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In an effort to create a successful retirement portfolio, investors often find their way to professionals who loosely call themselves "advisers" or their services "financial planning," even though they are de facto sales agents paid commissions by their company. This compensation structure can lead to conflicts of interest between financial professionals and their clients.

Yet, despite numerous anecdotes that pay structures influence investing advice, there is little reliable evidence about the quality of advice that financial professionals actually provide. Do financial professionals help retail investors make better financial decisions and educate investors? Or do they put their own interests first and attempt to generate more commissions and fees?

To find answers to these questions, I partnered with professors Sendhil Mullainathan of Harvard University, Markus Noeth of the University of Hamburg, and ideas42, an applied behavioral economics lab, to conduct an audit study of the investment advice industry for retail customers.

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We sent more than 40 trained mystery shoppers on multiple visits to more than 100 different financial service providers, including retail firms, banks, and independent advisers throughout the greater Boston area. (We repeated this approach in 2011 in both New York City and Boston.) We hired men and women who represented people of different income levels, ages and portfolio sizes in order to assess how well advisors responded to the needs of different kinds of clients.

Most importantly, we randomly altered the type of investment strategy represented in these mystery shoppers' portfolios. The strategies that were based on harmful biases about investing varied in how much money they could cost the clients if not corrected, and whether or not they created conflicts of interest between financial professional and client.

For example, some mystery shoppers presented financial professionals with an investment strategy that is often called "returns chasing," or investing in "hot" sectors that have recently done well.

Finance research has shown that this is a poor strategy. Returns in the stock market are not predictable on average; an industry that did well in the last quarter is not guaranteed to do well going forward. However, the strategy benefits financial professionals paid on commission, since it encourages clients to move their money in and out of funds frequently, generating fees each time.

In contrast, we assigned another group of mystery shoppers a portfolio that was heavily invested in their employer's stock. In this case, the interests of client and financial professional were aligned. Many financial professionals can generate fees by moving client funds out of this stock, and clients benefit too, since over-investing in company stock leads to severe under-diversification and risk.

The results of our audit were not terribly encouraging for investors.

First, we find that self-interest played a key role in the quality of advice provided. The majority of financial professionals were particularly supportive of investment biases that helped them maximize their commissions and fees while being less encouraging of strategies recommended by textbook finance research for maximizing returns.

Most strikingly, the professionals were particularly discouraging of low-fee investment strategies like index funds, which finance research has found to be a superior investment option. In fact, many of the financial professionals encouraged clients to move money out of low-cost index funds into higher-cost alternatives. It should be noted that there was no sign that financial professionals were doing anything illegal or violated existing regulations, since the behavior of financial professionals is lightly regulated.

How can investors find better advice and avoid preventable missteps? First, check an adviser's credentials and education. Investors should search in particular for professionals held to a fiduciary standard, such as Certified Financial Planners, who are obligated by law to offer advice in their clients' best interests.

Also, investigate the compensation structures and fees associated with any advisory relationship. While many financial professionals receive commissions that may create a conflict of interest, others charge a flat fee or a fixed percentage of the money they manage. These structures are much better for the investor since they incentivize the investment professional to grow the investor's portfolio.

Investors also need to check their own expectations before making investment decisions. They are often lured by "siren songs" of astronomical returns without much effort, because it is less pleasant to hear that they cannot rely on uncommonly high returns while avoiding the burden of saving for retirement.

In fact, if investors approach financial professionals with such overblown expectations, then financial professionals may feel pressure to recommend less-prudent strategies just so they can keep their business.

Accordingly, the most important thing investors can do is to be open to prudent advice. If an investment strategy sounds too go to be true, it usually is.

Antoinette Schoar is the Michael M. Koerner (1949) Professor of Entrepreneurship and Professor of Finance at the MIT Sloan School of Management.