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Jenn Juarez

Is Your Financial Advisor a Legal Fiduciary (and Why is that Important?)

If you hire someone who goes by the title of “financial advisor”, you expect them to place your interests before theirs. After all, doesn’t the word advisor imply that they provide true advice?

Many investors are surprised to learn not everyone who uses the title “financial advisor” is legally bound to act in your best interest.  In 2018, the picture became muddier. In March, a Court of Appeals vacated the Department of Labor Fiduciary Rule. This Fiduciary Rule was proposed in order to require financial professionals who provide advice to retirement savers to act as a legal fiduciary.

What exactly does this mean? If you are a fiduciary, you are legally responsible to place the client’s interest before your own. It is much like the responsibility an attorney has to their client, or a parent has to his or her child. Negligence can and should come with legal consequences.  When it comes to professional advice about your money, implied consequence can be a very good thing. Unfortunately, the financial industry has made it confusing to know whether or not you are working with a fiduciary.

Understanding the Fiduciary Role

Other professions regularly act as fiduciaries. If you retain an attorney or see a medical doctor, for example, they are each required to do what is best for you…not what is best for them. That means the attorney must make recommendations based on your best interest, not what will generate more fees for his or her practice. The doctor may not prescribe any procedures or medications that are not in your best interest.

Not all financial professionals are held to that same fiduciary standard. It is perfectly legal, for example, for a non-fiduciary advisor to recommend a more expensive mutual fund to you, as long as it is deemed “suitable” or appropriate for an investor’s objectives and risk tolerance.  This suitability can be documented simply by requesting the client complete a questionnaire.

As an investor, it is of the upmost importance that you know whether you are working with a fiduciary advisor or a commissioned broker. Investors may end up paying more simply because the suitable product pays a higher commission to the advisor.

Who’s Who of Fiduciary Financial Professionals

While most professionals these days go by the generic term of “financial advisor” or “wealth advisor” …the actual licensing and registration can tell you if they are a fiduciary or not.  Anyone who is licensed as a Registered Representative is not a fiduciary. In fact, they cannot charge you a fee for advice. Rather, Registered Reps will charge you a commission for product recommendations and implementation. Does this sound like an advisor to you? Actually, it sounds more like a salesperson. While Registered Reps may be competent and educated, it is critical to know if you are receiving true advice or product recommendations that result in a commission.

If you walked into a Ford dealership and asked which car they recommend, you are more than likely to drive away in a brand-new Ford. The salesperson is incentivized to sell you a Ford even if a used car or a different brand would have met your needs at a lower cost.  Registered Representatives are held only to a “suitability” standard. That means they must simply recommend something that could be appropriate for you. Even if the one they recommend pays them a (higher) commission, as long as it is documented as “suitable”, there is no problem.  In fact, a Registered Representative’s first loyalty is to their employer and shareholders…not you, the client.

Fortunately, not all financial professionals operate this way.  Those who are licensed as Investment Advisor Representatives (the employees) or Registered Investment Advisors (the firms) are held to the fiduciary standard. They must always place client interests before their own. A conflict of interest may not be present in the relationship. If they do not place your interests first, you have legal recourse.  Instead of receiving commissions from products, fiduciaries are only paid a fee for advice.

 The High Cost of Conflicted Advice

If a Registered Representative has placed a product in your account for the sole reason of making a commission, then you have experienced  a conflict of interest.  A White House Task Force estimated that this “conflicted advice” costs Americans about $17 billion per year.  While you still may end up with a solution that generally works, your investment expense will be greater as a way cover these commissions. Over time, these small expenses can have a real effect on your total return.  Ideally, investors should avoid conflicted advice altogether.

Always Find Out

It is not always easy to discern who is a fiduciary and who is not.  Some advisors are “dually registered” as both a Registered Representative and an Investment Advisor Representative acting as a fiduciary only some of the time.  Most investors are not in the habit of questioning the advice they receive or asking if the recommendation represents a conflict of interest.

Get it in writing

It is vital that you are confident in the financial advice you receive:  are you  dealing with a legal fiduciary, or not?  We always recommend clients visit the following websites to research potential financial advisors.

However, one easy way to find out is to ask the prospective advisor this one question:

Will you act as my legal fiduciary at all times?

