Financial advisors are showing keen interest in bringing private market investments into defined contribution portfolios, according to survey results released Monday by Empower.
Sixty-eight percent of advisors reported that they use private investments, mainly in high-net-worth and wealth-advised portfolios. Of those who use private investments, 58% said they would recommend them within retirement plans, signaling growing interest, Empower said.
An estimated $14.3 trillion is invested in private markets: 66% in private equity, 24% in private real estate and 10% in private credit.
“Private markets are not a niche corner of the investment landscape,” Edmund Murphy, Empower’s president and CEO, said in a statement. “With most U.S. companies privately held and trillions of dollars from individuals already invested, expanding access to these markets through defined contribution plans presents a significant opportunity to enhance long-term retirement outcomes.”
Advisors have a key role to play in responsibly guiding that evolution, Murphy said. He noted that “aligning the 401(k) system to private markets investing normalizes the U.S. retirement system with the international and defined benefit investing universe.”
Empower’s online survey, conducted in mid-July, received 237 responses from advisors. Ninety-seven percent advise on DC plans and 42% advise on pension/defined benefit plans; 41% act as lead financial advisor/RIA; and 22% act as investment/fiduciary consultant.
Moving Ahead, With Safeguards
Survey respondents cited these benefits as their main considerations for offering private market investments:
- Diversification — 62%
- Higher return potential — 48%
- Lower correlation to public markets — 48%
At the same time, two-thirds of advisors said that liquidity was the biggest challenge to broader adoption, followed by half who cited fees and a third who said that the main challenge is investment complexity.
Sixty-six percent of advisors said that greater ERISA/regulatory clarity would increase their likelihood of recommending private market investment in retirement plans.
That figure rises to 75% among advisors who also serve pension or defined benefit plans Empower sees this as a signal of advisors’ readiness to engage once the policy environment evolves.
“As regulatory guidance develops, we see advisors playing a pivotal role in helping plan sponsors evaluate private investment options,” Murphy said. “Professionally managed accounts and prudent exposure limits can help mitigate risk while offering retirement savers access to a broader investment universe.”
The survey found that 59% of advisors would limit exposure to private investments, 48% would use advisor-guided solutions or professionally managed accounts and 33% would use private investments within target date funds.
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