The growth of private markets allocations among US accredited investors is the result of an advice gap, according to new research.
The white paper from global wealthtech and decision-science firm Capital Preferences highlights a significant under-allocation to private markets among these investors and estimates that behavioural misalignment around risk, reward and liquidity prevents as much as $6.9 trillion from flowing into private market strategies.
Among the revelations in the report titled ‘The Client Alignment Challenge: A $6.9 trillion Private Markets Advice Gap’ is that the biggest barrier to broader private market use isn’t product or access but the industry’s inability to accurately understand how investors make decisions under trade-off pressure.
“Private markets represent one of the most important growth frontiers and client service opportunities in modern investing, yet the industry continues to treat client discovery as an unengaging, tick-the-box exercise instead of a means to meet more client needs,” says Bernard Del Rey, founder and CEO of Capital Preferences. “To serve clients responsibly and capture the full potential of private market adoption, advisors don’t need more generic education, they need a precise way to understand how each client weighs risk, reward and liquidity. Without that foundation, the trust, retention and growth of private investing will suffer.”
The findings arrive at a time of heightened interest in private market solutions, driven by regulatory changes, new product types and expanding awareness among advisors. But adoption continues to vary widely across wealth management and retirement channels.
The paper’s conclusions are based on proprietary research led by Shachar Kariv, Ph.D., former two-time chair of the economics department at the University of California, Berkeley, and co-founder of Capital Preferences. Using a decision-science methodology known as Revealed Preferences, the firm examines how real investors behave when forced to weigh liquidity against return.
Across a sample of 1,532 investors, the study found considerable differences in tolerance for illiquidity and private market exposure, even among people with similar ages and wealth levels. Demographics alone, the report states, fail to predict how much private-market exposure any individual can reasonably hold or whether they are likely to stay invested.
The research found that 30% of investors who once held private market assets have since exited those positions, largely due to a mismatch between investor comfort and product structure. At the same time, the study claims that 82% of investors could hold at least some level of private market exposure, but because most firms rely on static questionnaires and advisor intuition, reaching that potential will require rethinking the discovery process.
The white paper estimates that if advisors close the behavioural-alignment gap, accredited investors’ private market allocations could rise from roughly 5% to about 17% on average. Depending on each client’s comfort with illiquidity, recommended allocations could range from low single-digit percentages to as high as 40%. In aggregate, these increases represent the $6.9 trillion in potential new private-market assets cited in the report.
“Understanding how each investor resolves trade-offs is central to economics and should be central to personalized portfolios and financial advice,” Kariv said. “When clients are given a structured, interactive experience that mirrors real decision making, they learn, gain agency and are far more confident in their plan and recommended portfolio changes. That dynamic is what will drive scalable and sustainable participation in private markets. Compliance will be happy as well.”
To help firms act on the findings, the report provides a Private Markets Playbook which recommends using behavioural diagnostics during client discovery to identify who is suited for private market exposure, adapting product structures to fit investors’ comfort zones, integrating decision-science outputs into CRM and portfolio tools, and educating clients through interactive experiences that help them understand trade-offs before investing.
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