And ask for that in writing.  If that isn’t happily provided, you just learned something very important. It is safer to keep looking and limit your search to those who will act as your legal fiduciary.

Photo of Ryan C. Warwick

Ryan Warwick is Principal of Rathbone Warwick, a Registered Investment Adviser. Rathbone Warwick is a fee-based financial planning and investment management firm headquartered in Boise, Idaho serving families nationwide. Our advisors hold the Certified Financial Planner™ designation and the Chartered Financial Analyst® charter and serve as trusted stewards to help families preserve and grow their wealth for over three decades. Visit us at


How to Find The Best Financial Advisor in Boise, Idaho

If you are actively looking for a financial advisor in the greater Boise area, you have many choices. There are a multitude of financial professionals qualified to help with investment management, financial planning, estate planning and other needs.

Overwhelmed by the sheer number of firms, most people turn to their friends and family for a referral. Your network can be a good resource. However, with financial advisors, it can be dangerous. Why? Because most people have no idea what to look for and end up just hiring someone they like.

The following questions can help one analyze various financial professionals:

  • Is the person qualified to do the job?
  • Do they have the right education and professional designations?
  • Do they have enough experience to help me protect and grow my wealth?
  • Have they helped people like me achieve their goals before?
  • Are they ethical and do they have a clean record?

Answering these questions can help you avoid outright fraud or protect you from a negative experience that might result is significant heartache over time

Avoiding Conflicted Advice

While the idea of a Bernie Madoff is frightening, his boldness is relatively rare. The bad news, however, is that many financial professionals are not required to legally have to place your interests first and eliminate all conflicts of interest. In fact, some who use the title ‘advisor’ may not even legally be able to provide you with true advice.

This concept is called “conflicted advice” and unfortunately, it is quite common. Conflicted advice can occur when you unknowingly engage with a financial professional not legally required to place your interests in front of their own.

Usually, it is not personal or malicious. The advisor working for a large brand name bank or brokerage will have a first loyalty to their employer and the company’s shareholders. This may incentivize them to recommend that you buy more expensive financial products, simply because it is best for the company’s bottom line.

Is ‘conflicted advice’ an isolated incident? The research says no. A White House Council of Economic Advisors report estimated that “conflicted advice” costs Americans about $17 billion every year.

As you can guess, it is not always easy to find true, unbiased financial advice if your advisor is placing the company’s profitability before your needs. Thankfully, if you know the right questions to ask before you hire an advisor, you can be confident.

How to Find the Best Advisors

Here are five questions you should ask prospective financial advisors.

Question 1: Are you a Fiduciary?

A ‘Fiduciary’ is a person legally required to put your interests before their own. You want a fiduciary helping you with your financial planning and investing. Not all financial advisors are fiduciaries. Many of the brand name firms are not required to act in a fiduciary capacity. Instead, their representatives act as product salespeople who can legally recommend more expensive products to you, as long as they are deemed “suitable”.

Investors do not want to be questioning each product recommendation or the commission paid to the salesperson. You do not want to have any part of your money contribute to that $17 billion per year in conflicted advice.

To avoid this, always ask every prospective advisor: will you act as my legal fiduciary at all times? And, get it in writing, or better yet, as part of your client contract.

Question 2: What are your professional designations?

Being required to do the right thing, of course, is critical. But requirements can only get you so far. You also need to find an advisor who has the knowledge and skill to help you define and meet your goals.

With investments, this is extremely important. You want an advisor who is skilled at managing client wealth through all types of markets and economies.

While hard to measure, look for the right designations or professional credentials. But not just any credentials. Look for the “big three”:

  2. Chartered Financial Analyst
  3. Certified Public Accountant

To learn about these three designations and why I recommend looking for them, see my previous article on financial advisor designations.

Question 3: How Do You Charge for Your Services?

When it comes to your money, the fees you pay matter. Over time, they matter even more. Sadly, many people don’t understand how their advisor is compensated. If you haven’t asked what you are paying, there is no way to make sure you’re not overpaying.

