How 401(k) access to alternatives could reshape the retirement and investment industries

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Financial services firms are placing their bets that providing alternative investments options for retirement accounts will pay off handsomely to their bottom lines. 

Goldman Sachs and T. Rowe Price are the latest large financial services firms trying to capitalize on the new market, with Goldman announcing last week it inked a $1 billion deal to purchase shares of T. Rowe. The tie-up would see the two firms jointly offer private-market products to moneyed investors and retirement plan contributors. 

Asset managers and 401(k) providers have been salivating at the opportunity to open access to alternative investments such as private markets, cryptocurrency and real estate since President Donald Trump signed an executive order last month directing the Securities and Exchange Commission and the Department of Labor to facilitate access to alternatives in retirement plans.

Now many rivaling asset managers and 401(k) recordkeepers alike are anticipating an AUM increase from inflows to private assets and are ready to collect their share of an estimated $12.2 trillion 401(k) industry by being among the first to bring alternatives to market. 

Two years ago, wealth managers saw increasing demand globally among clients for alternative asset classes, spurring an industry push to allow private markets in retirement portfolios outside of institutional investors and wealthy family offices. 

The order also follows concerns of narrowing diversification within public markets. The number of public companies in the U.S., for example, declined from 7,000 firms in 1996 to only about 4,000 in 2024.

“There is a growing part of the markets – it used to be a niche and it's grown beyond a niche – that investors don’t have access to,” said David Stinnett , head of strategic retirement consulting at Vanguard . “Now the question is: how do novice investors gain access to that broader diversification in a way that doesn't erode that benefit with higher costs and lack of liquidity?”

The average allocation to alts hovers around 3% for wealth management clients, according to Jun Li , global and Americas wealth and asset management leader at EY , who added that changes to traditional 401(k) allocations to include a portion in alternatives would create an enormous boost for the private markets.

Yet the question remains of just how big that market could be.

Chris Littlefield , president of retirement and income solutions at Principal Financial Group , said he believes that investors will take advantage of alternative investments as they seek greater returns and diversification in their 401(k) plans.

Yet as many as one-third of Americans with retirement accounts never check their portfolio performance or check only once annually, according to a recent BlackRock survey.

Others, like Aaron Schumm , founder and CEO of Vestwell , believe that while initial uptake will be slow, many investors – particularly younger generations – are becoming more savvy and curious about their investment options.

Not everyone in the industry believes alternatives belong in every person’s portfolio. “For many people, they're already heavily invested in private equity; that's their home,” David Booth , founder and chairman of Dimensional Fund Advisors , told LinkedIn News earlier this year. “If you want to sell or buy your stock, you can buy it very inexpensively. You don't have to pay 2-and-20 for the privilege. So I am a big fan of public markets.”

Allowing alternatives in retirement accounts comes with additional risks, including asset diversification, liquidity constraints, transparency and lack of education surrounding emerging asset classes.

John Toomey , CEO of private equity firm HarbourVest Partners , said having hundreds or even thousands of underlying holdings in a portfolio will be able to help best generate returns and manage risk for retail investors. But private-equity buyout funds today typically invest in less than 30 companies, he noted.

Moreover, private markets are typically less transparent about their holdings than publicly-traded assets due to limited regulatory oversight.

“When a financial product gets deployed, it's on the advisors, the manager as well as the end customer to be educated on the complexity of the product,” Li said. “You can read online and do research on your own, but some of it really relies on financial advisors to help you go deeper. It’s not just all digital.”

Many retirement experts stated they would like to see a new form of target date fund – separate from existing funds that include publicly-traded stocks and bonds – that also throws in a small percentage of alternative investments to solve some of the challenges surrounding diversification and illiquidity. 

The changes that would affect how retail investors view their portfolio allocations undoubtedly will impact talent needs across both investment and wealth management. Stinnett at Vanguard predicts that experienced managers are going to be in high demand among recordkeepers and investment product providers. 

Now large asset managers are eager to have retirement plan sponsors pick their funds as investment options, as they stand to benefit from raking in management fees.

It’s something that Wall Street has made a huge bet on. Apollo Global Management, Carlyle and BlackRock have all engaged in a heavy lobbying campaign to win Trump over on the executive order last month, according to a Financial Times analysis of the firms’ financial disclosures. 

While private assets are generally more expensive to manage, retirement industry leaders said the potential for outsized returns are long overdue for being accessible to those with 401(k) plans and added that they don’t anticipate the additions to lead to an increase in recordkeeping fees for employer-sponsored plans. 

