How much was the bill?

Vanguard agreed to pay $106.4 million for allegedly misleading and failing to notify clients of changes to its retirement funds, which eventually led to much higher capital gains tax bills for hundreds of thousands of retail investors. The Malvern, Pennsylvania-based firm also agreed to pay $40 million in a separate investor class-action lawsuit. While the world’s second-largest asset manager neither admitted nor denied the findings, the money will be distributed back to harmed investors, according to a release.

The fine  was one of the larger ones handed down to a single firm in recent months. “We’re pleased to have reached this settlement and look forward to continuing to serve our investors with world-class investment options,” the company said in a statement.

Saving for Retirement

Transparency is big for regulators, and if financial firms aren’t upfront about how their products work, they risk facing lofty fines. That’s exactly where Vanguard found itself last week. 

Rewind to December 2020 when Vanguard lowered the minimum amount required to invest in its Institutional Targeted Retirement Funds from $100 million to just $5 million. Seems like a win for investors, right? But as a result, many customers began selling their Investor TRFs and switching to the Institutional TRFs, which had lower expenses. That forced the Investor TRF to sell underlying assets with gains from the recent stock market run, leading to historically high tax bills.

Always the Last to Know. The Securities and Exchange Commission said Vanguard failed to properly notify all investors of the changes, and those who didn’t make the switch paid the price, literally. In New York alone, more than 15,000 investors were forced to pay capital gains taxes on their retirement accounts that were exponentially higher because of the undisclosed changes, according to the state’s attorney general.

“Materially accurate information about capital gains and tax implications is critical to investors saving for their retirements,” the SEC’s Corey Schuster said in the release.

Bitcoin has been called the single greatest invention since the internet itself and that could be low-balling it.

Digital assets have now become one of the fastest growing technologies of all time, according to a new report by BlackRock. The world’s leading cryptocurrency reached 300 million users in just 12 years, faster than other transformative innovations, like the internet and mobile phones that took 15 and 21 years, respectively. Bitcoin now has a market cap of close to $2 trillion and new coins are reshaping the investment landscape. But is crypto finally hitting mainstream in financial advice?

“Bitcoin has outperformed the S&P 500 twenty-fold for years,” said Arron Bennett, CFO of the financial and tax planning firm Bennett Financials. “The value is going to explode.”

Sorry, I Quit

Even with all the attention, advisors are still on the fence. JPMorgan CEO Jamie Dimon even went as far as calling cryptocurrency a “fraud” last week. It’s a hard point to argue after President Donald Trump and First Lady Melania Trump launched meme coins over the weekend that became worth billions of dollars almost overnight, prompting alarm from ethics experts and the industry itself. Likening it to cigarette smoking, Dimon applauds investors’ right to trade digital assets, but just like lighting up … he doesn’t think they should. 

About half of advisors said they were more likely to invest in crypto in 2025 than in previous years, according to a report published last week by Bitwise. Adoption rates more than doubled year over year thanks to Trump’s election win, and now 22% of advisors say they currently invest client funds in digital currencies. The report also found:

• Client interest is the highest on record, with 96% of advisors receiving a question about crypto from clients last year.
• For advisors not invested in crypto, 19% are “definitely” or “probably” planning to add exposure in 2025.

“Dimon calls it a fraud because it threatens his entire industry,” said Bennett. “The moment Bitcoin and crypto ETFs become mainstream, hedge funds become irrelevant.”

Ask the Natives. Not surprisingly, Millennials are leading the crypto investing charge, according to the BlackRock report. Digital natives are now adopting the technology at a faster clip than previous generations, like Boomers and Gen X, and with more users come greater investments in infrastructure and new use cases.

“The way forward is to encourage education and innovation because we are still in the early days, and for the time being, volatility and skepticism prevail,” said Patrick Gruhn, CEO of the trading platform Perpetuals.com. “We will look at this time as the beginning of something new and vital.”

When Rob Sandrew went to work at the Boston-based Putnam Investments in the 1990s, he quickly realized he’d been thrown in the deep end. 

For eight months he took shareholder calls, many of which had him explaining to elderly, retail clients how one of the firm’s mutual funds had unfortunately blown up. He remembers sitting at his desk, reading The Wall Street Journal, and not understanding half of it. When the training finally began, he was hit with the classic “sell me this pen/coffee/sandwich/stock/whatever” test. He passed.

“If you start hyping up the product, they’re going to say no,” he said. “It’s about understanding the consumer’s wants and needs.”

Fast forward to today and Sandrew is chief growth officer with Integrated Partners, a Boston-based RIA and planning firm, where he spends his time thinking about the next generation of financial planners. “What about getting new blood into our industry?” he said. The Daily Upside caught up with him at Rockefeller Center in New York City to discuss how RIAs can better prepare their businesses for the future, train advisors, and deliver better financial planning.  

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