Responses to a current problem often create new problems.

I fear that the way a lot of financial advisors have responded to the financial turmoil may turn out to be another example of that. Following are three recommended solutions.

One advisor response to the recent market upheaval has been to recommend more conservative portfolios for retirees. A survey of financial advisors that my firm did this year found that 72% always or often recommend that clients entering retirement shift to more conservative investments. That’s up from 63% in 2007.

Similarly, 78% of advisors in 2009 said they suggest retirees reduce exposure to equities as they age. Two years ago, only 59% of advisors recommended that.

It is easy to understand the movement to more fixed investments: The recent market downturn has been extremely painful and has made many investors anxious. Thus, even though retirements are becoming longer and more expensive and even though the proportion of people who have not accumulated enough for financial security is growing, a number of advisors are recommending (or planning to recommend) portfolios having conservative investments.

This creates a foreseeable problem. Historically, conservative investments have produced lower returns than equities over the long term. Since retirement is, most often and hopefully, long term, those portfolios are likely to fall short of retirees’ long-term goals and needs.

If retirees become even more conservative investors, they will need new strategies to help provide the financial security so important to them. Here are three ideas.

First, if retirement portfolios are likely to produce less income, it becomes more important to get more retirement support from financial products bought prior to retirement.

One way to do this is to design financial products that people need while working to provide more benefits when they are retired. This can be done by designing products that transform at or during retirement. How about a life insurance policy that starts providing lifetime monthly income at the insured’s age 80, or a disability insurance policy that transforms to long term care insurance at a preferred rate at the insured’s age 65 or retirement?

A second approach is to encourage people in their late 40s and early 50s to buy financial products they will carry through retirement. Buying at earlier ages reduces the cost of the coverage in retirement.

Take LTC insurance, for example. The earlier it is bought, the lower the premium that is required during retirement. There is a further advantage: even those in the later working years of the early 50s to mid-60s do have a not imperceptible risk of needing LTC. Buying the coverage early can turn out to be extremely useful for them.

The workplace is a good venue for agents to use to present this coverage. There is ample evidence that many companies understand that their employees are concerned about the potential cost of LTC. Indeed, many companies are now losing productivity because the LTC their employees are providing to elderly parents is cutting into the hours the employees put in at work. So companies are sensitive to this issue.

However, research by my company has found that most employee benefit decision makers have not been approached by a financial advisor about offering LTC coverage as a voluntary benefit.

The workplace is an efficient site for reaching pre-retirees about LTC and other products that can be carried through retirement.

The third strategy is to make the fixed part of the portfolio more effective.

A great deal of attention has been paid to the equity side of the portfolio, but very little on the composition of the fixed part. Yet if the fixed side is where most of the money will be invested in retirement, it is important for it to produce as much as possible.

There are a number of ways to do this. One of is to allocate some assets to life annuities. A few months ago, for instance, a couple, both age 80, could invest $100,000 and get an annual income of $2,350 on a two-year bank certificate of deposit or $5,080 on a 10-year corporate bond (AAA). However, this same couple could get an income of $10,220 a year from a life annuity and have it guaranteed for life.

The next generation of retirees will not want to end life in extreme frugality, but it appears that many are destined for that, especially those living longer than average.

If portfolios become more conservative, advisors and financial services companies should develop products and strategies that help retirees derive the most efficiency they can from the available financial products.

Mathew Greenwald is president of Mathew Greenwald & Associates, Inc., Washington, D.C. His e-mail address is MathewGreenwald@greenwaldresearch.com