So, it’s best to work with an advisor who provides a transparent and easy to understand fee schedule. Your advisors should always be happy show your fees and expenses in writing so you can easily keep track. If your financial professional is not willing to do that, or cannot clearly explain how they are compensated, consider it a red flag. The best advisors believe in transparency and will appreciate involved clients that ask a lot of questions.

Question 4: Do you have any complaints or issues on your record?

One thing working in your favor when hiring a financial advisor is that the industry is regulated. Each person who is registered has an industry compliance record. Sadly, most consumers don’t even think to check these records. Don’t fall into that trap—there are more financial advisors with regulatory issues than you might think. In fact, according to research by the Wall Street Journal, about one in eight advisors or brokers have compliance issues on their records. These issues may be client complaints, actions by regulators, bankruptcies, terminations, even criminal proceedings…all things you want to know.

In addition, this research found that:

  • An estimated 70,000 advisors have at least one disclosure
  • Nearly 3,000 advisors have at least five disclosures

Always ask and then verify to make sure that you were told the truth. It’s simple to search by name using the Financial Industry Regulatory Authority website: and the SEC’s Investment Adviser Public Disclosure website:

Any advisor you consider should have a clean compliance record. With your financial future at stake, do not make an exception.

Question 5: How do you keep your clients fully informed about their money?

In surveys about satisfaction with financial advisors, one of the most frequent responses is concerns about the frequency of communication. Many financial advisors start strong when they get a new client, but then get comfortable and communicate less and less. That may be human nature, but you need to know the status of your money at all times.

Look for an advisor who has systems that helps keep you informed:

  • Performance reports
  • Meetings scheduled at specific intervals
  • Regular phone calls or email check ins
  • Easy to reach by email or phone
  • Quick response time

Why is this important? The best results are achieved when you interact with an advisor frequently. If paying for full-service and comprehensive advice, you should use the services to help you achieve your financial goals. One of the most important roles advisors play in their client’s lives is to act as an emotional buffer between their money and a big financial mistake!

It’s always a good idea to discuss big financial decisions with your advisor:

  • Should I refinance or pay off my mortgage?
  • Should I buy that rental or vacation home?
  • Should I sell my existing home and downsize?

Additionally, you and your advisor should talk or email frequently to make sure you are staying on track with your financial goals. That can be the difference between truly achieving your financial goals or simply those goals remaining dreams and wishes. The interaction is key and will help keep you both accountable.


As you can see, there is some homework to do to make sure you hire a high-quality advisor. It’s important that you research carefully, as this decision can impact your future quality of life. Use these questions to find an advisor who is a great fit.

Once you’ve found one, stay involved, because the fact is, no one will watch your money as closely as you will.

  • Always review your statements as they come in and look for anything you don’t understand
  • Monitor the fees and internal expenses to make sure they are reasonable and what you agreed to

It’s also a good idea to periodically check FINRA’s to look for new filings.

Bottom line (and don’t ignore this): If there are any concerns or red flags, deal with them quickly. Your family’s security and financial future are too important.

Photo of Ryan C. Warwick
Ryan Warwick is Principal of Rathbone Warwick, a Registered Investment Adviser. Rathbone Warwick is a fee-based financial planning and investment management firm headquartered in Boise, Idaho serving families nationwide. Our advisors hold the Certified Financial Planner™ designation and the Chartered Financial Analyst® charter and serve as trusted stewards to help families preserve and grow their wealth for over three decades. Visit us at

How and When to Pay Plan Expenses with Plan Assets

Tom Bastin, JD, LLM, AIF, CEBS, Managing Director, Southeast Region

Some retirement plan expenses can be paid for with plan assets — but many can’t. Which are the “reasonable and necessary” retirement plan expenses that can be paid out of plan assets?

Generally, services required to maintain the plan’s compliance and administration can be paid from plan assets. Obvious examples include the annual nondiscrimination testing and preparation of the annual Form 5500. Another example is a plan amendment or restatement that is required because of a legislative change.

Optional services generally cannot be paid out of plan assets. One clear example is costs for projections that are optional and benefit the company, not the plan participants.

Some service fees may not be easy to classify. Fees for resolving plan corrections — such as delinquent deferral remittances or contributions determined with a definition of compensation not supported in your plan document. In the event of an incorrect test result, regardless of who was at fault, the law ultimately holds the plan sponsor responsible for the proper maintenance of the plan. As a result, the plan sponsor cannot shift the financial burden for the corrections to the plan.

