PITTSBURGH (TNS) — For most of the past four decades, 401(k) investors have been limited mostly to stocks and bonds. That could change soon.

But the shift won’t happen overnight — the new rules will depend on federal agencies writing regulations, a process that will take several months and could stretch well into 2026.

David Root Jr., the founder and CEO of DBR & Co., Downtown, whose firm advises about 40 workplace retirement plans with more than $10 billion in assets, says the move presents both opportunity and risk.

Alternative assets may diversify retirement portfolios, but they come with higher fees, less transparency and the possibility of locking up investors’ money for years.

Most importantly, employers won’t be required to offer them at all — a fact that Root, in the Post-Gazette’s latest “In Conversation With” Q&A, says usually comes as a relief.

Post-Gazette: What are the potential benefits of giving 401(k)s access to private markets?

Root: For everyday savers, the main upside is access.

For decades, only large institutions like pension funds and college endowments could invest in things like private equity or infrastructure. Opening these doors to 401(k) investors could add new ways to diversify a portfolio and match long-term investments with long-term retirement goals. But it’s important to remember these are potential benefits, not guarantees, and the risks shouldn’t be ignored.

PG: What risks should savers worry about?

Root: The biggest risk is liquidity — these aren’t investments you can cash out tomorrow. Money may be locked up for years.

Transparency is another concern, since reporting isn’t as frequent or detailed as with public investments. And fees can be much higher. All of this means you really need to know what you’re getting into. Like my dad used to say, “Son, if you don’t know your jewels, you better know your jeweler!”

PG: How might fees and lack of liquidity affect returns?

Root: Private funds often charge much higher fees than mutual funds, and your money is tied up for longer.

To justify that, they need to deliver better results. Some do, but many don’t. Success often comes down to picking the right managers, and not everyone knows where to start in picking them.

PG: Do everyday savers have the literacy and risk tolerance?

Root: It depends. Fear and greed will always be a factor. There is a ‘get rich quick stigma’ with investments like private equity or crypto. We’ve seen some plans with highly sophisticated participants where alternatives could make sense, and others where it would be more confusing than helpful.

That’s why process and communication are so critical — what fits one group may not fit another.

PG: Do these products help savers, or mainly asset managers?

Root: Right now, it feels like supply is running ahead of demand. Asset managers are eager to get into 401(k)s, but most employers and participants are cautious. Over time, if alternatives really do deliver on diversification and returns, they could improve outcomes — but it’s too soon to say.

PG: What safeguards should be in place?

Root: Importantly, employers are not required to adopt alternative investments in the first place. In fact, many plan sponsors we work with have breathed a sigh of relief when we explained that they’re not obligated to jump in right away — they can take a wait-and-see approach.

If they do choose to offer alts to their employees, guardrails start with process, education and transparency. On the product side, alternatives are usually introduced as a small slice of a professionally managed fund — maybe 5 — 10% inside a target date fund.

PG: Will alternatives stay small, or grow big?

Root: They’ll likely start as a small supplement, but adoption could grow over time. It’s the same pattern we saw with target-date funds: slow at first, then widespread once people became comfortable. They are unlikely to replace the traditional core of stocks and bonds, though.

PG: How will this change the competitive landscape?

Root: For employers, it doesn’t force anything — it just gives them the option. Most will move cautiously.

For big investment firms, it’s kicked off competition to build-out alternative offerings.

For advisors, it means helping employers weigh the risks and decide if and when these investments make sense for their workers.

PG: Should the average saver consider alternatives?

Root: For most people, traditional investments like equity and fixed income mutual funds still make sense. But it really depends on personal circumstances. Two savers with the same age and account balance may have very different financial situations and risk tolerance. It’s not a one-size-fits-all answer.

PG: How will plan sponsors weigh their fiduciary duty?

Root: Very carefully.

As a wise client often told me about her 401(k), “Dave, money is like a bar of soap, the more you play with it the smaller it gets!”

Offering alternatives adds new risks, and most employers don’t want to be the first mover. We’ve had clients tell us they were worried they might be required to add private equity or crypto. When we explained that the executive order simply allows it — but doesn’t force it — they were visibly relieved.

That’s the mindset we’re seeing: cautious, thoughtful, and focused on protecting their participants.