Trump’s 401(k) Order Introduces Crypto and Private Assets but Raises Concerns Over Fees and Risks
New York, August 11, 2025 — A recent White House executive order aims to broaden the range of investment options available in 401(k) retirement plans by allowing access to alternative assets such as cryptocurrencies and shares in privately held companies. While proponents highlight the potential for higher returns, retirement experts and industry insiders warn that these novel investments can introduce new risks and increased fees that ordinary investors may not fully comprehend.
Expanding Investment Options Amid Uncharted Territory
The directive, issued under the Trump administration, encourages regulators to permit 401(k) plans to include alternative investments that have traditionally been reserved for institutional or accredited investors. Examples include private equity stakes in innovative technology firms like OpenAI and SpaceX, as well as digital assets like cryptocurrencies.
Christopher Bailey, director of retirement research at Cerulli Associates, an asset management research firm, cautioned, “This is brand new; none of it has been stress-tested yet in a market shock or long-term selloff.” He emphasized concerns over liquidity and the complexity of integrating these assets into retirement portfolios.
Higher Fees and Greater Complexity
Critics raise alarms over the cost structures and transparency surrounding these alternative investments. Philitsa Hanson, head of product, equity, and fund administration at Allvue Systems—a technology provider for private asset managers—underscored that “people are not talking enough about the potential for higher fees.” Unlike traditional 401(k) mutual funds that typically charge an average fee of just 0.26%, private equity funds often operate under a “2 and 20” fee model—entailing a 2% management fee plus 20% of any profits.
Jason Kephart, an analyst at Morningstar, noted that fee disclosures for alternative investments “aren’t clearly spelled out, some even have to be deciphered from footnotes,” making it difficult for plan sponsors and investors to gauge the true costs.
The Challenge of Liquidity and Transparency
Another critical challenge lies in the illiquid nature of private assets. While mutual funds provide daily pricing and transparency, private equity and crypto investments are frequently valued less frequently and lack the same level of market accessibility.
“All these assets are manually priced or less frequently priced, which poses a fundamental mismatch for 401(k) systems designed around daily trading,” explained Hanson. This creates difficulties for investors tracking their portfolio performance and understanding short-term risks.
Industry Adjustments and Framework Development Needed
Dmitriy Katsnelson, deputy chief investment officer at Wealthspire Advisors, which manages $30 billion for wealthy clients, observed that a broad adoption of these new investment options would reverse decades of industry focus on lowering fees and minimizing harm to investors.
He added, “It’s going to take a while for people to come up with a framework to make this work and think about the risks.”
Investment firms specializing in alternative assets are likely to face pressure to develop products with more transparency, lower fees, and improved liquidity to appeal to the vast pool of 90 million investors in employer-sponsored retirement plans, which contain trillions of dollars in assets.
Increased Need for Investor Education and Legal Safeguards
Industry experts stress that asset managers and plan sponsors will need to ramp up education efforts to ensure investors understand the risks involved with alternative investments.
Bailey emphasized, “A typical retirement fund investor is not sitting there thinking about optimizing their portfolio or assessing the risks of adding private assets.”
Jon Gray, president and COO of Blackstone, a major private equity firm, recently advised that private assets are better suited for younger investors with a longer investment horizon, rather than those approaching retirement.
Legal risks have also surfaced around including alternative investments in retirement plans. A notable case involved Intel employees filing a lawsuit over plans containing hedge funds, private equity, and commodities. Although the complaint was ultimately dismissed after seven years, legal experts suggest that many asset managers and plan sponsors do not have the resources to endure extended litigation.
Lawyers at Debevoise & Plimpton have indicated that regulatory bodies will likely need to provide legal protections to encourage the industry to embrace this expanded investment mandate successfully.
As alternative investments move from the realm of high-net-worth investors into mainstream retirement portfolios, experts urge cautious evaluation. While the financial innovation promises diversified opportunities, the risks associated with fees, liquidity, valuation accuracy, and investor comprehension remain significant hurdles that must be thoughtfully addressed.