As we prepare to close the chapter on 2008, few tears will be shed as we leave a truly dreadful year behind us.Before we consign the year to the dustbin, however, let's remember the Spanish philosopher George Santayana's phrase popularized by John F Kennedy in the early 1960s: "Those who fail to learn from the lessons of history are doomed to repeat them."

Here are twenty lessons we can take from 2008 to help guide us going forward. In a few cases, these were new lessons - in most, however, they were reminders of things we had learned in the past but perhaps forgotten.Risk Management

1. Mispricing of risk

Arguably, the root of the market downturn was the dramatic mispricing of risk by companies in the financial sector. Going forward, there will be much greater focus on the level of risk all companies assume and risk management will be Job One for every financial institution in particular. There will also be much greater emphasis by companies on transparency, managing complexity and ensuring that incentives for management are aligned with mid-term shareholder interests.

2. A real estate bubble

It's now evident that much of the U.S. housing sector and the subprime mortgage industry that was built around it was just as much a bubble as the high tech sector in 1999 - a reminder of the truth of the old adage that "if something seems too good to be true, it probably is."

3. Translating theoretical conversations into reality

2008 translated theoretical conversations about downside risk into reality and has changed many investors' views about the level of risk they can live with. These investors will be looking for advisors to be much clearer about the level of risk in recommendations - for the immediate period ahead, expect "How risky is this investment" to be one of the most common questions you encounter. Be proactive in initiating a discussion around risk in all of your conversations.

4. Lessons about owning stocks

The lesson was reinforced that stocks are not the place to be unless you have a time horizon of at least seven years, the normal length of a business cycle. After the income trust implosion of 2006 and the hit that banks and insurance companies around the world took this year (Canadian banks actually performed well compared to most countries), we were once again reminded that there is no such thing as a truly "safe" stock in the short term.

5. The perils of narrow sectors

The dramatic hit taken by U.S. banks and resource stocks was also a reminder of the risks of undue concentration in one sector, no matter how safe it might appear - and particularly of the inherent volatility of commodity-based companies.

6. The impact of leverage

We were reminded that the lessons about leverage are just as relevant for investors as for financial institutions - borrowing to invest cuts both ways, boosting return during rising markets but dramatically increasing losses in downturns.

Money management

7. A new level of volatility

The 7/24 world we've entered has changed markets forever - and with the continuing presence of hyper short term oriented hedge funds, it appears that we're going to have to get used to historically high levels of volatility. (It seems that the definition of short term has changed; short term investing used to mean investing for years, then months, days and hours - today short term can mean minutes and sometimes seconds.)

8. An interconnected world

In the period leading up to 2008, there was much conversation about global economies and stock markets becoming "decoupled" - and in particular less dependent on the U.S. The reality of 2008 reminded us our world continues to be very much an interconnected one - and that there is no escaping major downturns in leading economic sectors such as the U.S. or Europe.

9. The meaning of diversification

We got a lesson about the virtues of true diversification - that if protecting ourselves from market declines is a priority, while it is important to have our stocks diversified across different sectors and markets, real diversification only comes by also owning quality bonds and cash. (Note that if very risk averse, investors should only own bonds with short terms to maturity to protect against a rise in interest rates.)

10. Maintaining discipline

When it comes to asset allocation, it's critical that we stick to our guns and maintain our discipline - even when clients push us to chase hot sectors or boost equity weightings after periods of strong returns.

11. "It's different this time"

Some of the hedge fund and private equity investors who were lionized over the past five years and whose performance appeared to defy gravity emerged greatly humbled - again a reiteration of the danger of the words "it's different this time."

12. The key role of confidence

Even when it seems we've entered a new world, the old truths still apply. The most important element for economies and for markets to work is trust and fundamental confidence. We are unlikely to see a strong economic recovery until we see a return of confidence - confidence by banks in lending to consumers, businesses and each other; confidence by businesses in hiring and investing; confidence by consumers in spending and investing.

13. A reminder about fear and greed

The opposing emotions of fear and greed continue to drive the investing climate just as they always have - and we continue to see the pendulum swing between those two, never stopping in the middle. This creates opportunities for investors who are able to control their own emotions and take a disciplined approach.

Communications and relationship management

14. Financial planning

Whether advisors took a financial planning approach or used a more traditional, transactional tack - performance suffered and there were lots of difficult conversations. Where plans do seem to be making a difference today is in the opportunity to have informed conversations about where clients stand relative to their long term goals (quite often clients are not as far offside as they fear) and in cases where they're falling short the ability to discuss the options available to them. Without a financial plan in place, it would simply be impossible for advisors to have these longer term conversations.

15. A whole wealth approach

One group of advisors who were not as hard hit as most were those who take a total wealth approach, focusing not just on investments but also on tax and estate planning, insurance protection needs, cash flow management, and charitable and legacy issues. Doing this didn't mean that clients weren't still anxious to talk about their portfolios - but taking a broader approach allowed advisors to add value in other areas and to have conversations on topics other than investment performance.

16. The virtues of consistency

Advisors were reminded of the importance of creating a baseline of consistent communication in good markets and bad - with a priority on increasing communication in tougher times. By having consistent quarterly phone calls, letters or conference calls, advisors were able to address client concerns as part of their normal communication pattern, without appearing to be panicked or causing undue alarm among clients.

17. The importance of being proactive

In tough times, it's essential to call clients before they call you - the dynamics change fundamentally if clients call first. In those conversations, it's important to go to clients with a clear point of view and proactive suggestions, delivered with confidence and conviction.

18. Strategies to borrow trust

In times like these, the credibility of financial advisors and financial institutions is often stretched. That's why advisors need to look for ways to reinforce their credibility by buttressing recommendations with backup articles from trusted sources such as Warren Buffett or publications like the Wall Street Journal.

19. Addressing emotional issues

Before talking to clients about the nuts and bolts of their portfolios, advisors often need to first address their emotional response to market conditions and damage to their portfolios. In many cases, advisors have had to develop their skills in this area on the job. An especially important ability in this market was sincerely demonstrating empathy and asking questions to get clients to open up about their feelings - and then to have the patience to really listen to the answers.

20. Rebuilding our goodwill bank account

When times are good, advisors have the opportunity to build relationships and goodwill; in tough markets such as those over the last while, that goodwill is essential to buy patience. The last year has generally seen our goodwill bank accounts depleted; when we return to better markets, rebuilding these needs to be a priority.

As we move into a new year, it's important that we focus our energies forward - but also to ensure that we take with us some of the costly lessons from this past year.