What Advisers’ Clients Need to Know About Private Markets
Alternative investment strategies, including those in the private markets, have long been a component of sophisticated portfolio construction.
But there is a notable new trend in the financial advice industry: Retail investors are asking about them.
As product innovation lowers entry points and broadens distribution, individual investors want to access the strategies once reserved for institutions and the ultrawealthy.
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Successfully providing advice in this new era will require targeted client education, the setting of realistic expectations and keeping updated on the proliferation of products and offerings being introduced to the public.
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The opening of private market opportunities to retail investors is being framed as “democratization,” suggesting that broader access equates to a larger, more accessible playing field.
But it’s crucial to remember that greater availability does not ensure client understanding.
Alongside explaining the many benefits of private market investing, leading advisers will need to interpret and effectively communicate the unique characteristics of private assets — such as limited liquidity, complex valuations and wide performance dispersion — to clients who are mostly familiar with public markets.
To be sure, as beneficial sources of diversification, private market assets have grown popular for a reason. Gaining exposure to excellent companies and investment strategies that aren’t available in public markets is something to be legitimately excited about.
But, as clients become more interested, they’ll also be looking more keenly at adviser performance. Discerning quality, evaluating managers and aligning structures with each client’s liquidity needs and investment horizons will be crucial for making a good impression — and a good return.
The new opportunity for advisers
Institutional allocators were the first to harness the diversification and return potential of alternatives, helping private market assets under management surge to $16 trillion in 2025 — nearly triple what they were a decade ago.
Financial advisers who were early adopters of these strategies know that client interest in private markets is easily piqued. As product innovation and coordinated marketing campaigns broaden public awareness, more and more clients will aim to fit these investments into their long-term plans.
When used appropriately, private market strategies can be excellent complements to public market holdings.
Product options are indeed proliferating. Evergreen funds, interval funds and non-traded vehicles have opened the door to retail investors by lowering minimums, streamlining tax reporting and introducing partial liquidity.
For advisers, this represents a client conversation that needs to be led. The most effective practitioners will shape expectations, determine which clients are best suited for private market exposure and align allocation size and liquidity profiles to individual goals.
Clients may also need basic guidance in how these investments differ from traditional public market vehicles — especially in terms of structure, transparency and performance reporting.
Common private market performance metrics such as internal rate of return (IRR) or multiple on invested capital (MOIC) will need to be explained and contrasted with the time-weighted return measures common to public markets.
Educating clients that private investments typically involve longer holding periods and offer less liquidity can be an opportunity to emphasize investment patience, disciplined behavior and the avoidance of reactionary decisions during short-term market swings.
Due diligence: Operations and strategy
Most advisers select private market funds and strategies from a home-office bench or platform of pre-vetted offerings. But professional discernment still matters greatly. Due diligence is an exercise to understanding both how managers operate and how their strategies fit within client portfolios.
For example, in low-interest-rate environments, easy capital contributes to compressed yields and can mask differences in skill among private managers. Today’s higher rates have made for more discriminating capital, and performance dispersion has widened.
Learning how to identify managers with exceptional operational discipline, unique deal-sourcing advantages and transparent reporting will be crucial.
Advisers must understand not only what is available, but why each fund or vehicle deserves consideration. If there is an attractive fit, advisers should be able to explain how its structure and liquidity align with a client’s objectives; if it doesn’t, they should be able to explain why not.
The ability to translate a list of firm-approved products into a coherent, client-specific strategy is what distinguishes informed selection from mere access.
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Given the opacity, complexity and diversity of private markets, specialized knowledge is critical. Advisers with advanced credentials such as the Certified Investment Management Analyst® (CIMA®) designation may be better prepared to evaluate fund structures, critique manager practices and integrate private assets responsibly into client portfolios.
The path ahead
As the world of alternative assets and private markets grows more intricate and diverse, the challenge of choosing and managing these investments will only increase.
Advisers who truly distinguish themselves will be those who know how to leverage them expertly in the client relationship: aligning choices with investor goals, benchmarking performance against public alternatives and managing expectations with candor.
No one can predict exactly how private markets will evolve from here, and every carefully selected private investment carries both the possibility of success and disappointment.
This means transparency and education will remain as the adviser’s most reliable tools in maintaining trust and relationships across market cycles.
Sean Walters is CEO of the Investments & Wealth Institute, where he is responsible for the overall management and success of the Institute, a global leading association in professional development and certification for the financial advice profession. Since 2010, Sean has been pivotal in protecting and advancing the Institute’s non-profit mission to be the leading educational community of financial professionals, dedicated to elevating investment and wealth management client outcomes.
Mike Kurz is the director of programs at the Investments & Wealth Institute, where he serves to grow the strength of the Institute through continuous improvement in each of the certification programs and is a featured speaker in advanced education programs.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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