AI fears trigger selloff in finance stocks: why analysts say the threat is overstated

• Altruist's new AI tool on its Hazel platform automates personalized tax strategy creation by analyzing documents without manual data entry, targeting the multitrillion-dollar RIA custody market where it competes with Schwab and Fidelity
• The selloff spread globally with US wealth managers falling 3-8.7% and European firms declining 4-11%, driven by investor fears of margin compression and disintermediation in high-value advisory services like tax planning
• Multiple analysts called the selloff overdone, with Morningstar stating many companies now trade below intrinsic valuations and Citizens noting AI could expand rather than compress advisory services over the next several years

Summary

Key Development:

California-based fintech Altruist launched an AI-powered tax strategy tool on Tuesday, triggering a significant selloff in financial services stocks amid fears of AI disruption in wealth management.

Market Impact:

U.S. financial stocks experienced sharp declines: Charles Schwab fell 7.4%, Raymond James dropped 8.7% (steepest decline since March 2020 COVID-19 turmoil), LPL Financial and Stifel declined at least 3%. Banks with wealth management operations also suffered—Bank of America down 1.8%, Morgan Stanley fell 2.4%.

The selloff extended to European markets Wednesday, with St James's Place plunging over 11%, AJ Bell falling 6.5%, and Quilter declining more than 5%. German, Swiss, and Italian wealth managers also posted sharp losses.

The Technology:

Altruist's tool, integrated into its Hazel AI platform (launched September 2025), automates personalized tax strategy creation by analyzing financial documents without manual data entry. The company serves over 5,700 advisers in the multitrillion-dollar RIA custody market, competing with Schwab and Fidelity.

Analyst Perspective:

Experts believe the selloff is overdone. Citizens analysts argue that advisory roles require "judgment, behavioral coaching, and personalisation" that AI cannot fully replace. Devin Ryan of Citizens stated there's "nothing fundamentally new" in these developments, attributing the reaction to "market fragility."

Morningstar's Sean Dunlop noted relationship-driven businesses remain resilient and many companies now trade below intrinsic valuations. Swissquote's Ipek Ozkardeskaya suggested the speed of AI replacement forecasts is "overestimated."

Context:

Earlier concerns about Anthropic's Claude plugins and Insurify's insurance AI application have intensified investor anxiety about AI disruption across financial services.