Compliance June 27, 2025

SEC to Evaluate Use of PE and Alternatives in Retirement Accounts

The SEC's Office of the Investor Advocate as previously highlighted potential risks for retail savers posed by the expansion of private market products within defined contribution retirement plans.

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The U.S. Securities and Exchange Commission’s Office of the Investor Advocate will explore the growing use of private equity and other alternative investments in retirement accounts, it announced as part of its fiscal 2026 report on the office’s objectives, released June 25.

The office has previously highlighted potential risks for retail savers posed by the expansion of private market products within defined contribution retirement plans, such as 401(k) and 403(b) plans.

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The report noted that while private markets may offer opportunities for diversification and returns, their inclusion in retirement savings plans—particularly through target-date funds and managed accounts—also raises important investor-protection concerns.

According to the agency, which includes identifying problems with investment products among its key functions, the risks to be evaluated include reduced, incomplete or unreliable disclosures; limited liquidity; and a greater risk of fraud or investment loss. The investor advocate plans to explore how these risks intersect with fiduciary responsibilities under the Employee Retirement Income Security Act of 1974.

In fiscal 2026, the investor advocate intends to continue its work by evaluating whether plan participants are adequately informed about the nature of these investments and the potential trade-offs involved.

The focus on private equity is part of a broader agenda outlined in the investor advocate’s report. It also includes efforts to enhance the accessibility of disclosures for retail investors, evaluate rule proposals by self-regulatory organizations and support data-driven regulation through investor research. Additional priorities include investor testing of disclosures, analysis of China-based variable interest entities and collaboration with the SEC’s newly formed crypto task force.

In Practice June 27, 2025

Investment Advisers Optimistic About Inflation Amid Recession Fears

RIAs noticed a spike in clients looking to diversify their assets, with almost half reporting an increase in international equities allocations and 3 in 10 increasing allocations to U.S. equities.

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More than half of registered investment advisers are optimistic about inflation, with 6 in 10 expecting inflation to be less than 3% in the next twelve months, according to a new survey from Security Benefit in partnership with Greenwald Research. 

This is in alignment with a recent reading of the personal consumption expenditure price index from the Bureau of Economic Analysis, which dropped to 2.1% in April.  

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The May 2025 survey, which polled 100 RIAs from across the United States, found that, due to the uptick in market uncertainty since the re-election of President Trump, advisers’ views on his impact on the economy vary. Some 45% of RIAs reported feeling more positively since Trump entered office and 17% feeling about the same.

Conversely, 38% reported feeling more negative, according to the survey. Advisers with 20 years or more experience said they are more likely to feel positively about the economy, 53%; compared to just 28% for ones with three to 19 years in the business. 

Mike Reidy, national sales manager for Security Benefit’s RIA Channel, said in a statement that the firm’s Economic Outlook Index increased to 60 in the second quarter, up five points from the prior quarter.  

Even with this increase, “advisers still see potential risks on the horizon as almost half (45%) believe there is at least a moderate likelihood the economy will be in a recession in the next 12 months,” according to Reidy.  

Asset Diversification 

RIAs also noticed a spike in clients looking to diversify their portfolios, with almost half reporting an increase in international equities allocations and three in 10 increasing allocations to U.S. equities.  

Notably, 30% of advisers are not making tactical changes to their clients’ portfolios and another 33% have already made changes, according to the survey. 

Half of RIAs (53%) reported an increase in interest from clients in downside protection solutions like fixed index annuities or other structured products. However, only one in four (27%) are increasing allocations toward those kinds of investments “in lieu of economic pressures,” according to the survey. 

Social Security Claims 

Although geopolitical tensions took precedent in the list of client inquiries in Q2, Social Security came in second, according to the survey. 

According to recent data from the Social Security Administration, the volume of claims was up 13% in the current fiscal year, compared with the same period last year. With this rise, “Social Security anxieties may be a reason for many retirees to lock in their fixed income solutions,” according to the survey. 

Looking past Social Security, the survey found that products like annuities, that provide flexible income options, could also be essential in delivering steady income as retirees get to and enter retirement. 

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