What changes when the assets are private
An RIA's fiduciary duty does not have a private markets edition. The duties of care and loyalty under the Investment Advisers Act of 1940 are identical whether the recommendation is an index fund or a drawdown fund. What changes is the terrain those duties must cross. In public markets, continuous pricing, standardized disclosure, and instant reversibility do much of the fiduciary's evidentiary work automatically. In private markets, every one of those supports is weaker, so the advisor's own process has to replace them.
The table's pattern is consistent: private markets remove the ambient protections of public markets and transfer the burden to advisor process. Each section below addresses one piece of that transferred burden.
Duty of care and duty of loyalty
One feature of private markets sharpens both duties of care and loyalty: the recommendation is difficult to unwind. Once capital is committed to a drawdown fund or invested through an evergreen window, redemption may be unavailable for years. The fiduciary duty does not pause during that period. Ongoing monitoring, revaluation of suitability as client circumstances change, and honest reporting are all part of the engagement.
The SEC Marketing Rule (Rule 206(4)-1)
The Marketing Rule, fully enforceable since November 4, 2022, governs how advisers advertise and how they use performance information, including manager materials repackaged for clients.17 Its familiar provisions apply with more force in private markets, precisely because private performance data is less standardized than public data: a sponsor's exhibit may not carry net alongside gross, may rest on a methodology the adviser cannot see, and may still become the adviser's own advertisement the moment it reaches a client.
For advisors, the practical habit is simple: treat every sponsor performance exhibit as something you must be able to defend, not merely forward.
Suitability and eligibility documentation
Suitability in private markets is a documented conclusion, not intuition, and the documentation standard is higher than in public markets because the inputs are less verifiable. Each recommendation file should reflect the client's eligibility tier (Chapter 5), liquidity budget (Chapter 6), time horizon, concentration limits, and the strategy's specific role in the portfolio. The SEC's January 2022 Risk Alert on private fund advisers signaled examiner attention to advisers recommending private funds without adequate diligence, and the same logic reaches the advisory file.18 More than a third of SEC-registered advisers manage private funds, which keeps this area squarely on the examination agenda.18
Conflicts of interest
Private markets multiply the ways an adviser or its affiliates can be compensated, and each additional payment stream creates a potential conflict that must be eliminated or fully and fairly disclosed. Affiliated products deserve particular care: when an adviser or its related entities earn fees from a recommended vehicle, the client must clearly see the relationship.
Fee transparency
Private markets fees arrive in layers: management fees, incentive fees or carried interest, administration and servicing fees, and, where feeders are used, an additional access layer. In public funds, a single expense ratio discharges most of the disclosure burden; in private funds, no single number does. The duty of loyalty requires that clients understand the full stack. A useful discipline is to express total expected costs in dollars for the client's actual investment size, alongside the percentages.
Due-diligence documentation as fiduciary evidence
Due diligence protects clients; documented due diligence protects the practice. The file that satisfies an examiner is the one that shows the work: the questions asked, the materials reviewed, the risks identified, the conflicts disclosed, and the reasoning that connected the product to the client.