As the markets creep closer to “bear” status, financial advisors see managing fear as their top priority.

Many financial advisors are telling nervous retail investors to sit tight and keep their emotions in check as they watched stock markets around the world sell off on Monday and early Tuesday, and with bears and bulls struggling this morning for the U.S. stock market. In some cases, new clients have canceled appointments due to nervousness about the market.

And it’s not just clients that need hand holding: experienced financial advisors are talking to their younger colleagues, trying to assure them that this, too, shall pass.

Some advisors are encouraging clients to take a defensive stance, moving some of their assets into cash or bonds to protect them from the market’s decline.

To be sure, many financial advisors and clients remain confident that the markets will bounce back eventually, continuing the upward trend that is a staple of the U.S. financial system. Some cite the increased focus on asset allocation since the 2001 technology bust as preventing nervousness from becoming outright panic.

But that doesn’t make things easier for the near-retiree watching his savings dwindle.

“The market fluctuations create a much higher level of anxiety because they no longer have a salary coming in,” said Craig Rappaport, a financial advisor with Janney Montgomery Scott in Radnor, Pa., who said he’s hearing more from his clients who are at or near retirement than from other age groups. “They tend to feel more vulnerable.”

Even clients who aren’t close to retirement are getting skittish. One broker at Citigroup Inc.’s (C) Smith Barney said clients who just put money into the markets are frustrated, and that some potential new clients have canceled appointments because of the market’s uncertainty.

Part of that anxiety stems from helplessness, Rappaport said: “This is a market that’s being pushed around by the big boys,” he said, noting that short-term maneuvers may work well for hedge funds, but not for retail investors. “When you look at markets in the past, it’s generally people who feel they need to do something that end up on the losing end of the trade.”

An advisor in the southeast U.S. at a major brokerage firm said advisors who reach out and are responsive to client concerns during market turmoil can pick up new clients, provided clients’ investment returns aren’t seriously lagging their benchmarks.

Brokers aren’t immune from fear, either. Veteran financial advisors who have seen the markets’ ups and downs over a decade or more are holding the hands of their junior colleagues, said one Merrill Lynch & Co. (MER) financial advisor.

“We’re telling the younger brokers not to panic because they haven’t gone through this,” he said.

Some financial advisors said they’ve seen the market’s decline coming for a while, and adjusted their clients’ portfolios accordingly.

David Kudla, a financial advisor in Grand Blanc, Mich., said his firm now has the highest levels of cash it has had in the last three-and-a-half years. The market reached a high on Oct. 9; he said his firm started to increase its cash position within a week.

William Supper, a certified financial planner at Massey, Quick & Co., a wealth management firm in Morristown, N.J., said he and his colleagues have also increased the cash portions of their clients’ portfolios to reduce volatility.

“Coming into this, we’re very defensively positioned,” Supper said.

In addition, Supper said he’s been shifting client portfolios toward long and short equity positions so they’ll be prepared for buying opportunities should they arise. Now Supper is trying to figure out whether the market is close to the bottom and whether buying makes sense yet.

Indeed, the concept of buying stocks on sale seems to be another message that financial advisors are trying to get their clients to absorb in the down market. Tom Orecchio, a principal with Greenbaum and Orecchio, a wealth management firm in Old Tappan, N.J., said he’s telling clients, “We’re going to buy it as it drops and sell as it goes up. That allows us to consistently and objectively buy low and sell high.”

The other key to quelling clients’ fears is to focus on asset allocation and to walk them through their portfolios to see if rebalancing would make sense.

“You need to have a big enough umbrella to keep dry when it’s raining like this,” said Joe Montgomery, a financial advisor with Wachovia Corp.’s (WB) Wachovia Securities in Williamsburg, Va. “We’ll revisit those (portfolios) and make sure they’re properly positioned to continue on in their happy retirements. If we’ve done a good job of explaining, they understand they’re in the right position.”

Others are looking on the bright side. One broker at RBC Dain Rauscher, a unit of Royal Bank of Canada (RY), reported that his office phone was ringing off the hook before the market opened Tuesday. Clients were anticipating “a 600-plus” point drop in the market, he said, “But right now, it’s only down 260.”