As the wealth management industry struggles to generate organic sales growth, more financial advisors are pursuing the private markets as a way to distinguish themselves from competitors, especially when wooing potential ultra-high net worth clients.
But pursuing is not the same thing as succeeding. The peculiar nature of private markets, whether private equity, debt or venture capital, has scared off clients.
A 2025 report by Capital Preferences estimated 30% of private market investors eventually withdrew their money and never returned. A major reason the study cited was that investors did not want to lock up their cash for long periods, even if it meant forgoing attractive returns.
Such numbers suggest that some advisors have been failing to craft a strategy that matches their clients’ financial needs with the complexities of private assets.
“Successful advisors simplify without oversimplifying,” said Georgia Lord, Head of Financial Planning at Corbett Road Wealth Management. “That starts with education tied to outcomes rather than product features and explaining what role a private investment plays in the clients holistic financial plan.”
“Setting expectations upfront is very important, how capital will be called, when liquidity may or may not occur and how the success of the investment should be measured over time,” she said. “The discussion should be ongoing – regular updates and periodic portfolio reviews that revisit why the investment was made help to build trust and comfort.”
Part of the problem is that advisors themselves do not understand such investments, said Bob Hostetter, Chief Investment Officer, VestGen Wealth Partners.
“The adoption problem isn’t the relevance of private markets for individuals, or the products,” Hostetter said. “Instead, it is the wealth managers and investment teams who provided guidance in developing these products without simultaneously enhancing our own capabilities and processes to evaluate and make recommendations for our clients. Now clients and advisors look at the risks (of private investments) and they are rightfully intimidated.”
Said Michael Bryan, Chief Growth Officer of Strategic Blueprint: “Broadly speaking, many advisors are not doing enough to educate themselves on what lies before them. Advisors who are dedicating energy to their own education on private markets for the benefit of their clients, however, will be in the best position to win new business and create loyalty in their existing client base.”
Money Flowing To Private Markets
Despite these challenges, investors are increasingly flocking to private markets.
Cerulli estimates that advisors will allocate $3.7 trillion to such assets through 2029, about twice the amount they do today. Even those numbers might not be enough: Investors are under-allocating to private markets by nearly $7 trillion today, the Capital Markets report said.
One reason driving this move is the need for advisors to differentiate themselves in an industry that lacks organic growth, a fact that the recent wave of mergers and acquisitions has obscured.
“Used properly, private market investments can differentiate the advisor from commoditized pack, improve client outcomes, and create raving client fans who are excited to tell their friends about the advanced service they receive,” Bryan said.
Private assets can also offer investors a chance to diversify their portfolios away from public equities. Indexes like the S&P 500 have performed well in recent decades but much of those gains have been increasingly driven by a small group of tech companies, including Apple, Amazon and Nvidia.
Private markets also allow investors to generate returns during a company’s pre-IPO history, not just as a publicly traded stock. For example, a robust secondary market has emerged in recent years for shares in tech unicorns – high growth, venture-backed startups with private valuations of at least $1 billion.
CB Insights estimated there were 1,331 unicorns in the world as of November, worth $5.7 trillion in total. OpenAI, the world’s most valuable unicorn, commanded a private valuation of $500 billion, more than historical Wall Street giants like General Electric ($325 billion) and IBM ($275 billion).
“Private market investing is key to creating repeatable returns for clients’ portfolios in a market environment where public market returns are driven by select names and sectors,” said Vivek Jindal, Chief Investment Officer, Caprock. “In addition, there are fewer public companies now than 20 years ago. Private market funds can deliver accretive returns early in a company’s lifecycle, from venture investing through acquisition or IPO.”
“An advisor’s ability to source and invest in these companies, primarily through private-market vehicles, has become a major driver of total portfolio returns,” Jindal said. “This, combined with a fundamentally sound public-market allocation, creates a well-rounded portfolio that can compound its value over multiple business cycles.”
In addition, private markets have shown some more resilience from global economic shocks versus public equities.
“Public markets will also go through periods of extreme dislocation – dot-com bubble, COVID-19 – where private markets cannot only withstand the volatility of economic cycles, but use it as a buying opportunity,” Bryan said.
Many Challenges
Yet private markets are complicated and can present significant problems to investors and advisors. Assets like real estate and public infrastructure can lock up clients’ money for a long time without regular chances at redemption.
Another problem is transparency. Investors know the price of public equities in real time. But determining the value of private companies is difficult because the market for them is still relatively small.
“Liquidity is usually of high concern, especially for clients that hold mainly daily priced public investments,” Lord said. “Complexity and transparency are also big hurdles, clients often struggle to understand how returns are calculated, what fees are involved, and what risks are apparent.”
Taxes also confuse investors. Private assets like private equity and venture capital funds often generate “phantom income,” which can pass on taxable ordinary income to investors but use that money to pay for expenses. So, investors owe taxes on cash they have yet to receive.
Experts say advisors need to up their game and educate themselves about private assets if they are truly able to serve client needs and win new customers.
The industry is making progress, Jindal said.
“We will continue to see advisors meet directly with private market managers, expanding their knowledge of all asset classes, including private equity, venture, private credit, and more, and working with subject matter experts like investment strategists and Chief Investment Officers,” he said. “This trend will continue, and we see firms with extensive private market experience on the advisor and investment team sides leading the charge.”
However, Hostetter said advisors can’t just settle for remedial products or letting other people do the hard but necessary work.
“I believe we need Private Markets 3.0 – an institutional private markets approach to wealth,” Hostetter said. “This is about wealth platforms upgrading themselves to look like an institutional buyer instead of asking manufacturers to water down their offerings to appeal to clients. Private Markets 3.0 involves wealth managers stepping into the opportunity instead of outsourcing it to others.”
Thomas Lee is a Senior Editor and Staff Writer for Wealth Solutions Report. He can be reached at thomas.lee@wealthsolutionsreport.com.
