If you're searching for a financial advisor, here are some red flags to be aware of as you shop around:
1. An advisor who doesn't listen
You should know precisely what questions you want answered -- and what you're paying for -- before you write that first check to a financial pro. (We play Fool Shrink and help you unearth your specific needs in "When to Get Advice.") When you ask questions, you need to understand your advisor's answers. If you don't, you need to be comfortable admitting as much, and when you ask for clarification, you should expect the subsequent explanation to make more sense. Be wary of somebody who either desperately wants your business or can't "lower themselves" to your level. Oh, and if a life-insurance salesperson seeks you out by offering a free consultation, the right answer is always "No, thank you." Trust me on that one.
2. "Please sign here. I'll explain later."
It goes without saying, but we like to repeat ourselves: Don't sign anything that you don't understand. Don't write out checks directly to the planner for financial products and investments. Most importantly, don't sign for a "discretionary authority" unless you know exactly what you are doing. With discretionary authority, a planner can buy and sell investments without consulting you ahead of time.
3. Pros masquerading as pros
It pays to check up on professional credentials, and it can save you a few calls to the Better Business Bureau before it's too late. Don't rely on the simple title "financial planner." Even the shadiest of characters are free to call themselves financial planners. However, to use the title of certified financial planner (CFP), for example, a candidate must pass a two-day exam, agree to abide by certain ethical standards and financial-planning practices, and -- to maintain the license -- obtain 30 or more continuing-education units, two of which must be on the topic of professional ethics, every two years.
Getting a CFP is not the only financial-planning credential one can hold, though. To learn more about other credentials and other ways to check up on the pros, talk about the warning signs to watch for with your financial advisor. You can also learn much more about finding a good advisor by checking out our Advisor Center.