All in all, it’s perfectly acceptable and common to charge reasonable and necessary transaction-based and recordkeeper administrative fees to participants. However, it is critical to ensure that similarly situated participants are treated the same. It would be discriminatory and, therefore not allowed, for non-highly compensated employees to pay administrative fees while highly compensated employees did not.

If you are unsure whether a specific fee can be paid from plan assets, please contact your advisor. We’ll happily talk through the particulars of your situation to help you arrive at an appropriate decision.

About the Author, Tom Bastin 
Tom uses his expertise in plan design, administration, recordkeeping, compliance, investment analysis, fee analysis, vendor benchmarking, fiduciary governance and participant education to help plan sponsors and participants reach their retirement goals. PlanAdvisor ranked Tom one of the “Top 100 Retirement Plan Advisers” in 2013 and 2015. Financial Times ranked him one of the “Top 401 Retirement Advisers” in 2015. Tom earned a Bachelor of Arts at Purdue University, a Juris Doctor at Nova University and an LL.M. in Taxation Law from the University of Miami.

Where’s all this fear coming from?

As I discussed in my last market outlook, economists are fearful of, slow productivity growth. Such fear is not unreasonable given the importance of productivity to our standard of living over the long term.

However, some economic policymakers today are displaying a fear that is unwarranted – the fear that the strength of today’s labor market, as evidenced by a historically low unemployment rate, will lead to a high rate of inflation.

Consider the economic theories on which such concerns are based.

The idea that a government-controlled central bank can adequately control inflation through its policies on the amount of money in circulation or on deposit at banks began in earnest with the theories of John Maynard Keynes during the Great Depression.[1]

In his 1936 treatise, The General Theory of Employment, Interest and Money, Keynes explained how the fiscal and monetary policies of the government could possibly smooth out short-run fluctuations in the economy. When the economy slows, the government should step in and increase overall demand. When the economy is growing the government should do the opposite.

That is, government should buy when everyone is selling and sell when everyone is buying.

While Keynes’s theory was widely accepted, it was never fully implemented or tested.  That is, Keynesian economics is incomplete.

For example, Keynes proposed that governments run budget surpluses throughout periods of positive economic growth. Before 1930, the U.S. government had a budget surplus in two out of every three years. In the subsequent 82 years we have seen only twelve. Currently, government spending is rising faster than tax receipts; the exact opposite of what the theory calls for.

Monetary policy is any action undertaken by a central bank to influence the availability and cost of money and credit.  Through a myriad of different actions in our banking system the U.S. Federal Reserve can push interest rates higher so as to influence banks’ ability to provide credit.  If the banks respond to such incentives they may reduce lending, thereby reducing the likelihood that prices will rise.

But just as with fiscal policy, government policymakers have rarely followed Keynes’s monetary advice. In the early 1980s members of the Federal Reserve’s policymaking committee followed the lead of Chairman Paul Volcker and dramatically raised interested rates to counteract the inflationary policies of the day.

For these reasons and more there has yet to be a full test of the Keynes’s theory, and thus a complete understanding of how fiscal or monetary policy affects the real economy. In the eighteenth century, economist David Hume argued that monetary policy has no real effect on the economy.  This idea of monetary neutrality means that over time changes in the supply of money and credit affects only nominal variables, such as interest rates and exchange rates. Such changes have no effect, however, on real variables like income and consumption.

Some economists claim that the Fed’s actions do nothing but increase financial repression. Financial repression occurs when such actions channel funds from one area of the economy to another, often the government’s own debt. Under this theory, the low interest rate policy from the Fed these ten years has simply distorted the value of stocks and other financial assets while increasing the level of uncertainty in the overall economy.[2]

Regardless of all these academic debates, policymakers continue to follow a Keynesian model known as the Phillips Curve.[3]

Economist A. W. Phillips published a report many years ago that suggested a negative correlation between inflation rates and unemployment. According to the theoretical model behind this supposed relationship, when the Fed keeps interest rates too low the money supply expands too fast. The economy moves along the Phillips curve to a point of lower unemployment but at the cost of higher inflation.

