Q We have $400,000 invested in mutual funds with Wells Fargo Investments. Our financial adviser is with MRK Financial, here in town. We trust him. My question is a hypothetical one. What if my financial adviser, for example, fell down a flight of stairs and bumped his head such that his behavior completely changed, and he withdrew all of my retirement funds and ran off to Mexico? Are our funds protected somehow should that unlikely crime ever occur?

CARTER, MINNEAPOLIS

A Well, you have a vivid imagination, but the simple answer is yes: Your funds are safe.

You have a number of important protections. The most important is that your money is segregated with an independent custodian (in this case Wells Fargo Investments). The statements you get about your money and balances also come from the custodian. The adviser can't get at the money in the account.

"There's no way to get at the assets even if I am deranged and crazy and, what's more, I don't have discretionary authority over accounts," said Michael Kobs, president of MRK Financial. Added Nate Wenner, a fee- only financial planner at Wipfli Hewins Investment Advisors: "With an independent custodian, there is no Bernie Madoff problem."

Madoff, of course, is the convicted fraudster who for years successfully ran one of the largest scams in history, cheating friends, investors and foundations out of billions of dollars. The assets supposedly "managed" by Madoff were kept in-house, especially the record keeping. The lack of transparency and accountability was a major reason why he escaped detection for so long.

Mutual fund investments are protected because you own the securities and these accounts are segregated. So, even if Wells Fargo Investments, Vanguard, Fidelity or some other major financial institution got into trouble, you're still the owner. Of course, ownership doesn't prevent the value of your portfolio from going down. But the Securities Investor Protection Corp. provides an additional layer of security against fraud and malfeasance. You can learn more about it at www.sipc.org. Most major investment, brokerage, and mutual fund companies carry additional layers of insurance protection.

The downturn in the markets has exposed a dismaying number of Ponzi and Ponzi-like scams. The late economist John Kenneth Galbraith long ago came up with the term "bezzle" to describe the frauds that go on for years, undetected, during bull markets, only to be revealed during a bear market. This time around, it appears that a number of the schemes were tied to lightly regulated alternative investment schemes.

Contrast that to this fact: No mutual fund registered under the Investment Company Act of 1940 has ever been exposed as a Ponzi scam. The Act of 1940 requires that your money be held in a custodial account.

Now for the proverbial "but." (You knew that was coming. After all, this is finance.) It still pays to diversify. Most of us do it anyway. You worked hard for your money and there is no sure-fire, fool-proof way to avoid getting taken at some point. That's why you diversify. Not putting all your eggs in one basket is a way of ensuring that the consequences of getting conned aren't catastrophic. You'll be able to say, confidently, "This too shall pass" if that unfortunate day ever arrives.

Chris Farrell is economics editor for American Public Media's "Marketplace Money." Send questions to cfarrell@mpr.org.