“I don't fault providers for charging more fees,” Schumm at Vestwell said. “The market's going to determine that limit of what's acceptable from a fee structure.”

Data centers are seeing their best year to date amid an ongoing boom in AI-related investments. 

Vacancies for North American properties have reached new lows of 2.3%, according to research from JLL , which estimates that vacancies will hold close to 2% through 2027. Tenant demand, largely concentrated in the northern Virginia and Dallas-Fort Worth markets, has helped increase the combined asset value for data centers by 161% from 2019 to 2025. 

But the record low vacancy levels have constrained inventory nationally, which has caused tenants to dip into the construction pipeline to pre-lease future inventory. Construction projects totaling 8 gigawatts –- or about 73% of future inventory –- have locked in tenants preleasing through 2027, signaling stability in vacancy rates for the sector. 

This has also led to a significant increase in construction loans for data center campuses that have pre-leasing commitments, said Carl Beardsley , head of data center capital markets at JLL.

We take a quick dive into a company making a bet that others are running from.

Revolut and Starling , two fintech companies based in the UK, are making plans to acquire depository institutions in the U.S. amid a more relaxed M&A environment under the Trump administration.

The banking and payment tech companies are each looking to acquire nationally-chartered banks in the U.S., which would allow them American banking licenses and the ability to lend in all 50 states. 

It could be an expensive bet for the first British banking fintechs to expand into the U.S., where revenues for lending startups are miniscule compared to incumbents. Neobanks in the UK, meanwhile, are seeing customer acquisition in their home market slow down. An entrance to the American market via acquisition could provide them access to new customer deposits without having to apply for licenses from scratch, though both firms told LinkedIn News they are considering other methods to achieve this.

Domestic digital banks –- such as SoFi, Ally and Chime -– could face increasing competition in an already-aggressive environment if the UK companies are allowed to offer similar services stateside. 

“This would give us an established U.S. business on which to build and could provide us with an opportunity to showcase Engine by Starling in the local market if we were to replatform the acquired bank,” said Starling’s group head of corporate affairs Will McSheehy in a statement to LinkedIn News.

Art L. is chief business officer at Brex .

Chang: Before coming to Brex – when it was very early in its startup journey – you had previously spent much of your career working with VCs and on Wall Street. What advice would you give to other people today who want to transition to a startup?

Levy: Folks really need to [evaluate] startups like they’re a venture capitalist, meaning you have to evaluate the company with a set of principles. Number one: [make sure there’s] a mentor who is going to be looking out for you. It doesn't need to be a mentor, just someone you trust. At early stage companies, you need this inside man or woman who's an executive, because otherwise you might get lost in the sauce. You might join a company where there's a bait and switch. Have a mentor who says, “No, no, this company's numbers are real; this is going to work” versus talking to investors before you join and they just say what they want because they want you to join. You need someone on the inside who really cares about you. 

The second is market. You should join a company where the market is massive. It [also] can be the way the company positions the market. With Brex, it was obvious; it encompassed all global payments. With Teespring, it was a T-shirt company that said, no, no, e-commerce is our market. And I bought that vision. 

And then the last thing is momentum. It is so much easier to be successful at a company that has momentum already than it is to try to start it. Brex had a ton of momentum, then it went through growing pains, and now we have insane momentum again. But having seen that reacceleration, I know how hard that can be. When you see all of these AI companies that are popping up, my advice would be like, sure, it can be exciting and fun to take a flyer on one of these companies, but realize that most of them will fail. That makes it even more important to have a mentor who's looking you in the face and saying, “You and I are going to be on the last lifeboat out of this company and this is why it's going to work.” 

Chang: What are the biggest developments or trends that are top of mind for you these days when it comes to fintech, payments and financial software?

Levy: I’m an M&A junkie, I've been really excited to see this administration seemingly allow M&A to happen. I think about Stripe’s recent movements, and I think the reason it's interesting to discuss here is that it's using M&A as a way to hedge, which I think is a really mature thing for a company to do. Usually companies are just dismissive of competition, and Stripe is doing the opposite. The three acquisitions that they did in rapid succession is a hedge against merchant acquiring and the way that most people buy on the internet today. And they were able to take this flyer on stablecoins and crypto as a way for consumers to transact by buying three companies. The idea is now they have the crypto infrastructure with an on- and off-ramp to stable coins. It's basically a next gen money movement workflow. Some think, “Wait a second, that seems like completely potentially blowing up their current business.” Exactly. They need to be literally inside of them building a competitor to their current company in order to make sure they don't lose a step. 

Chang: How do you look at those moves and recent changes in stablecoin regulation in the context of Brex as a competitor? 