So it is fear of inflation that is keeping policymakers up at night.

According to the minutes from their most recent meeting, Fed policy makers expressed the view that “the labor market has continued to strengthen and that economic activity has been rising at a strong rate.” From this observation they concluded “that further gradual increases in [interest rates] will be consistent with sustained expansion of economic activity…”[4] However, as noted above there is no certainty as to what effect such interest rate increases will have on the real economy.

So what is an investor to do if Keynes’s theory is incomplete and such policy concerns are unwarranted?  Keep your eye on the long-run goal! Don’t let the fears of some economists and some policymakers distract you.

We invest so as to secure a better future for ourselves and our families. We invest to provide a stable level of income in retirement or protect against health or other risks.

Over the long term, the current fiscal and monetary policies are likely to have little or no effect on the performance of my investments. As long as these policies don’t substantially deter businesses from investing in their operations and new products or services the US economy will continue to grow, even after adjusting for inflation. Historically, the only consistent hedge against inflation is stocks. The return on bonds tends to only match inflation.[5]

Fear in the financial markets is mostly unwarranted. Stick to your long-run investing plan.


The Impact of Inflation

When the prices of goods and services increase over time, consumers can buy fewer of them with every dollar they have saved.  This erosion of the real purchasing power of wealth is called inflation. Inflation is an important element of investing. In many cases, the reason for saving today is to support future spending. Therefore, keeping pace with inflation is a crucial goal for many investors. To help understand inflation’s impact on purchasing power, consider the following illustration of the effects of inflation over time. In 1916, nine cents would buy a quart of milk. Fifty years later, nine cents would only buy a small glass of milk. And more than 100 years later, nine cents would only buy about seven tablespoons of milk. How can investors potentially prevent this loss of purchasing power from inflation over time?

Exhibit 1.    Your Money Today Will Likely Buy Less Tomorrow

In US dollars. Source for 1916 and 1966: Historical Statistics of the United States, Colonial Times to 1970/US Department of Commerce. Source for 2017: US Department of Labor, Bureau of Labor Statistics, Economic Statistics, Consumer Price Index—US City Average Price Data.


As the value of a dollar declines over time, investing can help grow wealth and preserve purchasing power. Investors should know that over the long haul stocks have historically outpaced inflation, but there have also been short-term stretches where this has not been the case. For example, during the 17-year period from 1966–1982, the return of the S&P 500 Index was 6.8% before inflation, but after adjusting for inflation it was 0%. Additionally, if we look at the period from 2000–2009, the so-called “lost decade,” the return of the S&P 500 Index dropped from –0.9% before inflation to –3.4% after inflation.

Despite some periods where stocks have failed to outpace inflation, one dollar invested in the S&P 500 Index in 1926, after accounting for inflation, would have grown to more than $500 of purchasing power at the end of 2017 and would have significantly outpaced inflation over the long run. The story for US Treasury bills (T-bills), however, is quite different. In many periods, T-bills were unable to keep pace with inflation, and an investor would have experienced an erosion of purchasing power. After adjusting for inflation, one dollar invested in T-bills in 1926 would have grown to only $1.51 at the end of 2017.

Exhibit 2.    Growth of $1, 1926–2017

S&P and Dow Jones data © 2018 Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Past performance is no guarantee of future results. Actual returns may be lower. Inflation is measured as changes in the US Consumer Price Index.

While stocks are more volatile than T-bills, they have also been more likely to outpace inflation over long periods. The lesson here is that volatility is not the only type of risk that should concern investors. Ultimately, many investors may need to have some of their allocation in growth investments that outpace inflation to maintain their standard of living and grow their wealth.

One additional tool available to investors who are concerned about both stock market volatility and inflation are Treasury Inflation-Protected Securities (TIPS). TIPS are guaranteed by the US Treasury and as such are considered by the marketplace to have low risk of default. The Treasury issues TIPS with a variety of maturities, and these securities are easily bought and sold. Unlike traditional Treasury securities such as T-bills, TIPS are indexed to inflation to protect investors from an erosion in purchasing power. As inflation (measured by the consumer price index) rises, so does the par value of TIPS, while the interest rate remains fixed. This means that if inflation unexpectedly rises, the purchasing power of any principal invested in TIPS should also increase. Although they may not offer the long-term growth opportunities that stocks do, their structure makes TIPS an effective risk management tool for investors who are concerned with managing uncertainty around future purchasing power.


