Vanguard made its first acquisition in 2021, but by the looks of it, it may just be the last.

The Malvern, Pennsylvania-based firm is now facing a lawsuit stemming from the purchase of JustInvest, one of a handful of direct indexing platforms that were all the rage back in the early 2020s. The complaint alleges the world’s second-largest money manager acted in bad faith post-sale by thwarting certain business deals that would have led to payouts for JustInvest founders and shareholders. Even today, Vanguard investors aren’t able to use the service, which was rebranded Vanguard Personalized Indexing Management, nor can the firm’s in-house advisors, according to Jeff DeMaso, editor of the newsletter the Independent Vanguard Advisor. So, why the acquisition in the first place?

“Perhaps it was a move to defend the firm against the risk that direct indexing would replace index mutual funds and ETFs,” DeMaso said. “If that was the goal, sure, mission accomplished. But that’s a low hurdle.”

Full Court Press

The suit alleges that Vanguard blocked deals that would have led to performance payments, which represented a “large share” of compensation to JustInvest’s founders. In one instance, JustInvest was close to landing $900 million in assets but Vanguard management allegedly put the kibosh on the deal without an explanation. Before the acquisition, however, Vanguard insisted there would be “lines out the door” for their direct indexing service and that it could help bring in $1 billion in assets to JustInvest on Day 1 alone, according to the complaint filed in Delaware Chancery Court. “Indeed, before the merger closed, Vanguard expressed concerns that the security-holders would earn the full performance payments under the agreement too quickly,” the suit said.

The complaint also alleges the three founders — Jonathan Hudacko, Vijay Rao, and Alan Cummings — were terminated last year without cause in retaliation for raising concerns. Vanguard declined to comment.

Direct Hit. Who can forget when direct indexers were hot commodities in the early 2020s as experts predicted the platforms, which help clients build their own, personalized indexes that come with significant tax advantages, could even take over the ETF industry itself? The laundry list of proud new index shop owners included BlackRock, Charles Schwab, Morgan Stanley and JPMorgan, to name just a few.

“[Acquisitions] are not easy, no matter which seat you are in,” DeMaso said. “But this has not been a win-win coming together. Said differently, Vanguard is 0 for 1 on acquisitions … at least from the viewpoint of the acquired.”

War, what is it good for? Well, for one thing, these exchange-traded funds.

Defense ETFs are surging this year, boosted by ongoing conflicts in Europe and the Middle East. Many are outperforming the broader market, with some pulling in more than $1 billion in inflows. Sector-specific ETFs are tricky beasts, though. Lacking broad exposure, they can often depend on market timing — a big no-no for advisors. But hey, a broken clock is still right twice a day.

“Security and defense ETFs have been highly successful in 2025,” said Bryan Armour, director of ETF & passive strategies research at Morningstar. “Geopolitical tensions and European rearmament have driven returns higher.”

Take Up Arms

Wars and conflict may not be ideal on a human level, but they often become boons for certain sectors and businesses. The war in Ukraine, now in its third year, and increasing fears of Russian aggression have led NATO to boost defense spending targets to 5% of GDP for member nations by 2035. France plans to raise its military budget to $74.8 billion by 2027.

As countries rearm, investors are pouring money into funds focused on the businesses behind the buildup. “These strategies are no longer niche,” said Gavin Filmore, chief revenue officer at Tidal Financial. “They’re being recognized as core allocations amid rising geopolitical tensions and global defense modernization. The flows are reflecting that urgency.”

Some of the top funds include:

• The Global X Defense Tech ETF (SHLD) is the standout defense fund, up more than 60% this year. As of the end of June, it had taken in roughly $1.65 billion in inflows, according to Morningstar Direct.
• The Themes Transatlantic Defense ETF (NATO) is up more than 40% this year, and took in about $33 million inflows in that time.

Stratego. Despite strong returns and investor enthusiasm for defense ETFs, Armour said advisors should always consider the potential drawbacks, such as higher fees and concentration. “Investing in a defense ETF makes sense based on the geopolitical changes of the past few months,” he told Advisor Upside. “But that information is already priced in by now, so is it still a good time to buy?”

RIA growth is showing no signs of slowing down.

Both revenue and number of clients continue to rise across the industry, according to Schwab’s annual RIA benchmarking study, which surveys more than 1,000 firms representing more than $2.4 trillion in AUM. A major part of that success has been AI, which is now being used for everything from administrative support to marketing content. However, human referrals still remain a primary method of lead generation, proving that prospects still trust human beings over ChatGPT.

“One [change] that I always look at every single year is, ‘Where’s the growth coming from?’ And it’s remarkable that it’s still client referrals … making up about 69%,” said Lisa Salvi, whose team at Schwab leads the study. “So that really hasn’t changed, even with all this digital marketing, all the podcasts people are doing. That is really interesting.”

Upping the AI Ante

That’s not to say AI hasn’t made huge impacts on the industry, with nearly 70% of reporting firms using the tools in some way last year. What’s more, “top-performing” firms — those that rank near the top of Schwab’s index, which accounts for factors like AUM growth, client and staff attrition, and compound annual growth rates — outsource operational duties to AI and spend more time on client service. Salvi said this happens because as firms reach certain benchmarks, like moving from $750 million to $1 billion in AUM, tech stacks need to keep up.

“When you’re really small, you have all this room. Your systems have plenty of capacity, and your office space is great, and your website’s looking good,” Salvi said. “But then you keep growing, and you need to think of those things a little bit differently to get ready.” According to the study:

• 43% of firms reported using AI for administrative support, like notetaking and drafting emails.
• 38% of firms said they used it to generate marketing content, including digital ads, email campaigns and social media posts.
• 31% of the surveyed respondents said they used AI to correspond with their clients.

More CRM, Please. Portfolio management systems and CRMs were reported to have the greatest impact on returns, with nearly 100% of respondents selecting them as having had the highest ROI, per the report. Top performers also used CRMs more than everyone else. “One of my key observations is that firms are signaling some capacity constraints,” Salvi said. “So technology and operational improvements are really important.”