THE HELP DESK The Help Desk: Top Tips

Don't be Madoff'ed

Some telltale signs to help you avoid putting your investment dollars in a Ponzi scheme.

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By Gerri Willis, CNN personal finance editor

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For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.

NEW YORK (CNNMoney.com) -- Bernard Madoff is getting sentenced today for running a massive Ponzi scheme and swindling investors out of billions. Prevent your money from being Madoff'ed. Here's how:

1. Check the records

If you're choosing a financial adviser for the first time, or you want to make sure you're with the right adviser, make sure you do your homework.

Look at their records by going to Finra.org. That Web site is managed by the Financial Industry Regulation Agency. The "broker check"tool on the site will give you their qualifications, including licenses, registrations and exams the broker has passed.

You'll also get your broker's employment history for the last 10 years. Look for the disclosure section that will list problems your broker may have had. And make sure you get references from past and current clients.

2. Beware of red flags

Watch out if your planner guarantees big returns on investments. Investing is always risky. And results should never be guaranteed.

When purchasing investments, make sure you are writing checks to a third-party custodian, like T. Rowe Price or Fidelity Investments. Don't write checks to your financial adviser directly says Doug Flynn of Flynn Zito Capital Management.

And finally, you should never feel pressured to buy a specific product. Be wary of any adviser who dodges your questions or tries to put a positive spin on everything.

Make sure they are a fiduciary -- this is an ethical standard. A fiduciary is legally bound to watch out for your best interest. If someone does not have this designation, they are not required to put your best interests first, says Wayne Cooper of Wealth Management Exchange.

3. Know potential conflicts of interest

Find out how your financial adviser gets paid. Some charge by the hour or a flat rate. Others earn money through commissions on products they sell.

It's not unusual for planners to have working relationships with companies that sell insurance policies or mutual funds. Make sure get a written description of any conflicts of interest.

If you're in the market for financial planner, it's worth your while to check out fee-only advisors so you don't have to worry about anyone selling you a product for their personal gain.

-- CNN's Jen Haley contributed to this article.

Got a financial dilemma? Go to CNNMoney.com/helpdesk to submit questions, read the Help Desk articles and check out new Help Desk videos. And tune in to CNN's Newsroom Tuesdays and Fridays, when Gerri Willis and other experts answer your questions. To top of page

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