From the September 2005 issue of Entrepreneur

How do you decide who handles your money? According to Jack Waymire, author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor, 75 percent to 80 percent of financial advisors are really sales reps masquerading as advisors. We recently talked to the author to learn how entrepreneurs can choose wisely.

Entrepreneur: What are the most common mistakes entrepreneurs make when looking for a financial advisor?

Waymire: If you think about finding an advisor, two things generally happen: either you find the advisor, or the advisor finds you. And unfortunately, a lot of entrepreneurs are on [many advisors'] hit lists. [Bad advisors] tend to be more sales-oriented, and they're cold calling, marketing. One of the biggest mistakes [entrepreneurs] make is that they listen to these sales pitches . . . and they hire people that sound good as opposed to looking at the credentials and business practices of the advisor.

What should you look for in a good financial advisor?

Waymire: You want somebody who's college-educated with at least five years of experience--probably 10 years or more. You want somebody with one or more certifications: a Certified Financial Planner (CFP), [or another good certification] is a Certified Investment Management Analyst (CIMA). You want somebody with a lot of knowledge and a lot of integrity; check their compliance record at the National Association of Securities Dealers website (www.nasd.org) to make sure they're clean. That's the kind of person you want handling your assets.

What are the red flags to look for in a bad financial advisor?

Waymire: [Many are] only Series 6 licensed--which means they can only sell products for commissions, they can't offer advice for fees. You really want a fee-based advisor because one of the biggest criteria for avoiding that bad guy is [asking], How does he get paid? If they only want to sell you products for commissions, that's a huge red flag. Think about the way you compensate a lawyer, CPA or any other professional. I pay [them] an hourly rate; I don't pay a commission.