Your sister's Fisher Investments experience does not appear to be unique. I was also sold by FI's claim that they would protect me from bear markets and invested with them in December of 2007. I quickly realized that this was a promise that they were unlikely to be able to keep and fired them soon thereafter.

My simplistic strategy after firing Fisher Investments has been to sell over time positions in that portfolio that have appreciated. So far, I have been able to get out of roughly 1/3 of their positions (mostly during the suckers rally in March) and as of this writing this strategy has resulted in an approximately 4% performance improvement over keeping their original positions in tact.

If the capital gains from the sale of appreciated securities you described were all taken in 2007 tax year, that damage has already been done and, as far as I know, there is nothing she can do about it retroactively. On the other hand, any 2008 capital gains, your sister could offset by selling some of her loosing FI positions. (She should consult her accountant for advice on these tax matters.)

Nobody can tell you with certainty what is the best course of action for your sister to take from here. (I am not a financial adviser and even the best financial advisers are wrong some of the time.) Certainly, stocks can retreat further from current levels. It is also possible, for example, that irrational euphoria takes over markets as Obama wins his race for the White House and stocks recover.

If your sister does not feel comfortable making her own money management decisions and she is not willing or able to find an alternative to FI, it may be best for her to just stick with FI and do absolutely nothing.