You decide to consult with a financial advisor to see if your savings plan for your kid's college education is on track. She takes a look at the investments you've chosen and notices what she considers a subpar mutual fund in your portfolio. She suggests a better fund for your needs. Sure, you say. You don't want to be stuck with a bum fund. She delves a bit deeper and asks about your insurance coverage, sharing a cautionary tale about a client she just met whose savings was wiped out when her spouse suddenly passed away. Her recommendation: Purchase a whole life policy before the roads ice over.

What's wrong with this scenario? A lot. Sure, she's got all the right plaques and certificates on the wall. And the insurance policy and the mutual fund she recommended are clearly better than what you had -- better for the advisor, that is. She earns a handsome commission for selling them to you. And you just bought bad advice.

Compare it to a meeting that goes like this: You decide to consult with a financial advisor to see if your savings plan for your kid's college education is on track. After explaining her fee structure, the planner asks you lots of questions about the black-and-white financial aspects of your life and then delves into some of your less-tangible money wishes for the future. Using the information you've given her, she prints out various college savings scenarios and specific account options, including fees, advantages, and disadvantages. She tells you that you have a few weeks to make a decision based on this fiscal year and advises you to take a little time to review your options. She also notes that there are a few year-end tax moves that would be advantageous.

Ahhh, much better.

How do you know if you got bad advice?
We hire professionals for their expertise and pay them for guidance on topics that are unfamiliar to us. And there's the rub: How can we judge if it's sound advice or advice that just sounds good?

Some red flags are more obvious than others. Here are a few that should send you running toward the exit sign:

  • A financial pro who insists that you relinquish all the thinking -- and the authority to manage your money -- to them.
  • A life insurance salesperson who seeks out your business offering a free consultation.
  • An advisor who is preoccupied with suggesting stock picks -- unless, of course, you specifically asked for them.
  • A pro who offers "exclusive access" to a "sure thing" investment, glossing over or completely ignoring the topic of risk.

Of course, the best salesmen are much more subtle when they pitch their services. With your money on the line, it's important that you vet your professionals. Doing the right reconnaissance makes all the difference in the world. Before you sign on the dotted line, shake hands, and say  "you're hired," make sure the candidate can answer the tough questions.

The four-question background check
How do you get paid? Obviously, you want to know how much the expert charges to dispense advice. But even more important is finding out how your advisor gets paid. Is the advisor paid via flat fee? Hourly? Asset-based? By commission? (Here's a guide to how money pros make their money.) The answer to that question is the easiest way to determine whether the recommendations you'll receive are based on what's best for your financial situation, or what's most lucrative for theirs. At The Motley Fool, we've been longtime fans of The Garrett Planning Network philosophy -- that financial planning advice should be free from conflicts, that products are sold without commissions, and service is billed on an hourly or per-project basis, not based on the client's net worth. (We recently partnered with Garrett to offer a discount for Fools. See details at the end of this article.)

What are your professional initials? Sadly, in most states any yahoo can call him or herself a "financial planner." It's your job to look for the seal of quality in the form of official designations. Look for designations such as certified financial planner (CFP), chartered financial consultant (ChFC), or certified public accountant (CPA) with a specialty designation as a personal financial specialist (PFS). These designations don't tell you the person does good work, but they do say the person has extensive training and experience. You can double-check their credentials and find out if there are any public disciplinary actions and how they were resolved via the FINRA BrokerCheck database. Keep in mind that even good brokers may have a few disputes on their record -- however, more than five is a red flag. Your state securities regulator might also provide background information on registered advisors.

Do you have the proper forms on file? Avoid any individual provider or firm principal who is not registered with the SEC or the state securities agency. Any person who provides financial planning services and manages investment assets of $30 million or more has to file Form ADV with the Securities and Exchange Commission. The form discloses the advisor's education and business background, compensation, and investment methodology. (Those who manage less must disclose similar information either with the SEC or their own state's security agency.) Along the same lines, any professional who sells securities will have a Central Registration Depository (CRD) file. (You can get CRD information through your state's securities agency.) It gives you a 10-year history of the provider, including any disciplinary actions taken against that person.

Are you experienced? How long has the financial professional been doing business, and has he or she done similar work in the past? Ask the advisor to provide client references. But instead of asking these hand-picked clients how they liked working with the advisor, ask them what they didn't like about the services they received or what areas they think their advisor isn't as strong in as others.

Gut-check time!
In addition to those four items, you'll want to find how your relationship with the advisor will work. How often will you meet? After you provide the needed information, how much time will it be before you receive a prepared assessment? What form will it take? If you're interviewing advisors for an ongoing relationship (and not just to handle a single issue), ask how often you'll receive tips or updates throughout the year.

And, finally, there's the intangible but important gut check. Do you click? When you ask questions do you understand the answers? When you ask for clarification, does the subsequent explanation make more sense? If not, move on to the next candidate. Your money is much too precious to waste it on bad advice.

Need advice? Start your research here
If you're looking for a trustworthy financial advisor to help you sort through a specific situation or provide an overall financial plan, the Garrett Planning Network is offering a limited-time 10% discount for new Motley Fool clients. Just click this link, search your state, and look for the Motley Fool icon to identify participating advisors.

Dayana Yochim asks all job candidates this very important question: "Do you believe in ghosts?" Mostly just to see their reaction. The Fool's disclosure policy sleeps with a nightlight on. Yes, still.