Times of financial downturns and tottering financial titans are times when advisors need to maintain a reassuring manner without seeming blas?, experts advise.

The principle was driven home during the week of Sept. 21 with the bankruptcy of Lehman Bros. and the near financial catastrophe suffered by Merrill Lynch and AIG, both in New York.

Both Merrill and AIG avoided bankruptcy filings: Merrill by agreeing to be acquired by Bank of America, and AIG by federal intervention in the form of an $85 billion loan. Lehman is in negotiations to sell large parts of its business to Barclays.

Barbara Sullivan, managing partner of Sullivan & Company, New York, a marketing communications firm that works with financial service companies, stresses the need to keep in touch with clients during periods of turbulence.

“Financial services companies should not wait for their clients to call,” she says.

Instead, reach out to reassure them that their company is sound and their money is secure, she advises.

“Be concrete and suggest what clients should do now with their investments,” she adds. Among points to make, Sullivan recommends:

Remind clients about the importance of diversification.

Help them put investment performance into perspective and think long term.

Be positive, underscoring the safety of their assets being managed, despite market risk.

Robert Cusick, president of Investment Insight Ltd., Cortlandt Manor, N.Y., also believes staying in touch with clients in times of financial turmoil is vital.

Cusick says his company regularly e-mails a newsletter to clients. Sending special notes commenting on troublesome developments is an effective way to maintain their confidence, he notes.

In one recent message to clients, Cusick wrote, “While even our well diversified portfolios have slipped a bit this year, we have been preparing for this exact scenario.”

It was not realistic to expect the big run-up in stock prices from 2003 to 2007 could continue, he added.

“There is always a price to pay for excess anything,” he stated. “Think of it as a market ‘hangover.’ It is time for a serious pullback. It is OK. It is normal. It is actually healthy.”

Last week, amidst the turmoil surrounding AIG, Lehman Brothers and Merrill Lynch, Cusick told clients, “The radical actions of the past week appear to offer a welcome turning point, a ‘bottom’ from which we can begin a rebuilding process.”

In talking directly to individual clients, Cusick is advising them for the time being to increase saving rates, use dollar-cost averaging in investments, reduce debt and look hard at their spending .

“Don’t buy it unless you can afford it with savings and/or cash on hand,” he is telling them.

Robert J. Kuehl, a certified financial planner and vice president of H.C. Denison Co., Sheboygan, Wisc., believes an important lesson of the current market turmoil is that mutual funds, particularly index funds, are a weak investment.

“It’s time to get real” about index funds, he says “They’re terrible. The average investor in index funds hasn’t done well.”

The typical S&P 500 fund over the past 10 years has earned a little over 4% payback annually, and that includes dividends, he observes. Looking back to Jan. 2000, returns on that same type of fund would have averaged a measly 0.13% annually, Kuehl calculates.

“Look at the returns of the last 10 years and you see the average person is much better off paying off the mortgage, car and credit car debt” than putting money in mutual funds, he argues.

The current crisis makes a good case for concentrating on getting out from under credit obligations, he tells clients. Too many have been caught up in refinancing mortgages and otherwise taking on more debt, a trend that financial institutions have been encouraging, Kuehl says.

“The only time a banker is going to advise people to pay off their debt is when they don’t have any more money,” he observes wryly.

Aside from reducing amounts owed, he’s telling boomer clients right now to diversify into certificates of deposits and carefully selected stocks.

Bard Malovany, a certified financial planner with Sagemark Consulting, Vienna, Va., says diversification and active asset management makes sense for most boomers. But investors need to be careful with the asset manager they select during uncertain times, he says. “You want one with a history of recommending significant downside protection in the past,” he says

Malovany says to mitigate a client’s risk, prudent diversification considers not just stocks and bonds but also a variety of dissimilar asset classes, such as precious metals, managed futures and bonds.

Some mutual funds do very good hedging, and Malovany uses them, along with funds that mix long-term and short-term bonds and that “exhibit low correlation with the stock market,” he says.

“People are nervous, particularly about financial services and housing, as well they should be,” Malovany notes.

Still, he adds, stocks are not down as far as they fell in 2002, when they dropped 47%. On average, the market has been down 20% 1 out of every 6 years, he observes.

The tanking financial markets won’t spell disaster to clients who have followed investment strategies suitable for their age group, these advisors note. Certainly, some boomers who had been hoping to retire soon may have to put that off for another year or so. But if that’s the case, chances are they haven’t been saving enough anyway, even if the market had remained strong, they point out.