Securities in This Article
Shares in many public wealth management firms fell significantly during Feb. 10 trading, as fears regarding disruption from artificial intelligence continued to spread beyond software and financial data companies. The disruptive risk for wealth management is significantly less clear.
Why it matters: Shares in high-quality companies, like Schwab, LPL, Raymond James, Ameriprise, and Stifel fell 6%-8% on fears of disintermediation. The launch of Altruist’s AI-enabled tax planning tool seems to be the culprit. Morgan Stanley was less affected, down roughly 3%.
Industry observers have seen this story before with robo-advice, which has made only limited inroads despite having been around for longer than a decade. We don’t view this case study as inappropriate; inclusive of robo-advice offerings from industry stalwarts like Vanguard and Schwab, total robo-advisory assets under management remain below $1 trillion in the US, a small fraction of the $36 trillion in estimated retail advised assets at year-end 2024 (Cerulli).At this stage, portfolio construction is largely commoditized, yet the proportion of retail assets that are professionally managed continues to increase, even as robo-advice and retail brokerage platforms are now ubiquitous. We’d expect similar outcomes with AI-enabled wealth management tools, with the real value offered by financial advisors more closely tying to behavioral coaching, holistic financial planning, and trust.
The bottom line: We maintain our per share fair value estimates across the industry. Investors would do well to buy LPL, our top pick in the space, at current prices. Schwab, Raymond James, Ameriprise, and Stifel look slightly cheap at Feb. 10 intraday prices.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article.
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