My client was receiving monthly unaudited performance reports prepared by the adviser, however, the annual audited financial statements the adviser had committed to furnishing in the offering document had not been produced in the past three years.

FORBES: Anatomy of (Yet Another) Hedge Fund Fraud (June 1, 2001)

Once the adviser turns in impressive performance, lots of new money flocks to his fund, diluting the ability to continue performing well.

WSJ: Hulbert on Investing: Can You Beat the Market?

Nearly three quarters of both groups cited trust as the most important characteristic of a financial adviser, but the big discrepancies were in performance and cost-per-service.

FORBES: Do Your Customers Trust You?

For instance, Ross Wolfe, financial adviser with Altfest Personal Wealth Management in New York, says the performance of Yacktman Focused is why his clients like it.

WSJ: Are Expensive Fund Managers Worth It?

Rafael Coven, the adviser to the underlying index for PZD, noted that the poor performance of most renewable energy stocks in 2010 was a major reason why Cleantech Index-based funds (such as PZD) significantly outperformed their peers.

FORBES: Top Performing Clean Energy Funds in 2010

That is, if the adviser benefits when the fund goes up, so too must he suffer when the fund performance goes down.

FORBES: Pensions Funds: Funding Unsavory Practices of Venture Capitalists (May 1, 2000)