Why Altruist’s New AI Tax Tool Spooked Investors in Schwab, LPL, Raymond James
Tax planning tools have been around for years, but they’ve mostly been manual.
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Want to scare the big brokerages next Halloween? Dress up as AI.
On Tuesday, the digital-first custodian Altruist launched a new artificial intelligence-powered tool on its Hazel platform designed to create tax strategies for clients based entirely on their documents. The launch caused the stock prices of several major wealth management firms to take a tumble, including LPL Financial, Raymond James and Charles Schwab. Experts said the selloff appeared to be an overreaction, but that whether any AI tool becomes a real threat to bottom lines depends on adoption.
“Hazel is significant, but not by itself,” said Bill Harris, CEO of Evergreen Wealth. “It’s part of a wave of AI tools for advisors.” He added that there is a large menu of wealth management tools — notetaking, marketing, report generating — that will “definitely change the way that advisors work.”
IRS Meets AI
Tax planning tools have been around for years, but until now they’ve been more manual, requiring users to enter information by hand. The Hazel upgrade, on the other hand, purports to generate tailored tax plans for clients based on the data in their 1040s, account statements, pay stubs and more. Harris said certain wealth management firms will go the way of mutual funds in the era of the ETF — just a lot quicker. “Mutual funds have not disappeared, but the growth is gone,” he said.
However, other advisors said the tool is not as big a threat as recent stock market shifts have indicated. “[Advisors] are here for interpretation more often than information, and the human layer is often what becomes the differentiator,” said Kyle Mostransky, CEO of Mostransky & Associates. “Most financial decisions are driven by fear, regret, greed, pressure, goals. AI can optimize the math, but not the meaning of those decisions.”
That didn’t stop many firms’ stocks from taking a hit, and some dropped further Wednesday:
- LPL Financial’s stock was down 5.7%, and Charles Schwab’s was down 4%.
- Stifel Financial and Piper Sandler Companies were down 1.5% and 4.5%, respectively.
Under My (Price) Umbrella. The real impact of AI tools may be on fees as they continue to push down the price of human advice, Harris said. “Right now, a wealth management firm offering a human financial advisor, as opposed to a robo advisor, is typically [charging] 1% per year of the assets or more,” he said. “That will erode.”
