After Selloff, Wall Street Execs Double Down on AI

AI-n’t no thang, but a chicken wing.

It’s easy for financial planners or wealthtech entrepreneurs to say: “AI is not going to replace human advisors.” However, that was before last week, when the digital-first custodian Altruist launched an AI-powered tool on its Hazel platform. The program’s debut spooked investors, and wealth management stocks took a tumble. Charles Schwab’s stock sank almost 11%, and Morgan Stanley fell nearly 5% last week. Meanwhile, LPL and Ameriprise saw their stocks drop 13% each. 

“What we’re likely to see is some periodic volatility as new tools are announced and investors and analysts reassess competitive advantage in real time,” said Brian Storey, head of multi asset strategies at Brinker Capital Investments, adding that he doesn’t see it as a wholesale shift in how investors value advisory models. 

21st Century Digital Boys

Despite the sharp sell-off, Wall Street’s biggest wealth managers aren’t downplaying the future of the technology, but doubling down. Executives at major firms said they’re expanding AI across their wealth units. It’s the latest development in the race to monetize AI, a technology that many believe will end up reshaping the wealth management industry itself. 

AI has already become a co-pilot for advisors, taking meeting notes, drafting emails and assisting with research. Now, the industry’s largest firms are pushing further into automation. Morgan Stanley Head of Wealth Management Jed Finn said during a conference last week that the firm is building AI tools across “three broad buckets of functionality.” 

• The first expands on the company’s existing co-pilot features, enabling systems not just to retrieve information but to execute tasks like opening accounts or changing beneficiaries. 
• The second is an AI agent capable of interacting directly with clients. 
• The third is a portfolio construction engine. Advisors submit client financial goals and timelines, and the system takes care of asset allocations. 

“The human relationship is the whole point,” said Reed Colley, president of Orion Advisor Technology. “The advisors who thrive will use AI to be more present with clients, not less.”

Constant Change. Schwab is deploying AI in call centers to help staff respond more quickly to clients and has identified more than 200 potential use cases across the business, CEO Rick Wurster told Barron’s. Schwab also took a minority stake last year in Wealth.com, an AI-powered estate planning platform. “Technology has changed a lot in our business over the past 51 years, but we have always been part of that change and led it,” Wurster said.