(MONEY Magazine) – WHEN PRESSED TO EXPLAIN exactly what they do to earn all those rich commissions and fees, financial advisers have traditionally had a pretty good answer. They're there to save you from yourself. Left to their own devices, investors are prone to engage in all kinds of bad behavior, like chasing whatever fund is hot at the moment. A good adviser will head all that off and keep you on your long-term plan.

And indeed, if your adviser lives up to that ideal, he deserves a good payday. Unfortunately, according to a recent study of cash flows into and out of mutual funds, the pros are just as susceptible to classic errors as the rest of us. So when your adviser calls to remind you how well your portfolio is doing (bull markets bring out the braggart in everyone) and to suggest that you slip his business card to your rich friends, ask him these three trick questions. His answers will help you decide whether he has a steady hand on the tiller--or just another hand in your pocket.

• Emerging markets have been sizzling. Shouldn't I put all my money in China and India? The answer you're looking for here is no. What you'd next like to hear is a stern lecture on the wisdom of diversification and a reminder that you already have an appropriate stake in China, India and other hot economies through the emerging markets funds or more general international funds that he has put you in. "It's a lot easier for an adviser to say yes to your ideas than to say no," says planner Gary Schatsky of Objectiveadvice.com. "But you want someone who's not going to parrot what you say you want." If you are really excited, a smart adviser will recommend that you limit yourself to a small percentage of your portfolio.

• Can you promise that the funds you put me in will outperform the market? Again, the right answer is no. Advisers who post better-than-market results are taking higher-than-market risks--and, by definition, that means all promises are off. "The only thing I guarantee clients is that if we make 10 or 15 investments, something along the way is going to lose money," says Gary Ambrose, a certified financial planner in New York City.

• Do you mind my asking how much you make off me? Another no, without hesitation. Many advisers at brokerage firms still earn commissions from funds they buy for you, but the recent trend has been to earn fees for managing your portfolio. You might pay a fee-only adviser anywhere from a couple hundred to a couple thousand bucks for a single consultation, or you can hire an adviser to look after your money for a percentage of your assets. (You'll need a portfolio of at least $100,000 to go this route; expect to pay 1% to 1.5% on assets up to a million bucks.) Use a broker and you're pretty much going to pay loads or other "distribution" fees. If you plan to hold for more than seven years, go with so-called A shares, for which you pay the load up front (B and C shares may look cheaper, but they come with back-end fees that can cost more later). But if the load is over 3.5%, ask your broker to find cheaper funds. By whether he resists or complies, you'll know exactly who you're dealing with.

Help or Hindrance?

A new study compares the cost and performance of more than 4,000 mutual funds--some sold by brokers, some selected by people on their own--from 1996 to 2002. The people won.

Average amount by which broker-sold bond funds trailed funds that investors chose each year: 1.38 percentage points

Estimated annual amount by which funds that people bought on their own outperformed broker-sold funds: $8.8 billion

Amount that investors shelled out in 2002 on loads and other fees: $15.2 billion

SOURCE: "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," by Daniel Bergstresser, Peter Tufano and John M.R. Chalmers, January 2006.

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