Is Your Financial Advisor Waving These Red Flags?

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When choosing a financial planner to help manage your money, the importance of careful screening cannot be overstated. Indeed, amid the thousands of reputable advisors who serve their clients well, there exist a few who are only out for personal gain—or worse, to scam would-be investors out of their hard-earned savings.

If your advisor makes anywhere near the following statements, run, don't walk for the nearest exit.

"I Am Only Able to Sell a Limited Number of Shares"

Pushy sales tactics have no place in financial planning. If your advisor suggests the clock is ticking on an investment opportunity, or recommends high-risk securities that are outside your comfort zone, take your money off the table. A professional advisor will always construct an investment strategy that conforms to your individual goals and risk tolerance, not hot tips.

(Read More: 5 Bond Questions to Ask Your Financial Advisor Now)

"Creating a false sense of urgency by claiming limited supply, limited time or exclusive access is really just a form of pressuring you to make a quick decision about an investment, one you may soon regret," said Gerri Walsh, senior vice president of investor education for the Financial Industry Regulatory Authority (FINRA).

Make the Check Out to Me

Scam artists who claim to be financial advisors often ask "clients" to write checks out to them, rather than an investment bank or mutual fund company. Independently confirm that your advisor is employed by the financial institution for which they claim to work. Investment professionals should also be registered with FINRA, with the Securities and Exchange Commission or with state regulators. FINRA's BrokerCheck tool makes it easy to research the professional backgrounds of registered brokers, and investment advisors.

There's No Charge

Nothing comes free. When a financial advisor says their services won't cost you a thing, ask point-blank how they get paid. Fee-only advisors are paid exclusively by their clients, but the rest collect a commission from insurance companies and mutual fund firms each time they sell their products. That makes them salespeople for the industry, and thus, the products they recommend may or may not be in your best interest. The legitimate ones will have no problem explaining how they get reimbursed.

(Read More: Financial Advisor Fees: Understand Services, Costs)

I Can Beat the Market

If your financial advisor had a crystal ball, he wouldn't have to work. Steer clear of any professional who promises you above average returns or suggests he can time the market. Remember, guarantees are not only unethical, but they'll likely compel that advisor to chase higher-risk investments to meet that return. That makes for a bumpy ride—and plenty of sleepless nights for you. "Your investment professional should spend as much time on the potential risks (how you could lose money) as the potential rewards (how you might make money)," Walsh said.

Please Leave a Message

If the only time you hear your advisor's voice is on their answering machine, or they're unresponsive to email, find someone else who makes time for you. Advisors should meet with clients (in person or by phone consultation) at least once a year to discuss life changes and rebalance their portfolio, said Bonnie Kirchner, a certified financial planner in Marion, Mass., and author of "Who Can You Trust With Your Money?" She said: "Some advisors don't communicate enough. If they don't return calls or meet with you on a regular basis, that's a concern."

Credentials Don't Count

Virtually anyone can hang a shingle and call themselves a financial advisor. No experience required. Before handing their money over, investors should always ask if they are a licensed broker or investment advisor, Walsh said. Advisors who have passed the requirements from their professional organization to act as a certified financial planner (CFP) or chartered financial consultant (ChFC) also have demonstrated competency in helping investors create a comprehensive financial plan. Likewise, chartered financial analysts (CFA) are trained to provide investment advice, while certified public accountants (CPA) are considered tax experts.

(Read More: When Shopping for an Advisor, Know the Pros and Cons)

Put Your Eggs in One Basket

Those who encourage clients to sell off a large percentage of their portfolio, liquidate their 401(k) or borrow from their home equity to invest in a single product, like an annuity, may be more interested in the commission they'll receive than in meeting their client's goals. Advisors who recommend any investment should be able to make a clear case for why it makes sense, outline the downsides and offer alternative investment options that would yield a similar result.

—By Shelly K. Schwartz, Special to