Why the Future for Financial Advisors is in the Private Market

Originally published in Forbes

The secret is out about private markets. BlackRock’s recent announcement that their model portfolios will now incorporate private market investments marks a pivotal shift in the investment landscape. This move may make a significant impact in democratizing access to private assets - something that I’ve dedicated my career to at EquityZen. Big market moves like this also challenge the status quo. If Blackrock’s model portfolios make private market investments the norm, all financial advisors will need to rethink their strategies to remain competitive.  For those late to the private markets train, it’s time to get onboard. 

The global economy is currently facing substantial headwinds. President Trump's recent announcement of sweeping tariffs has injected uncertainty into the markets, with fears of a potential recession looming. These protectionist measures have led to increased market volatility, prompting investors to seek alternative avenues for diversification and stability. 

The market landscape makes BlackRock’s strategic shift towards private markets all the more timely. By blending private and publicly traded assets, BlackRock aims to provide investors with more diversified and resilient investment portfolios. This move reflects a broader industry trend towards incorporating alternative assets to dampen the effects of volatility, while capturing the illiquidity premium and providing better risk adjusted returns.

Implications for Financial Advisors

Financial advisors have to work harder to make the same fees. All market evolutions - from the launch of ETFs to SPACs - present both opportunities and challenges for financial advisors. Now that individual investors can more easily gain diversified exposure to alternatives while paying much lower fees than an advisor may charge, advisors will be challenged to further prove their value add.¹ Here are some of the ways they can.

1. Differentiation Through Expertise: With private market investments becoming more accessible to individual investors, advisors can distinguish themselves by developing deep expertise in this market. Understanding the nuances of private assets, including their risk profiles, liquidity constraints, and potential returns, will be crucial.​ Many financial advisors use EquityZen to differentiate themselves from their peers, by building knowledge on the private markets. Whether providing liquidity to clients who are early employees or investors in startups or knowing the ins and outs of secondary transactions, they prove their value by their expertise in a growing, but niche market. 
2. Curating Diverse Product Offerings: As private market investments become table stakes, advisors must expand their product suite to include differentiated options that are best suited to their clients’ individual needs. This could involve partnerships with platforms that offer access to private investments like EquityZen or advisors developing in-house capabilities to evaluate and recommend private assets.​  Our RIA partners tell us that their clients seek access to the technology companies at the forefront of innovation in industries like artificial intelligence and cybersecurity. There are different avenues to provide this access - each with different time horizons, investment minimums, and investment structures. Much like they have with direct indexing in public portfolios, advisors who can identify and curate the right private market products for their specific clients, will win.
   
   
3. Enhanced Client Education: As private market investments become integrated into portfolios, educating clients about these assets becomes imperative. While the private market is growing rapidly, it can still be opaque and daunting to the uninformed. Clear communication regarding the benefits and risks associated with private investments will build trust with clients.​ Not every private market investment is right for every client. Advisors who can help clients navigate the landscape and choose the right investments will not only build trust, but also generate better returns for their clients. 
   

The financial market is undergoing a massive change as alternatives - once a wealth creation avenue only available for the ultra-wealthy - go mainstream. With the number of public companies continuing to diminish and as private companies choose to stay private longer, it is more important than ever to offer this access to clients of all sizes. EquityZen’s platform is dedicated to helping individual accredited investors and their advisors access this market with investment minimums as low as $5,000. We are going into our 13th year and remain focused on creating both investment offerings and a technology-driven marketplace that brings Private Markets to the Public^TM. We steadfastly believe that the future of investments is in the private market.

BlackRock's vocal endorsement of private markets is a clarion call for financial advisors to evolve and meet this moment. By deepening their understanding of private assets, diversifying their offerings, and prioritizing client education, advisors can not only differentiate themselves but also provide enhanced value in this new investment era. Embracing this shift is not just about staying competitive—it's about leading the way in democratizing access to investment opportunities for all.

Not all pre-IPO companies will go public or be acquired, and not all IPOs or acquisitions are or will become successful investments. There are inherent risks in pre-IPO investments, including the risk of loss of the entire investment, illiquidity, and fluctuations in value and returns. Investors must be able to afford the loss of their entire investment.

Footnotes:

1. Diversification does not assure a profit or protect against market loss.