Money manager Richard Cripps has one principle for investing: Follow the rules. It may sound simple, but during down markets even seasoned investors can lose sight of the basics.

Take diversification, one of the first rules of sound investing. A study by EquityCompass Strategies, the group headed by Cripps, questions the tactic of concentrating assets in a portfolio's top 10 positions. Morningstar's mutual fund database was screened for domestic equity-based funds that held fewer than 60 positions over a five-year period. The study found little or no correlation between funds with high concentrations in their top 10 positions and excess returns. According to the attribute philosophy of Cripps, these high-concentration funds represent the confidence of portfolio managers in their superior ability to evaluate stocks. In reality, these funds carry more stock-specific risk and tend to anchor the biases of portfolio managers in ways that short-circuit rules of diversification designed for achieving favorable risk-adjusted performance.

What is Cripps' takeaway? Rules matter. Conviction managers take more risk and do not maximize performance once you account for the higher risk. Attribute-based managers like Cripps, on the other hand, take the emotional decision-making out of the equation by pre-determining a set of rules, or attributes, that will trigger buys and sells. They tend to spread their risk evenly and let probabilities work for them. That's why, when clients rely on you as a financial advisor to select sound investment managers, Cripps advocates scrutiny. Your value to the client is in manager selection. Cripps says that asking the right questions will help you be appropriately selective in your manager evaluation, and keep you from merely chasing historical performance that cannot be duplicated.

Cripps, an investment strategist formerly with Stifel Nicolaus and Legg Mason, acknowledges his bias toward structure in investment methods. In fact, the Equity Compass methodology he developed adheres to a bottom-up quantitative approach. With that in mind, he proffers three questions to ask in any manager evaluation:

How is the manager generating alpha? Cripps supports skepticism where there is luck involved. If the manager happened to pick the right sector—oil, anyone?—that may have been the right bet. But can that phenomenon be repeated? Realistically, probably not.

Look at the sector, beta, concentration and style. Is the manager taking more risk? Is performance achieved in a single sector? Was performance driven by an outlier? And does the portfolio have proper diversification? Was the manager in a style-favored environment? Remember, value performs in a value market, and growth performs in a growth market.

Can the strategy be replicated? Is it really alpha or something else that the manager is offering, and what's the manager's claim to future performance? Everyone is trying to calculate intrinsic value. Some managers can be cryptic about describing their model, which is a poor choice in our age of transparency. Advisors and investors should not accept the notion that they would not understand the manager's model. Cripps calls this "intellectual conceit," and he says he sees it time and time again.

How will the manager adapt when conditions change? An attribute-based investment philosophy trumps a conviction-based one, in Cripps' view. Managers who begin with what they believe and incorporate the investment attributes from their investment process stand the best chance of reproducing superior performance, he says.

There are no sure things, but advisors can protect themselves—and their clients—by asking the right questions.