MANY INVESTORS, ESPECIALLY

those with significant sums, prefer money managers to oversee their assets. While there are some advantages namely more control over your tax liability the problem with separately managed accounts is that, from what I've observed, very few are actually managed. So even if you decide not to manage your money, you might need to take some steps to manage your manager.

Let's define our terms. "Managing" an account doesn't mean constantly trading it. In fact, one of the primary, yet oft-overlooked, responsibilities of an asset manager is to make sure a client's portfolio matches his particular risk tolerance. This is usually done when the account is set up, but often stops there. The truth is that this should be an ongoing process.

Like many elements of investing, the concept of "risk tolerance" is often made a heck of a lot more complicated than it need be. Instead of actually focusing on hard numbers, advisers toss around vague descriptions of how much risk they plan to take. Let's be frank: What exactly does being "aggressive" mean, anyway?

While a client might have an account of, let's say, $100,000, I'd venture that only a portion of that, perhaps 20% to 30%, is truly "risk capital." As we wrote last October, most of the money in this country isn't in fact investment capital, but rather savings. Real wealth is built on compound interest, not stock returns and proper asset allocation demands our risk capital to shrink with each passing year. As our years left on the planet decrease, so does the opportunity to compound our money over time.

It's for this reason that financial advisers should be given a specific number a portfolio "stop loss" that the value of the account can't go below. It's a way for clients to protect themselves against advisers who forget that in order to make money over the long run, they must first preserve it in the short run. So instead of speaking in vague generalities like being "moderately aggressive," tell your adviser that your account value can't fall below a certain amount. Period.

As we've written before, when you hire someone to manage your money, the very least they can do is actually watch it. Yet I know far too many money managers who spend their days in meetings, on airplanes, at lunches or on sales calls. They're doing this, that, everything, it seems, except for watching clients' portfolios. There are plenty of multimillion-dollar portfolios out there that are left adrift like ships on a sea. If your adviser isn't keeping an eye out for icebergs, who is?

So don't be afraid to ask! Does someone review the portfolio every day? Every week? Is someone maxing cash or considering the effect of noncorrelated assets? How are investments screened? Is the portfolio allocation made all at once, or gradually over time?

Knowing how the portfolio is traded is important, because in most cases, "brokers" have now become "account executives" (read: sales people), who oftentimes are many steps away from actually managing the portfolio. Most financial advisers can tell you the average annual return for stocks over the past 72 years. They can tell you what some Morgan Stanley honcho thinks about the economy, or consumer spending, or the market. If they're really good, they can tell what was on the cover of Barron's last weekend, or perhaps even rattle off the names of a few prominent CEOs. But do they know how to trade? Unfortunately, many individuals put their trust in financial advisers who know precious little about the nuts and bolts of managing a portfolio.

I see evidence of this by the number of money managers who buy what I call useless positions: insignificantly small allocations that, even in the best of circumstances, won't make any material impact on their client's bottom line. So in a portfolio that might be worth $250,000, among a number of $25,000 or $30,000 positions you'll often find four shares of Pfizer, seven shares of Glamis Gold or 10 shares of Liberty Media positions that, even if they were to double, wouldn't actually make any difference to the client.

My guess is that an adviser's motive in putting on these useless positions isn't only to generate the accompanying commission, but simply to appear to be doing something for their clients, even if it's completely wasteful to their bottom line. So keep an eye on your confirmation statements. If you see a number of seemingly insignificant positions, you might want to inquire what your adviser is attempting to accomplish by charging you a $30 commission to buy a few hundred dollars' worth of stock.

But above all, expect results. The only reason to go to a financial adviser or money manager is to make money. Yet in my experience, many advisers excel in managing expectations more than money. So when they bought you AOL Time Warner at $55 a share (and doubled your position every 10 points down), what matters isn't the loss, it seems, but that "It's still a great company," or "It's just oversold," or "It's this Iraq thing that's hurting everybody." Amazingly, even after a client has lost 20%, 30%, even 40% of their portfolio, many financial advisers can still say with a straight face, "It's about the long haul." Boy, I'll tell you that takes some moxie.

Trust is key to any relationship, including one with a financial adviser. But there's a fine line between trust and gullibility. If your portfolio is full of losses and your financial adviser is full of excuses, then it might be time to put your account up for review. Because at the end of the day, it's all about making money, and if you're adviser isn't even giving your account the care it deserves, then perhaps you deserve another adviser.

Jonathan Hoenig is portfolio manager at Capitalistpig Hedge Fund LLC.