Levy: We definitely think a lot about stablecoins and how we are integrating them in our platform. When a market innovator and leader like Stripe is doing something, even though our business model is different, we obviously think, “okay, what should we be doing?” We've been exploring partnerships with on- and off-ramp providers and seeing what this will do to the customer problem, which is improving money movement globally. One of the biggest applications of stablecoins is global fund flow, right? They allow customers to transact globally with more favorable foreign currency exchange rates. We have already been working to give our currencies local equivalent cards and increase the acceptance of those cards globally. But stable coins will be another arrow in our quiver on this journey where we are going to be using them to enable customers to move foreign funds into a USD-based stablecoin and do it in a way that saves them FX. 

Chang: These days we're seeing the greatest amount of competition in the spaces that Brex operates in, both from incumbent banks and fintech startups. How do you navigate that competition in such a fast-paced ever-changing environment? 

Levy: The key is who owns the underlying payment infrastructure and the payment workflow? There are all these AI agents that are saying that they're going to own the workflow, but my pushback to that is that they need to get into a company's workflow before they can improve it. When you think about our space, you have a bunch of innovators that I believe are moving very quickly, like Brex. Just the past month our CTO was holed up in a hacker house with our top engineering staff, rethinking how our agents will interface with customers. We don’t have the incumbent's dilemma of focusing on something else. Yes, you have next gen companies even to Brex that are starting out and saying they’re going to reimagine the payment workflow. And let's continue to use stablecoins as an example. Sure, you [can expect] some banking regulation change with the Genius Act, but corporate card regulation I don't think is going to change globally anytime soon. And so I believe that owning your own payment infrastructure and the deep mode of being our own issuer processor is something that's going to keep compounding for Brex and will get easier over time. 

And I actually don't see that as the moat. I think the moat is as it's always been in B2B distribution: speed of execution. Integration is going to be the thing that separates the future industry leaders. For example, these new billing agents: are they going to interface with Brex? Are they interfacing with Salesforce? Are they interfacing with Coupa? Because if not, you better be building a whole next generation system, otherwise I'm not going to rip out my current systems.

Here are the latest updates in the world of finance, private equity, banking, real estate, markets and more:

Robinhood rises on S&P 500 inclusion: Investing fintech Robinhood saw its share price climb by more than 15% Monday following an announcement late Friday that it will soon join the S&P 500. The trading platform will replace casino conglomerate Caesars Entertainment on the stock index. 

PE firms poach fundraising talent: Private equity firms have been hiring aggressively and battling Wall Street banks for top talent as dealmaking shows signs of recovery. With capital tight, large firms are “happy overpaying” to bolster their fundraising teams, a compensation consultant says. Hiring for investor relations and marketing roles was also strong in the first half of 2025, according to a report from Magellan Advisory Partners. The surge has prompted investment banks to impose stricter retention rules. 

Nasdaq eyes tokenized stock trading: The Nasdaq filed a request with the Securities and Exchange Commission to approve rule changes that would allow the trading of tokenized securities under U.S. securities laws. The move would potentially unite blockchain technology with stock market infrastructure. It comes amid a boom in tokenized offerings from cryptocurrency exchanges and Wall Street giants.

PNC to buy FirstBank in growth push: PNC Financial Services Group has agreed to buy Colorado-based FirstBank for more than $4 billion as it looks to expand westward in a bid to better compete with larger national banks. The acquisition would bring PNC’s total assets to just under $600 billion, putting it on par with U.S. Bancorp and Capital One, in terms of scale. The Pittsburgh-based bank plans to hang onto FirstBank’s 100 branches in Colorado and Arizona, adding them to its existing network of more than 2,000 locations. Industry watchers are expecting more such acquisitions under the more merger-friendly Trump administration.

Employer health plan costs increase: Employer health care plan costs could rise 6.5% on average next year, according to benefits consulting firm Mercer. That would be the highest single-year increase since 2010. Mercer cites a host of factors behind the jump, including the costs of new cancer treatments and weight-loss drugs, the rise of virtual healthcare and even the expense of building out AI platforms. Among employers surveyed, 59% said they’re planning to implement cost-saving measures for their health plans next year. 

Asset managers, banks and 401(k) providers have been salivating at the opportunity to open access to alternative investments to retirement vehicles. Many are gearing up their talent to be able to deliver new private markets products, but the industry is still trying to solve challenges that come with retail expansion into the asset classes.

We want to hear from you: How would access to private markets in retirement accounts change talent needs across financial services?

Join the conversation in the comments section below.