Shares of major U.S. brokerages declined sharply after Altruist, a wealth management startup, unveiled an AI-driven tax planning feature built into its Hazel AI platform. The new functionality automates the generation of personalized tax strategies by instantly analyzing client documents such as 1040s, pay stubs and meeting notes, a capability that investors fear could erode the business models of established firms that have long relied on human advisory services.
The market reaction was immediate. Charles Schwab slipped 6.4%, LPL Financial dived 8.3%, Raymond James Financial fell 7%, and Stifel Financial dropped 6.5%. Morgan Stanley, a large Wall Street firm, declined 2.8%, while Ameriprise Financial eased 6%.
Altruist, founded in 2018, serves as a self-clearing brokerage for investment advisers and provides an integrated platform for account opening, trading, reporting and billing. Its latest Hazel AI enhancement automates tax planning by reading and processing clients' financial documents to create individualized strategies.
Market commentators linked the selloff to broader investor anxiety about AI-first entrants automating complex advisory tasks that were traditionally the domain of human advisors. "Looks like it could potentially disrupt some of the retail brokerages. That’s why the stocks are selling off here right now," said Dennis Dick, chief market strategist at Stock Trader Network, referring to Altruist’s launch.
Incumbent and insurgent brokerages alike have been adding AI capabilities. Public introduced an AI-powered brokerage in November that enables users to build their own ETFs. Robinhood offers an AI-powered investing assistant to its Gold subscribers, letting users discuss trading ideas and place orders through an interactive chat feature.
The episode adds to recent market turbulence. Financial markets, which had been buoyed by enthusiasm for AI-focused investments, experienced a sharp reassessment last week when global software stocks dropped on concerns over new coding and automation tools. The extension of that rout into financials highlights investor sensitivity to even incremental AI-driven product launches.
Context and implications - The Altruist announcement and subsequent market reaction underscore how AI-enabled product rollouts by newer, tech-centric firms can prompt swift revaluation of traditional financial services companies, particularly those whose value propositions depend on premium advisory services.