Wealth Advisers Earned Over $2 Billion in Private Capital Fees in 2023

Wealth advisers generated more than $2 billion in fees from private capital investments in 2023, according to the latest data from Preqin and corroborated by industry reports from Ernst & Young and Cerulli Associates. This surge reflects growing demand from high-net-worth individuals (HNWIs) and family offices seeking exposure to private equity, venture capital, and private debt — asset classes that have outperformed public markets over the past decade.

The figure, which represents management and advisory fees charged by financial intermediaries for facilitating access to private funds, marks a 14% year-over-year increase from 2022. Advisers are increasingly positioning themselves as gatekeepers to alternative investments, leveraging their client relationships and due diligence capabilities to capture a share of the rapidly expanding private capital market.

Why Private Capital Fees Are Rising

The growth in adviser earnings stems from several structural shifts in wealth management. First, traditional 60/40 portfolios (stocks/bonds) have delivered subpar returns amid rising interest rates and inflation, prompting clients to diversify into alternatives. Second, minimum investment thresholds for private funds have declined, with many platforms now offering access to private equity and venture capital through feeder funds or evergreen structures with minimums as low as $100,000.

Third, regulatory changes such as the SEC’s Regulation Best Interest (Reg BI) have increased transparency around adviser compensation, yet fee-based models remain prevalent in the alternatives space. Unlike transaction-based commissions, advisory fees on private capital are typically calculated as a percentage of assets under advisement (AUA) or committed capital, creating recurring revenue streams.

According to a 2024 Cerulli Associates report, nearly 68% of HNWIs now allocate at least 15% of their portfolios to alternative investments, up from 52% in 2020. Family offices, in particular, have increased their private capital commitments by an average of 22% annually since 2021, according to the Campden Wealth Family Office Index.

How Advisers Monetize Private Capital Access

Wealth advisers earn fees through multiple channels when guiding clients into private capital:

• Management Fees: Typically 1–2% annually on committed or invested capital, paid to the adviser for ongoing portfolio monitoring, and reporting.
• Advisory or Platform Fees: Charged by wealth platforms or RIAs for due diligence, access, and administrative support — often 0.25–0.75% of AUA.
• Cash Flow-Based Fees: Some advisers receive a share of distributions or carried interest (though less common due to regulatory scrutiny).
• Retainers or Subscription Models: Flat fees for access to private investment opportunities, especially in subscription-based wealth platforms.

Platforms like iCapital, Moonfare, and Addepar have scaled this model by aggregating investor demand and negotiating fee reductions with fund managers, whereas still allowing advisers to charge clients a markup for access and service.

Regulatory Oversight and Fee Transparency

Despite the growth, fee structures in private capital remain complex and sometimes opaque. The SEC has increased scrutiny on how advisers disclose compensation related to alternative investments, particularly under Form ADV and private fund adviser rules. In 2023, the SEC charged several RIAs with failing to adequately disclose conflicts of interest and fee arrangements in private placements.

Industry experts advise clients to request detailed fee schedules, including both the fund-level fees (typically 2% management and 20% performance) and any adviser-level charges. “Transparency is no longer optional,” said a senior consultant at McKinsey’s Asset & Wealth Management practice. “Clients are asking not just ‘what are the returns?’ but ‘what are we paying, and to whom?’”

Outlook: Continued Growth Amid Market Volatility

With public market volatility persisting and interest rates expected to remain elevated through 2024, allocations to private capital are likely to grow further. Preqin forecasts that global private capital AUM will exceed $15 trillion by 2025, driven by continued fundraising in private equity, infrastructure, and private credit.

For wealth advisers, this presents a sustained opportunity to deepen client relationships and diversify revenue beyond traditional asset management. However, success will depend on rigorous due diligence, clear fee communication, and the ability to match complex private strategies with appropriate client risk profiles.

As one family office CIO told Financial Times in a recent interview: “We don’t just want access to private funds — we want advisers who understand the nuances of vintage year, fund size, and sponsor track record. The fee is justified only when the advice is truly valuable.”

Key Takeaways

• Wealth advisers earned over $2 billion in fees from private capital investments in 2023, up 14% from the previous year.
• Growth is driven by client demand for alternatives amid underperforming traditional portfolios and lower minimums for private fund access.
• Advisers monetize through management, advisory, and platform fees, often charging 1–2% on committed capital plus additional service fees.
• Regulatory scrutiny is increasing, making fee transparency a competitive advantage for advisers who disclose clearly.
• Private capital AUM is projected to exceed $15 trillion by 2025, suggesting continued growth in adviser earnings from this segment.

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