Private investments in 401(k)s: More options for savers highlights the urgent need for personalized guidance in retirement accounts

Americans with employer-sponsored retirement accounts have just unlocked a powerful new way to invest. Empower, one of the largest 401(k) recordkeepers in the country, has just announced it will begin offering private market investments, like private equity, private credit, and venture capital, to retirement savers.

While this might seem like just another investment option added to the retirement menu, the new addition represents an evolution toward giving retirement savers access to the kinds of high-return, diversified assets that have long been available only to institutional investors and the ultra-wealthy. And it underscores a fast-growing reality in defined contribution retirement plans: more choice means more complexity—and a critical need for professional advice.

Unlocking private market investments

Historically, access to private market investments has been limited to defined benefit pension plans and experienced investors. Regulators have restricted them to individual investors in an effort to mitigate risk: while these assets can be higher-performing, they come with greater complexity and illiquidity—so individuals may not have the financial knowledge or means to understand the investments and particular risks they carry. 

Times are changing, as evidenced by Empower’s move to give certain 401(k) participants access to these investments. Guardrails against risk remain: the investments aren’t offered directly to plan participants for individual management. Instead, the options are included only in managed account offerings, which are professionally-managed portfolios tailored to a retirement saver’s age, risk tolerance, and wealth level. This choice is a smart one, since it ensures financial professionals—rather than individual retirement savers navigating vastly unfamiliar territory—are making the allocation decisions.

The tradeoff: The complexity of private investments

Private investments are typically less straightforward than stocks or bonds. These investments can be illiquid and can have complex fee structures and longer investment horizons. Additionally, private-equity funds often prevent shareholders from selling their holdings for months or even years, but 401(k) plan participants can rebalance daily. 

Furthermore, the employer has final say over whether or not they will include these assets as an option for their employees to choose from. Many may hesitate to include these investments in fund line-ups, or lack confidence participants are getting the guidance necessary to make informed decisions.

Why personalized advice matters more than ever

This moment is a wake-up call for recordkeepers, financial advisors, and individual investors. As investment options inside 401(k)s become more sophisticated, retirement savers will need help making choices that lead to long-term financial wellness. 

“It’s exciting to see Empower, an industry leader, democratize access to alternative investments to DC participants. As participants construct portfolios with new building blocks like alts, professional advice will become a growing need,” Peter Nolan, SVP, Head of Sales at Pontera, said.

Given individuals’ unique financial goals and longer retirements, one-size-fits-all guidance no longer solves all problems. Participants will increasingly need proactive advice from an advisor who understands their individual needs.

Platforms that enable compliant, comprehensive portfolio management now exist. This technology, like Pontera, plays a critical role: enabling advisors to manage participants’ 401(k)s directly and in line with the rest of their finances, ensuring decisions are made with full context and professional oversight.

“As retirement planning gets more personal, the challenge remains that consumers don’t pick their retirement provider, their employer does. This shouldn’t constrain consumers from choosing their own advisor, which is why Pontera exists,” Ben White, Sr. Director of Public Policy at Pontera, said.

The future of retirement planning

Ultimately, Empower’s decision to introduce private investments into 401(k)s isn’t just adding a new fund or asset class. It’s reshaping the role of professional advice in employer-sponsored retirement accounts. The more participants must navigate complexity, the more they deserve—and need—clear, trusted, and personalized guidance from an advisor who understands their entire financial picture.