You work hard. You scrimp and save. You sacrifice for your kids. You surely don’t want to worry about people stealing your money! It sometimes seems like evil financial doers have mushroomed in our lifetime. Heck, over the last 10 years there has been a perpetual parade of perpetrators, at least the ones we know about, including Bernard Madoff, Kenneth Lay, Allen Stanford, Nick Leeson, Marc Dreier, and Bernard Ebbers. But, as you undoubtedly know, money scammers have been around for a very long time.

Charles Ponzi, where the “Ponzi” scheme moniker came from, swindled people out of millions of dollars in 1920. He promised investors a 50 percent return on their money in 90 days! Mr. Ponzi didn’t even invent the Ponzi scheme, which is when old investors are paid with newer investors’ money since there is no real investment made. This kind of stuff has been happening for centuries.

How can you protect yourself from people wanting you to part with your money rather than protect it?

First of all, no matter who recommends an advisor to you, you need to check the person out yourself. Do not accept anyone else’s word when it comes to something as precious as your money. Do some work: Question, Listen, and Observe.

Ask the advisor to explain to you their investment philosophy. If he or she ignores the question or talks down to you or in complex terms, be very concerned. The advisor should be able to explain it to you in plain English.

If the advisor promises investment returns that sound too good to be true, then they probably are! And if past returns are consistent from year to year, be extra concerned since the stock and bond markets are anything but consistent from year to year.

Never, never ever write a check payable to the individual advisor directly. Make sure he or she has a custodian firm that manages clients’ trades, statements, and tax reporting. It is virtually impossible for an advisor to cook the books if an outside custodian handles the accounting and paperwork.

Check to see that the advisor is registered with the Securities and Exchange Commission and ask to see their filing which is called an ADV Part 2 document. This spells out detailed information about his or her experience and how they run their business.

Finally, observe the advisor’s personality and lifestyle. Is she pushy? Does he insist you must buy such and such a product immediately before it’s too late? Does she talk more about products she has for you than what your unique objectives, expectations, and constraints are? Can he clearly explain the investments he is recommending? Does she live a lavish lifestyle?

If your stomach feels the slightest bit queasy through the interview process, trust your gut! It’s the best red flag-ometer you have!

To encourage readers to take charge and be active in their financial security, and have a real experience with a professional advisor, I am offering a thorough asset review for readers who have the best questions that I can use for my future columns.

• Ellen Le is the founder and president of Ascend Investment Management (www.ascendinvmgt.com). She has been a financial planner and investment adviser for more than 20 years.
I look forward to receiving your questions about anything related to investments, retirement planning, or the economy. Send them to: ellen@ascendinvmgt.com and write “Chadds Ford Live” in the subject line.