THE VERY WEALTHIEST INVESTORS USUALLY HAVE their pick of all the newest and shiniest investments, from oil-well partnerships to emerging-market real-estate trusts. But when push comes to shove, their goal nowadays is about as old-fashioned as could be: to avoid losing money.

It may have been six years since the bear market began to bite, but the memory of some of the grueling times that followed hasn't begun to fade among ultra-high-net-worth investors. As a result, capital preservation is job No. 1 for the top financial advisers at brokerage firms and banks. "Our clients are rich, and they want to stay rich," says Lori Van Dusen, a vice president of investments and financial adviser at Citigroup Smith Barney. "They may want to support their lifestyle or pass on their wealth to their children and grandchildren, but for them, an adviser isn't there to figure out how to get them the biggest exposure to the hottest market."

An adviser who can help a multimillionaire preserve capital and invest sensibly year after year usually gets rewarded with a big pile of assets to handle. And the best of the bunch wind up on Barron's annual list of the top 100 financial advisers (see the rankings¹). R.J. Shook, an independent researcher who compiles the list for Barron's, focuses on financial advisers at brokerage houses but increasingly has included banks, as well. Partly as a result of broadening the universe, 31 new names appear on the list this time, and many of the repeaters have swapped positions.

The rankings are based on both the size of an adviser's book of business and the quality of service provided. After receiving more than 7,000 nominations from across the country for this year's list, Shook scrutinized regulatory records and internal records, and talked to the advisers' colleagues and clients. He settled on the 100 advisers who he believes have the greatest assets under advisement in the industry and who follow what he considers to be the best practices. Shook, who writes about the brokerage and advisory industry extensively in his Winner's Circle books, says he receives no payment from the financial industry for the survey, though the firms may buy his books.

There's a new No. 1 this year: Mark Curtis of Smith Barney's Palo Alto, Calif., office. No stranger to followers of the rankings, Curtis has consistently been a top performer and now helps clients invest some $12 billion of assets.

Longtime No. 1 Martin Shafiroff of Lehman Brothers doesn't appear at all, because Lehman declined to share data on any of its advisers. While Shafiroff and other Lehman pros may well belong on this list, Shook was unable to name any without Lehman's cooperation. We hope Lehman reconsiders next year.

When talking with advisers throughout the top 100, the increased importance of capital preservation comes through loud and clear. "Seven years ago, the markets were driven by greed; five years ago, they were driven by fear," says Gregory Vaughan, managing director of private wealth management at Morgan Stanley's office in Silicon Valley. Now, he says, clients are more motivated by the concept of managing risk than by either extreme emotion. Of course, the pendulum could swing back toward greed if the stock market keeps rallying.

Right now, just getting steady returns is no easy task, as financial markets react swiftly to everything from soaring crude oil prices to a seemingly endless string of interest-rate hikes by Federal Reserve policymakers. Advisers report that their clients, many of whom are multimillionaires or billionaires, are focusing not so much on the upside of such events but on the factors they feel may hurt their returns. Will their real-estate holdings suffer when the supposed "bubble" finally pops? Are there simply too many hedge funds competing for ideas for that market to continue generating above-average returns?

In the following profiles, Van Dusen, Vaughan and three of their colleagues lay out the strategies they and their clients are deploying in the face of those conditions. In the push for stability, the advisers are generally recommending more diversification, especially into foreign markets. And while they aren't completely above chasing the markets of the moment, like timber, they do so in their own, cautious ways. The rich, after all, are different.

Jeff Erdmann
Merrill Lynch
Rank: 21, Assets: $3 billion.

The marching orders that Erdmann gets from most of his ultra-high-net-worth clientele are simple: "Don't mess with my lifestyle." That means seeking good performance but not taking too many risks. "They are not interested in hearing that they have to buy a smaller boat this year because the market isn't doing that well," he says. "And I'm going to make sure they never have to do that."

Erdmann, who works from an office in Greenwich, Conn., first sits down with his clients to discuss everything from their cash-flow needs to their estate-planning requirements. Only then will he start to draw up an asset allocation and investment plan, a document that can differ greatly from one client to the next.

There are some common themes, however. For starters, Erdmann expects overseas markets to outperform the U.S., and is seeking out cost-effective and diversified vehicles that allow his clients to profit from that across the board. In the real-estate sector, for instance, he is trimming exposure to domestic real-estate investment trusts in favor of international REITs, and he is seeking out savvy managers to handle ever-growing allocations to international stocks, particularly in markets like India and Japan.

He doesn't believe in just buying an index-like portfolio of stocks in a particular overseas market. "We look for managers that have distinct styles, such as concentrated growth or deep-value investing," Erdmann says. "Those that have outperformed are those that are more flexible and nimble and have put assets into Asian, Latin American and Canadian markets in the last year or so."

