Sheryl Garrett, founder of the Garrett Planning Network, says the clients worst off may be those who retired in the past year or two. Retirees typically spend at a higher rate during the first few years of their retirement, she notes.

"People have a lot of pent-up desires on what to do in the early years of retirement," she says. "Now, all of a sudden, there is no money."

The housing market collapse has added to the stress since many middle- and upper-middle-income clients depend on their home equity as a significant part of their retirement assets, she says. "Now, if they want to relocate, it may not make any sense to try," Garrett says.

The crisis has been just as much an eye-opener for advisors as it has been for clients, she says. For many advisors, it's the first time their carefully crafted plans have failed. "Our whole industry has been built on the analytics of, well, 98% of the time this is going to happen just fine," she says. "But if you are the client or individual that doesn't happen to be in the 98%, it is intolerable. It does not work."

Advisors in the Garrett Planning Network have tried to focus on identifying their clients' comfort level. This has led to many clients shifting from 20% to 50% of their assets from equities into fixed income, Garrett says. Some of the money has gone into CDs-which probably wasn't even on the list of options a year ago.

"If that makes someone more comfortable, that is where they ought to be," Garrett says.

'This Is Different'
John Napolitano, president of U.S. Wealth Management LLC in Braintree, Mass., says clients don't happily embrace the buy-and-hold approach as they have in the past. "This time it is different," he says.

This is partly because, for many younger investors, this represents their first crisis. Market losses this time around have also been very sudden, he notes.
"You go away for a month or two and you're down 40%," he says. This, plus the fact that the market drop could get worse, has caused clients to be "genuinely extremely nervous," he says.

Yet Napolitano hasn't made any significant changes in the firm's management style. He toyed with using technical analysis, but his clients and 50 advisors shot the idea down as a form of market timing. Even the possibility of making more use of income annuities makes Napolitano nervous because of solvency issues with the companies that back them.

For now, says Napolitano, it's a matter of waiting for the market to right itself. "Mutual fund managers are pretty smart guys that get paid a lot to try to be right," he says. "That's why I really haven't shattered my long-term buy-and-hold vision."

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