This article originally appeared in Bloomberg View on December 1st, 2011.

Is it possible that, even after the uncountable lessons of the past three years, investors have learned nothing? A popular financial planner and blogger made a very public disclosure of his personal economic meltdown last month, telling the story of how he got in over his head with a Las Vegas house that had two mortgages, no equity, and a date with destiny for a short-sale with Wells Fargo & Co.

What’s stunning to me isn’t that Carl Richards of Park City, Utah, inspired hundreds of online hate-mail postings after writing his tell-all, “How a Financial Pro Lost His House,” in the New York Times on Nov. 8. The thing I’m trying to figure out is why even a smattering of readers would sing his praises. He’s “a brave guy to write what he did,” one reader wrote on the Times’s comment board. “If I lived in Utah, I would hire you in a minute,” another wrote.

Fifteen investors have sent e-mails to inquire about becoming new clients after reading the article, Richards told me in a telephone interview, and not one of his 29 clients have strayed as a result of the confession heard around the blogosphere. Anonymous writers on various blog sites mostly trashed him, but Richards says readers with the courage to contact him directly swamped him with supportive messages.

Which leads me to a single, simple question: Are you people all nuts?

It’s important to make it clear that Richards, despite his bad financial judgment in racking up a mountain of personal debt, has a squeaky-clean record with securities regulators. And it says a lot if clients are sticking with him. But all this honesty-begets-heroism nonsense tells me that some investors are still out to lunch when it comes to evaluating financial professionals. It’s a fair bet that the people applauding Richards don’t have a clue whether he’s a guy with a spotless record or is a financial Jack the Ripper.

Begging for Trouble

Separate from that, as far as I’m concerned, if you hire an adviser who is having a personal financial crisis, you are begging for trouble. It’s axiomatic that some financial advisers will be tempted to make their money trouble your money trouble.

I’m sorry, sort of, if that means deserving advisers are passed over by investors who show an abundance of caution. But this is no time to get hooked up with a broker, financial planner or investment adviser feeling the squeeze. Richards, in fact, has heard from financial planners who wrote to tell him that they, too, were in trouble, but had no one to talk to about it. Heartbreaking, I know.

There are lots more where they came from. And not all have the pristine record that Richards has.

When the credit crisis hit in 2008, financial advisers who were overleveraged, afraid of losing their jobs, or just plain crooked suddenly had an elevated motivation to maintain their income with tricks that ranged from dipping into clients’ accounts to old-fashioned churning in order to drum up commissions. No matter the state of the economy or the stock market, it’s in your interest to find out if your financial expert has liens, big loans from an employer or a history of bankruptcy. When bad times hit, you forsake that sort of investigating at your peril.

Liens and bankruptcies by brokers licensed with the Financial Industry Regulatory Authority, or Finra, are listed at the end of their public Broker Check reports. Certified financial planners with certification from the CFP Board of Standards can wind up with an online citation of any bankruptcies in their CFP histories, although it pays to check Finra, too. I’ve seen CFP records that don’t include red flags such as the short sale of a broker’s home — when a property is sold for less than the mortgage amount.

A caveat is that if the broker doesn’t report it, or the regulator doesn’t catch it, you’re not going to see it. Pay a few dollars to search Public Access to Court Electronic Records and you might catch something an adviser is trying to keep off the radar.

Professional Crisis

There’s a rash of finance professionals going through personal financial crises, says Bill Singer, a New York securities lawyer since 1985. “I’ve never seen it like this,” he told me.

A Finra spokeswoman says the agency doesn’t compile aggregate statistics about broker bankruptcies for public consumption. The CFP Board of Standards — which tests and vets financial planners – says that this year it has held 49 disciplinary hearings of planners who declared bankruptcy, up from 20 in 2010. But those numbers don’t include other warning signs, such as short sales of homes.

It doesn’t help that stockbrokers often are motivated to cheat because of six-figure upfront bonuses that convert into personal debts to their firm if they leave or get fired. Scot Bernstein, a California lawyer who represents aggrieved investors, says it keeps the pressure on brokers to follow management’s sales agenda even if it means fleecing customers. The shady firm desperate to do business sends a message “that we can toss you out on your ear for any reason, including if you don’t want to sell variable annuities to a 90-year-old,” Bernstein says.

Public records at Finra and the CFP show the link between financially pressed investment pros and customer complaints over recent post-credit-crisis years. A Minnesota broker was barred from the brokerage industry in October after using the Social Security number of a customer and personal friend — without that person’s permission — to co-sign a college loan for his daughter. The broker told Finra at a hearing that he and his wife had gotten used to doing “things we never did before” and that when times got tough, he had to “mask things a bit.” He’s appealing Finra’s bar.

A broker from Long Island was suspended for two months beginning Nov. 21 after he neglected to tell Finra about a felony charge: A Las Vegas casino filed charges, saying he’d bounced a $10,000 check with the intent to defraud. He already had contributed to settlements of two customer complaints since 2009 and has four liens listed in his records with Finra, which waived a monetary penalty because he couldn’t have paid a fine anyway.

Great Timing

Sometimes brokers file for bankruptcy with remarkable timing that gets them off the hook just as a hearing looms. Another Long Island broker has a Finra dossier that lists two criminal items; four resolved complaints that involved payments to investors; and four pending client disputes. He filed for Chapter 7 bankruptcy in February, just as a $5 million claim against him was headed for arbitration.

If you think I’m just a crank who is overstating the risk when bad times set off the cheating side of advisers, consider the perspective of an expert who has a more forgiving view of financial types who make personal mistakes: Carl Richards.

We didn’t agree on some issues when we spoke last week. I told him, for instance, that I would never let someone with his history run my money. But when I asked him whether investors should worry that ethically challenged advisers with personal money troubles might be more inclined to cheat a customer in bad times, he conceded I was “spot on.” It’s “a legitimate concern,” he said.

There are always conflicts when you are taking care of other people’s personal finances, Richards told me. But it’s “harder to handle” for the adviser whose own checkbook balance begins with a minus sign. You can see Richards’s own record under “David Carl Richards III” here.

It’s clean. Do the same thing with the name of anyone who is pitching to run your money. If you are looking to steer business to someone who is needy, get a list of deserving workers from your local church or homeless shelter. Parking your money with needy brokers is just too risky.