Erdmann is allocating the largest chunk of assets to overseas markets that he can recall in his 22 years of managing money for Merrill's wealthy clients -- up to 30% of stock portfolios. To offset the higher risk associated with volatile emerging markets, he says he's "bullish on boring" when it comes to the rest of a client portfolio. He is enthusiastic about companies that devote an increasing portion of growing cash flow to paying dividends, while warning against chasing yield at all costs. "Getting suckered into that leads to disaster," he warns.

Erdmann has also sought out closed-end mutual funds trading at a discount, and routinely finds ways to use options to enhance income and reduce risk associated with some stock positions.

Erdmann and his 14-person team, which includes three senior bankers, oversee some $3 billion for 125 families, many of them headed by former CEOs or founders of public companies.

Just as he himself forms a mini-institution able to draw on the resources of Merrill's private-banking division, he views his well-heeled clients as institutional investors. Says he: "Our goal is to provide them with access to the same range of investment products and strategies, at the same low costs, that a pension fund or endowment could command."

Lori Van Dusen
Citigroup Smith Barney
Rank: 55, Assets: $3 billion

From her home in Rochester, N.Y, Van Dusen roams across the U.S. Northeast to manage the endowment funds of some two dozen colleges -- and that's only part of her job. She also handles the investment strategies of about 20 wealthy families or family offices nationwide and in Europe.

Van Dusen doesn't try to cover all that ground herself. Like many advisers catering to the richest investors, Van Dusen heads up her own small group of advisers and experts in everything from taxation to estate planning, under the umbrella of a major brokerage firm. "It's not possible to serve this market fully without a team," she says. "Without my team, I would be tearing my hair out."

She has the backing of three investment consultants, four people devoted to technical research and three operations staffers. "There can't be one kingpin," Van Dusen says. "My clients need to feel that there is a depth of expertise available to them."

Van Dusen joined the world of asset management nearly 20 years ago, after deciding that selling copying machines for Xerox wasn't her dream job. She discovered that the ever-changing nature of the financial markets and money management was far more compelling. After two decades watching markets deliver all kinds of financial shocks, ranging from Japanese deflation to the Internet bubble, "you become very aware of the impact that one exogenous shock can have on an entire portfolio, and that imposes some discipline on how you structure a portfolio for your clients."

These days, Van Dusen is constantly being presented with new products and ideas for high-net worth clients. She greets many with a skeptical eye. "You always have to ask, are they truly different, will they really complement the portfolio?" One new opportunity she has opted to pursue is the secondary private equity market, identifying top managers who specialize in purchasing interests in existing private equity funds -- a still-emerging part of the venture and buyout fund landscape.

"Overall, what I am looking for is a way to build a portfolio that combines different sources of returns, that doesn't link it to any one economic factor," she explains.

To do the job well, she says, "you need to be emotionally intelligent" and ask the right questions of clients.. The newly wealthy clients who arrive on her doorstep are a case in point, she says. "They figured that once they had that liquidity event and had new wealth, things would get easier," Van Dusen says. "Instead, they find that the challenges of managing the money are really complex, that in some cases, the money is controlling them."

Dale Reed
JPMorgan Private Bank
Rank: 42, Assets: $12 billion

Reed's rich clients have taken big risks to build their fortunes, forging real-estate empires, launching cutting-edge medical or biotechnology firms or battling to the top of the entertainment industry. "They created that wealth, and it has a different kind of meaning for them than it would for someone who has always been wealthy," says Reed, a managing director at JPMorgan. "Now, preserving that wealth is at the forefront of their minds."

For Reed and his colleagues at JPMorgan's Century City office in Los Angeles, portfolio diversification is the vital element to accomplishing that goal. "Once we have established an asset allocation for a client, and built a diversified portfolio based on that, we will look to add value via tactical investments," he explains. The approach gives Reed's team a way to boost the portfolio's return without taking on an inordinate amount of risk.

The biggest shift that Reed has overseen in his clients' portfolios in the past 18 months is a bigger allocation to international equity. A few years ago, the average exposure was around 9%; now that has ballooned to 15%. In search of ways to implement this directional bet, Reed ended up turning to structured products. "If you believe, for instance, that while Japan has run up in value, it still has some more upside ahead, we will structure some kind of annual-review note that extends for 13 or 15 months," he explains. The notes would give the investor downside protection, but use leverage and be structured in a way that ensures the client still captures the maximum potential upside, if the market continues to rally.

In general, Reed says it's been difficult to find undervalued markets or sectors. "As a result, there is no one market I would say we have a particular focus on; we think it is important to build quite a diversified portfolio. But Reed doesn't see any big risks on the horizon, either. "Profits remain strong and companies have lots of cash on their balance sheets," he says.