Inflation is an important consideration for many long-term investors. By combining the right mix of growth and risk management assets, investors may be able to blunt the effects of inflation and grow their wealth over time. Remember, however, that inflation is only one consideration among many that investors must contend with when building a portfolio for the future. The right mix of assets for any investor will depend upon that investor’s unique goals and needs. A financial advisor can help investors weigh the impact of inflation and other important considerations when preparing and investing for the future.

Exchange Your Old Retirement Solutions for New Ones

What is an Exchange?

An exchange is a turnkey solution for businesses that allows you to provide the benefit of a retirement plan while offloading much of the administrative and fiduciary responsibilities at a potential cost reduction. A team of professionals work together on your behalf, so you can focus on running your business, not your retirement plan.

Retirement Readiness

An exchange is a great way to help your employees reach retirement readiness by providing them with a savings vehicle like a 401(k) plan, but with less administrative burden and by transferring certain risks.

Fiduciary Risk Mitigation

The fiduciary has a legal obligation to carry out its plan responsibilities with prudence, good faith, honesty, integrity, service and undivided loyalty to beneficiary interests – in this case, retirement plan participants. When joining an exchange, a fair amount of fiduciary responsibility is taken off your hands.

Administrative Relief

Employers oftentimes don’t have the resources to effectively manage the complex requirement of administering a qualified retirement plan. With an exchange all plan administrative duties can be outsourced – a benefit typically only available to very large companies.

Cost Effectiveness

There’s strength in numbers. By teaming up with other businesses in an exchange, you can benefit from economies of scale and seamless processing that help reduce the costs associated with operating and maintaining a retirement plan.

For more information on exchanges, please contact your plan adviser.

About the Author, Jonathan Coombs
Jonathan provides guidance to plan sponsors across the country on retirement best practices regarding fee benchmarking, investment analysis, plan design, fiduciary compliance and participant outcomes. As an asset allocation specialist, Jonathan project manages key business development initiatives in the custom solution arena. He also serves as a fixed income analyst. Jonathan attended The Julliard School, where he obtained a Bachelor of Science in music and a Master of Music.

August 2018 – The Idaho Business Review honors Boise Financial Advisor Brooke Ann Ramstad, CFP® as one of 15 financial professionals in the State of Idaho recognized for Excellence In Finance

Photo of Brooke A. Ramstad, CFP®

Rathbone Warwick wishes to congratulate Principal and Investment Advisor Brooke Ann Ramstad, CFP® for being nominated and selected as a 2018 Honoree for the Idaho Business Review’s Excellence in Finance.

The 2018 honorees are among “the best of the best” in the financial arenas of banking, corporate, investment and professional.

To earn the award, each submitted an application and was judged by a selection committee of past IBR Excellence in Finance honorees, who reviewed and rated them in the areas of leadership, mentorship, achievements, community leadership and community service.

Idaho Business Review’s Excellence in Finance awards program celebrates financial professionals in banking, corporate, investment and professional, whose fiscal accomplishments set a high bar for their company and Idaho’s business economy.

Brooke A. Ramstad, CFP® began her career with Rathbone Warwick in 2008. As a CERTIFIED FINANCIAL PLANNER™ professional and Principal, she meets with families to map out realistic long term financial goals while delivering a diversified, low-cost investment strategy. Brooke is a native of Wenatchee, WA (The Apple Capitol of the World) and a 2000 graduate of the University of Washington with a Bachelor’s of Arts degree in Romance Linguistics. A lifetime member of Kappa Kappa Gamma sorority, Brooke now serves as the Philanthropy Advisor to the Zeta Pi chapter of Kappa Kappa Gamma at the College of Idaho. When not enjoying the Boise River Greenbelt with her husband and two young children, she is a passionate Ambassador for the Women’s and Children’s Alliance. Brooke is also a member of the Idaho Women’s Charitable Foundation, the Idaho Chapter of the Financial Planning Association and will forever be a fan of “The Wonder Years”.