Private property. C’mon in.

AllianceBernstein, Brookfield Asset Management and Carlyle Group are partnering to launch a private markets fund for 401(k)s and other defined contribution retirement plans. The product, ABC [ONE], is designed to sit alongside existing target-date funds or managed accounts and give investors exposure to private equity, private credit and real estate. AllianceBernstein will oversee the private credit sleeve and determine allocations based on participants’ ages and risk profiles, per a release. Brookfield will manage the real estate investments, and Carlyle will handle private equity.

It’s the latest development in Wall Street’s growing push to bring private markets into retirement plans, a movement backed by asset managers, record keepers and even some politicians in Washington. However, financial advisors see the trend as a mixed bag that might become complicated and risky for clients. “The more investment choices that a 401(k) offers, the lower the participation rate,” said Stacy Francis, CEO of Francis Financial.

Who Wants In on This?

Private markets have long been limited to institutional and accredited investors, but that’s changing and fast. Executive actions from President Donald Trump aimed at expanding access, combined with a wave of partnerships, have fueled expectations that alternatives will become a larger part of retirement investing:

• Allocations to private investments in DC plans could reach $1 trillion by 2030, accounting for just over 6% of all assets in the plans, according to a new study from Deloitte.
• Private equity is expected to account for the largest share of the allocations at 43%, then real estate at 28%, private credit at 20% and infrastructure at 9%.

“With the public markets reaching all-time highs on nearly a daily basis, it makes sense to add investments with lower correlation to the public equity markets,” said Tom Balcom, founder of 1650 Wealth Management.

Democratization. It’s not like the average Joe or Josephine hasn’t been exposed to private markets inside pension funds. However, those are pools managed by professionals, whereas 401(k)s are designed for individuals who can pick and choose their own strategies.

“Not everyone’s an investment professional, so there’s certainly a risk of misallocating,” said Sean McCaffery, a senior DC plan analyst at Fiducient Advisors, adding that managed accounts and target-date funds probably make the most sense because they limit liquidity risks. “It’s difficult for a participant to truly understand the complexities of alternatives.”

Another day, another wealthtech announcement.

There’s a good reason why it’s so hard to keep up with all the technology updates being announced in the wealth management industry these days. There’s a bloody lot of them. Established turnkey asset management platforms, emergent fintech software companies and financial advisory firms are all working hard to build an open architecture, interconnected technology ecosystem that puts more tools and information (and also more strategic decisions) into the hands of planning professionals. Leading TAMPs including Orion and Envestnet unveiled partnerships this week that they said would enhance the “wealth management experience.” It’s a big change from proprietary software and closely cordoned data, and one that should ultimately benefit both advisors and their clients

There’s sure to be some discomfort along the way, however, as advisors adapt new workflows and even new philosophies about delivering value in the financial planning process. Consider those growing pains.

Enlightening Integrations

Orion unveiled an upgraded integration with Flourish that aims to bring client cash front and center. If clients opt in, eligible cash account data can be linked into Orion’s reporting and planning workflows.

Historically, held-away cash assets often remained outside the advisory workflow, limiting visibility into an important component of household balance sheets. In practice, this has held advisors back from deeper planning conversations around cash-flow management, distributions, windfalls and excess cash. Similar challenges have existed in other planning areas, including estate and trust planning. Today, advisors are experiencing a steady shift towards a more unified planning framework with a little help from something called … artificial intelligence:

• The vast majority of advisors (87%) believe their technology stack effectively supports their achievement of key business objectives, per Cerulli data.
• Conversely, significantly fewer feel their current tech stack is providing a high-quality client experience (35%) or enabling effective and efficient delivery of investment management services (33%).

We See You, Envestnet. Not to be outdone, Envestnet joined the party this week and announced a partnership with the fast-growing RIA firm Osaic aimed at enabling advisors to “manage client assets more efficiently from a single platform while increasing their platform assets.” Envestnet executives said the partnership reflects a broader industry trend toward platform-based asset management, including the increased adoption of unified managed accounts.

Could this be the end of the 10-Q?

In an attempt to encourage more companies to go public, the Securities and Exchange Commission this month proposed cutting back on how often companies are required to file earnings reports. Under the new plan, businesses would have to report only semiannually instead of quarterly. Most advisors aren’t making significant allocation changes every few months, but when data has become a more precious resource than oil, many wealth managers are asking why they would want less of it.

“For publicly traded companies, it’s great news,” said Lisa Kirchenbauer, founding partner at Omega Wealth Management. “For investors, not so much.” It may not be a problem when companies are in the black, but getting insights into struggling businesses every six months could become a problem, she added. “In a 24/7 world, that can feel like a disconnect.”

Report Card

Since 1970, public companies have been required to report quarterly, but it’s something that President Donald Trump and the SEC see as overbearing. The new rule would give companies “increased regulatory flexibility,” SEC Chair Paul Atkins said in a statement.

While we love a good quarterly earnings report here at Advisor Upside, some wealth managers view them as a distraction. “They are data points, but they are also one of the noisiest inputs,” said Mark Stancato, founder of VIP Wealth Advisors. He added that most long-term allocation decisions are driven by fundamentals, valuation and forward expectations, not a single quarter’s results. And the new rule could help increase the number of public companies, which has been in decline for decades:

• The number of US-listed companies has dropped nearly 50% since the mid-1990s, according to CIBC Asset Management.
• Meanwhile, the median age of US IPOs has increased from 6 years in 1980 to more than 16 years today.

Crock Pot. As much as the wealth industry has outsourced investment management and shifted its focus to financial planning, some advisors are still active stock pickers and hold the portfolio in high regard. Without quarterly reports, gaps start to form. Monica Dwyer, senior VP at Harvest Financial Advisors, noted the collapse of Enron and the 2008 financial crisis as reasons there should be more publicly available information, not less. “Companies should report their financials quarterly; otherwise, how are individuals supposed to know whether they should buy, sell or hold?” she said. “This is a crock of bull.”