One trend that Reed is helping his clients capitalize on is the flattened yield curve. For instance, clients can use low-cost long-term debt to lock in financing for the purchase of assets that may generate a stronger return over the lifetime of the financing, whether that is real estate, private equity or other opportunistic investments. "We have done a lot of that for clients over the last 18 months or so," he says.

Gregory Vaughan
Morgan Stanley
Rank: 3, Assets: $10.5 billion

Nearly 25 years ago, Morgan Stanley, eyeing the beginnings of what would become the technology boom in Silicon Valley, decided to open up an asset-management practice to cater specificially to the region's growing ranks of wealthy entrepreneurs. Vaughan was one of the first to climb aboard. Now, based in an office on the fabled Sand Hill Road, he oversees some $10.5 billion of assets.

Most clients walk in his door with large sums resulting from selling a company or retiring with lots of stock and options in a company, perhaps one they founded. "The first time we sit down with them, we try to find a way to bulletproof the portfolio, so that their financial future" isn't inextricably linked to the fate of a single sale, Vaughan says. That, he says, usually means designing a portfolio that doesn't mirror any existing exposure, such as a controlling stake in a company. "If a client has a lot of wealth tied up in technology, the last thing he needs us to do is come up with a portfolio of technology stocks," he says.

The core of every portfolio remains stocks, but for a technology entrepreneur, "we will build a diversified portfolio of stable growth companies that have yields that will generate cash flow and that aren't correlated with his key asset." Then he will seek out interesting opportunities that will help boost returns at the margin. Last year Vaughan steered clients into an Asian private equity fund investing in companies expected to benefit from a surge in consumer spending in China. He also hired a veteran manager to oversee a timberland investment partnership.

Vaughan also thinks commodities and currency-related investments can be interesting. But when he puts client capital to work in those areas, he often does so through structures such as principal-protected notes, which may cap the upside potential but limit losses or guarantee that investors won't ever lose their original investment. "Our clients don't need or want to take excess risk to get excess return," he says.

The issues for some clients are well off the beaten path. One client, he says, was in the process of ordering a large customized boat that would be built overseas, a project that would call for a major investment over a period of several years. "Once he decided to build in New Zealand, he came to us to ask how to go about setting aside the capital for the project," recalls Vaughan. Morgan Stanley's global team came in handy when Vaughan sought advice before making the recommendation that keeping the bulk of the funds in New Zealand dollars and the rest in U.S. dollars would be the best strategy. As it turned out, the U.S. dollar fell against the New Zealand currency. "It saved him a lot on the cost of building that boat," says Vaughan.

Charles Zhang
Ameriprise Financial Services
Rank: 46, Assets: $800 million

Charles Zhang's 11-year-old son, Mitchell, already has his eye on taking over his father's financial advisory business, a team within Ameriprise Financial Services. "He says it offers freedom and the opportunity to make a lot of money," says Zhang, who has worked for Ameriprise in Portage, Mich., since 1991.

The Shanghai-born Zhang laughs wryly at the idea of the job being an easy one: He struggled for years, one cold call at a time, to build up his current practice, beginning with a pitch to his college economics professor. "I had no natural client base I could draw on," he recalls. "People didn't know who I was.''

Fifteen years later, he and his wife, a CPA and tax specialist, lead a team of 10 people and manage some $800 million in assets for more than 600 clients. The majority of these are retired executives or professionals, with senior executives, physicians and college professors in their 40s and 50s making up most of the rest.

Zhang keeps a keen eye on everything from clients' asset allocation to mutual fund expense ratios. He won't put assets into a fund with annual management fees of more than 1%, and often gravitates to exchange-traded funds and other vehicles that offer low-cost ways to obtain exposure to specific markets.

For international diversification, he favors Barclays Global Investors iShares. He sees the ETF as a way of giving clients exposure to specific markets, such as Japan, while achieving diversification and maintaining a greater degree of liquidity.

Right now, Zhang is positioning his clients for a long-awaited and much-predicted rebound in U.S. large-cap growth stocks. "Valuation-wise, it is looking very attractive," Zhang says. While he says he is eager to identify undervalued market sectors like this, he hastens to add that clients shouldn't expect him to do their market-timing. "I help them deal with risk and invest for the long-term."

The author of a 2003 book titled Make Yourself a Millionaire, Zhang hopes that his clients and potential clients will avoid traps like market-timing and chasing recent winners. Says he: "Long-term success comes from maintaining diversification and discipline.'' That's never been more true than now.

SUZANNE MCGEE is a Brooklyn-based financial writer.