Episode summary
The 401(k) Shift Advisors Can't Ignore
Summary
Drew Carrington argues that the Department of Labor’s investment selection rule is a clarification of fiduciary process, not a mandate to add private markets to 401(k) menus. He says there is “nothing in the rule” that requires plans to include private equity or other alternatives, but it does create a path for fiduciaries to consider newer asset classes through a disciplined process centered on modest allocations, diversified portfolios, and professionally managed solutions.
He frames the issue as part of a broader structural shift in capital markets. Public companies have become a smaller share of the opportunity set, while private equity, private credit, and private real estate now represent a larger slice of economic activity. Carrington says defined contribution plans have historically accessed far less of that universe than pensions, foundations, endowments, or sovereign wealth funds, so advisors need to think about whether participants are missing exposure to faster-growing parts of the economy.
The practical challenge, he says, is implementation inside the retirement ecosystem. Early adoption will likely come through collective investment trusts paired with evergreen private-market vehicles, with attention to recordkeeping, reporting, valuation, fees, and ERISA disclosure requirements. For Carrington, the key objective is not product adoption for its own sake, but better participant outcomes.
Key takeaways
- Carrington says the DOL rule does not require 401(k) plans to add private markets; it sets out a fiduciary process instead.
- He argues that defined contribution plans now access a smaller share of the capital market opportunity set than they did in the late 1990s.
- Carrington expects early private-markets adoption in retirement plans to use collective investment trusts wrapped around evergreen vehicles such as interval funds.
- He says advisors need to understand valuation, reporting, fees, and ERISA disclosure before recommending these products.
- Carrington’s north star is better participant outcomes, not simply expanding menu options.
Notable quotes
“there's nothing in the rule that requires advisors or plans to incorporate private markets in in their 401k plan menu”
“what they've laid out is a path to incorporating private markets. um based on three really important tenants”
“modest allocations, diversified portfolios across multiple asset classes and professionally managed solutions”
“today, that number is probably closer to 85 and it continues to decline”
“the only reason to think about any of these innovations auto enrollment, auto escalation, target date funds, adding private markets to portfolios is to create better outcomes for participants”
How the episode opens
Hi everyone and welcome to this wealth management fast chat. I'm Shen Rossi, director of content and solutions and I am thrilled to be joined today by Drew Carrington, managing director and head of retirement portfolios at I Capital. And today we're looking at a shift that could have significant implications for the retirement market.
the evolving role of alternative investments in 401k plans. And Drew has spent a lot of time thinking about this intersection of retirement alternatives and fiduciary responsibility. So, I'm excited to dig into what advisers need to know now and what they should be thinking about.
So, Drew, welcome.
Thank you. Thanks for having me. So, I want to go ahead and dive right in because the reality is is there's been a lot of noise around the do's investment selection rule. You describe it as a clarification process, not a mandate. So, for the advisor who has only read the headlines, what are the two maybe three things they absolutely must understand about this rule and how it impacts their current process?
Yeah, I think so. I think that's a a great starting point. uh the the the Department of Labor uh has uh proposed this rule, had a comment period on it.
Um that was in response to the the president's executive order last summer. So, there's been a lot of uh lot written, a lot of ink spilled on this uh on this topic. Um I think it's really important to to stay focused uh on a couple things.
First of all, there's nothing in the rule that requires advisors or plans to incorporate private markets in in their 401k plan menu or default investment option. There's no requirement. What it lays out instead is a process that fiduciaries and their adviserss can go through to consider uh asset classes including newer asset classes, asset classes that we haven't seen in defined contribution plans in the past.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- 401k rule
- department of labor investment selection rule
- retirement portfolios
- advisor impact
- client planning
Companies and tickers mentioned
- iCapital
Watch the episode
Watch “The 401(k) Shift Advisors Can't Ignore” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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