By The Editors of Wealth Management Exchange

Recent events on Wall Street and in Washington have left investors badly shaken. It seems that the paramount concern is not that so many investment vehicles have been battered by the meltdown of once reputable investment firms, but the widespread anxiety that more bad news is on the horizon.

Top advisors all agree that now is not the time to panic but to keep your sights fixed on your long-term investment goals. Still some careful, strategic rebalancing of your portfolio may be called for. As in most times of market upheavals, those who have a nicely diversified portfolio reflecting their sensitivity to risk are best positioned to ride out the storm.

In these uncertain times, it is more important than ever for investors to take an active role in investment planning. The media may advise you to "sit on the sidelines" until the danger has passed, but most of us already have substantial investments in the current market, so the key is what we can do now to protect our portfolios from further risk and identify new opportunities in the current environment. Here are a few key questions to ask your advisors:

Many of us have bank accounts that exceed the $100,000 FDIC insurance limit and substantial money market and bond funds that we've traditionally thought of as "safe". It is prudent to review your cash and money market accounts and understand what type of insurance is provided and up to what level. Also, what are the underlying securities. Some money market funds own exclusively Treasuries and other government insured instruments. Other money market funds include corporate debt to improve yields but this adds a level of risk.

It is wise to have your financial advisor's legal department send you a letter explaining how your account and individual investments are protected. As an example, Sanford Bernstein & Co. recently emailed their customers a memo labeled "Questions Relating to Account Security," which provided a detailed yet clear explanation of how their investments are protected in case the firm should run into major difficulty. The letter reassured clients that the SEC requires broker-dealers "to keep clients cash and securities separate and distinct from our own" and by law, "remain the property of the customer."

The media frenzy over the recent market turmoil would have us believe that we are on the verge of a new depression. So it is nice to hear that your investment advisor believes the worst is over and that you will turn out okay in the long-run because your portfolio is diversified. That is the approach that most wealth managers are taking with their clients.

Still, a savvy investor wants candid feedback. One firm recently wrote its clients, "We hold no illusions. There are many headwinds present in the environment that will need to run their course. So righting the economy and the capital markets will take time, but the necessary things have begun to happen.

The answer is probably no. Many investors have gotten caught up in the anxiety that is gripping the public. It is not wise to make an important decision regarding your relationship with an advisor when emotions run high even if you believe that your advisor should have built the proper safeguards into your portfolio to withstand market volatility. If your advisor didn't build an appropriate portfolio for you with adequate risk protections, you probably should start looking for a new advisor and transfer your assets when you find the appropriate one, but it is often a mistake to sell all your holdings before you know where you want to redeploy them. The people with the worst long term performance tend to exit at market bottoms based on emotion and miss the sudden and often unpredictable recoveries.

It's always a good idea to evaluate your advisor's track record, taking into consideration good and poor investment periods. And while it's not your advisor's fault that the market is down, it is his responsibility to listen to you and construct a portfolio that meets your long term goals. If you told your advisor that wealth preservation is of paramount importance and he ignored your wishes and put you in a high octane portfolio that is riskier, you have justification for being angry.

There are global standards on how track records are to be calculated and presented. The CFA Institute's Global Investment Performance Standards (GIPS) are the criteria that institutional investors require of their investment managers. These standards allow clients to evaluate track records from any firm in the world that adheres to them.

In much the same way that public corporations have to present accounting data in accordance with Generally Accepted Accounting Principals (GAAP) in the U.S., investment managers have to present their track records in compliance with GIPS. In this way, it is possible to make objective and consistent comparisons across managers and not rely on an advisor's presentation or sales skills.

History shows that investments made in moments of distress are often the most rewarding. Sure the payback may take a little time. Remember the Resolution Trust Corp? It was set up by Congress to sell off billions of dollars in real estate from the banking crisis in the late 1980s. Many investors reaped huge rewards purchasing real estate at bargain basement prices. And in today's market, there are very good companies with strong franchises and financial outlooks, that are trading at bargain prices. This is the kind of market where savvy investors like Warren Buffet are deploying capital vs. retreating.