On September 1, 2025, the U.S. Securities and Exchange Commission (SEC) announced enforcement settlements with both Empower and Vanguard related to inadequate disclosures in their managed account services. Both firms failed to fully disclose that their advisors were financially incentivized to recommend these services, potentially misleading plan participants about the impartiality of advice.
Yes, I do remember the sales contests last century for various investment products. While I do believe in healthy and fair competition and motivation, it must always be done with the focus firmly on what is right for the prospective client.
I am quite proud of my firm, Green Retirement, Inc. and the 100+ retirement plans we advise across the US. I am equally proud of the amount of prospective clients we have redirected to other advisors and investment firms as I felt they would be better served in those channels. After 35 years in the industry, I dare say the ethical choice is usually the right one!
The Fines
Empower was fined nearly $6 million—specifically $5,989,969.94—which includes:
1. Disgorgement of $4,063,569.80
2. Pre-judgment interest of $426,400.14
3. Civil monetary penalties totaling $1.5 million split between Empower Advisory and Empower Financial Services.
Vanguard agreed to a fine of $19.5 million for analogous disclosure failures and lack of written policies to prevent misleading statements about advisor incentives.
Violations Cited
Both firms were found to have willfully violated Section 206(2) of the Investment Advisers Act: engaging in practices that constituted deceit upon clients.
Empower also violated Regulation Best Interest (Reg BI) by not meeting disclosure and conflict-of-interest obligations under Exchange Act Rule 15l-1(a)(1).
Vanguard was further criticized for failing to have adequate written policies and procedures to ensure accurate disclosures and guard against misleading statements.
Remedial Measures
Empower
1. Removed managed account AUM (Assets Under Management) goals from advisor performance targets.
2. Hired senior-level compliance professionals.
3. Engaged an external consultant to assess participant-facing and compliance controls.
4. Overhauled policies and training regarding the Retirement Readiness Review.
5. Implemented an algorithmic decision aid to help participants evaluate the value of the service.
6. Required advisors to clearly disclose their role—whether representative of Empower Financial Services or Advisory—and any role changes during reviews.
Vanguard
1. In 2023, removed assertions on its website that Personal Advisor Services (PAS) advisors had “no outside or financial incentives.”
2. Updated marketing and regulatory documents including the PAS Supplement and Form CRS.
3. Hired a consultant to review and strengthen its disclosure and conflict-identification framework.
Fair Fund Distributions
Both firms will fund distribution programs (“Fair Funds”) so affected clients receive prorated advisory fees refunded—with interest—subject to thresholds. Importantly, any accounts with current or former officers or directors holding a financial interest in the funds are excluded from payment.
The Parting Glass
As a 401(k) advisor, these cases underscore the critical importance of transparency and documented compliance. Even when advisor incentives are internal or subtle, failure to disclose them explicitly is a clear violation of fiduciary trust and regulatory standards.
Here are key takeaways for fiduciaries and advisor practices striving for integrity:
- Ensure full, plain-language disclosure of any incentive structures affecting recommendations.
- Maintain written policies and procedures aligned with Reg BI and the Advisers Act to prevent misleading presentations.
- Align advisor goals with client interests—not sales or asset-gathering targets.
- Use tools and training that help clients objectively understand service value, thus replacing guesswork with clarity.
- Proactively review and update materials, especially public-facing statements and client communications, when compensation models evolve.