Rich celebrities are supposed to have access to the best of everything: restaurants, nightclubs, designer clothes and plastic surgeons.

But when it comes to financial advisers, they seem to have an uncanny knack for making the wrong choices.

Does the name Dana Giacchetto sound familiar? It has spilled out of the gossip columns and onto the business pages recently. This friend and financial adviser to the likes of

Leo DiCaprio


Matt Damon


Cameron Diaz

is in jail, accused of stealing as much as $9 million from client accounts and using the loot to pay for dinners, hotels and even the rent on a Soho loft in New York City. (Giacchetto plead not guilty to the charges, according to published reports.)

If it can happen to Leo, it can happen to you.

Even if you are worlds away from the lives of these jet-setting actors, there are lessons you can learn from their predicament. Let's look at a few preventative steps you can take when putting your money into the hands of a financial adviser.

Background Check

The process of finding a financial adviser might seem as easy as picking a new dentist. You ask your friends who they use, pick the one who gets the most recommendations and then make an appointment.

When hiring the person who is going to handle your money, you should do more footwork than that.

First, use public documents to check the background of the adviser or the firm he or she works for. You want to make sure your potential investment adviser has the appropriate registrations and has never been disciplined for mishandling a client's funds.

Anyone who presents himself or herself to the public as someone who gets paid for giving investment advice about securities has to register as an investment adviser.

"If someone says they don't need to be registered because they only handle international money, walk away," says Ralph Lambiase, director of the securities division for the

Connecticut Department of Banking

. "In fact, call us with the tip."

Both the

Securities and Exchange Commission

and state securities agencies regulate investment advisers. The SEC oversees firms with more than $25 million under management. The states handle those with less than $25 million.

Whether a firm is registered with the SEC or a state agency, it must file something called a Form ADV. This two-part document includes important background information on the disciplinary record of the firm and the people running it.

You can get the Form ADV by calling the SEC's Public Reference Room at 202-942-8090. The SEC will charge you a fee for copying the document, so ask how much it is going to cost first. Or you can try calling your state regulator. The

North American Securities Administrators Association

, the national organization of state securities agencies, offers a list of each state's regulators on its Web site at, along with the necessary phone numbers.

The giant SEC doesn't typically handle the registration of individuals who work as investment advisers. That is left up to the states. To check a person's disciplinary history, call your state regulator.

If in doubt about who regulates a firm, check with both the SEC and the state in which the individual or firm is doing business.

Of course, you can start by asking for all of this information from your possible adviser first.

"I am a firm believer in the fact that the firm should help you do this," says Bob Barry with

Barry Capital Management

in Hackettstown, N.J. "I would ask a firm point blank: What can you do to allay my fears in this area? And it should be more than three references."

You should know how much experience the adviser has and from where, all educational background and how much money that person currently has under management.

Many individuals who are registered to give investment advice also have brokerage licenses. If so, you can check that person's background history through the

Central Registration Depository

, a disciplinary and employment database available from

NASD Regulation, an arm of the

National Association of Securities Dealers


Barry also suggests checking with organizations that dispense credentials. If the adviser is a certified financial planner, the

Certified Financial Planner Board of Standards

, which gives out the CFP mark, would list any disciplinary actions taken against him or her on its

Web site.

Setting Up the Account

Often, opening an account with an investment adviser also involves setting up a custodial account with a brokerage or other financial institution.

When you do this, don't give an adviser unlimited control over your money.

The best way to handle this is to open the account yourself and only give your adviser the ability to buy and sell securities for the account. Do not give him the ability to withdraw funds from account directly. Your adviser might be able to request a disbursement of funds, but the firm should be instructed to mail the check to you -- the client -- at your address of record.

Giacchetto, the aforementioned friend to the famous, is accused of calling his clients' custodian and having checks sent directly to him. He then allegedly endorsed those checks and put the money into his firm's own account.

"I would look to have a reasonably recognizable custodial relationship -- a well-known name holding your funds," says Barry. You might look to a firm like

Charles Schwab




All of these details should be laid out in the advisory agreement that you sign with the investment adviser of your choice. This document will outline how the accounts will operate, what your adviser is and isn't allowed to buy and the fees you'll be charged.

"If you don't understand it, you should try to get someone else to read it who does understand it," says Pamela Wilson, an attorney with

Hale and Dorr

in Boston.

Scrutinizing Your Statements

You should receive a regular statement from your custodian or brokerage.

Bill McDonald, the enforcement director for the

Department of Corporations in California

, recalls one adviser who was sending people statements every month saying they owned a certain number of securities but the statements were pure fiction.

"They were all made up," McDonald says. "No one ever bothered to check if they had those things or not in their names. You have to literally verify that the money and securities are there."

Separating your broker from your adviser can help prevent this from happening. If you are getting two statements regularly, you can see if any money is going out of your account that shouldn't be. Your balance should be in sync with your returns and the amount of money entering or exiting the account.

Thievery tends to happen over time, not all at once. You should carefully examine your monthly statements. And you shouldn't rely on someone else to do it. "The fact that you trust someone is not reason to let your guard down. It's the people who you trust who are going to steal from you," says Barry.

If you aren't receiving any statements, you should be worried.

Joe Borg, the director of the

Alabama Securities Commission

, remembers asking one wealthy investor who had been robbed in an offshore investment scam why he didn't have any statements. Borg says the man replied, "Well that's the beauty of it. I don't have any statements and the

Internal Revenue Service

can't tax me."

The lesson: Don't let your money out of your sight.

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Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.