have 40% of their money in bonds and high-quality short-term positions, and he has ignored the noise about the sinking real estate market. His persistence with the DFA Real Estate Securities portfolio has paid off handsomely. It was up 8.33% as of April 30, while "most think that segment of the market is getting destroyed," Phelps notes. "It just goes to show you that cocktail party stories are almost always the wrong thing to do."

James M. Knaus, co-owner of Global Wealth Advisors LLC in Troy, Mich., says his assets have increased year after year largely because he asks for referrals from clients, attorneys and CPAs. He says he gets them largely by focusing on areas where he can control the pricing of his firm's fees and include low-cost funds.

He estimates that he offers 25% to 50% lower aggregate pricing than competitors. "There have been temporary fluctuations in the last three or four months," says Knaus, the past president of the Financial and Estate Planning Council of Metropolitan Detroit, who is also a frequent guest on TV. "That's to be expected."

Nevertheless, those who are unsettled are invited to come in for reassurance, and to be certain that their portfolios are set up to meet targeted time horizons.