AI Just Hit Wealth Management’s Core Business
A tax-planning tool from Altruist rattled Schwab and Morgan Stanley. Now the industry faces a cost-to-serve reckoning
Altruist’s launch of AI-powered tax planning inside its Hazel platform on Feb. 10 triggered an immediate repricing of wealth management stocks.
Shares of Charles Schwab, Raymond James Financial, LPL Financial and Stifel Financial fell between roughly 6% and 9% that day, according to market coverage. Bloomberg Intelligence analyst Neil Sipes attributed the move to concerns around “efficiencies being competed away, fee compression long-term and potential market share shifts.” Dennis Dick, chief market strategist at Stock Trader Network, told Reuters that traders “sell first and ask questions later” when new AI headlines appear.
The selloff centered on one feature: automated tax strategy generation. Hazel reads clients’ 1040s, paystubs, account statements, meeting notes, emails and CRM data to produce personalized tax plans “within minutes,” Altruist said in its Feb. 10 press release. The system also models “what-if” scenarios such as retirement transitions or asset sales in real time. Founder and CEO Jason Wenk said the feature “expands what a single advisor can handle” and “makes average advice a lot harder to justify.”
Tax planning sits inside the core revenue model of advisory firms. Many advisory relationships are priced as a percentage of assets under management, often around 1%, though rates vary by client size. Industry surveys cited by Barron’s show that ultra-high-net-worth portfolios can carry lower effective fees, sometimes closer to 0.66% in certain segments. Cerulli Associates has reported ongoing pricing adjustments across the industry as advisors respond to fee pressure. Tax planning is also one of the more labor-intensive services advisors provide, which ties it directly to the cost structure of advisory firms.
The Cost Equation Behind Advice
Advisory firms earn revenue as a percentage of assets, but their expenses are driven largely by compensation and operational labor. If AI reduces the time and labor required to deliver planning, it changes the cost structure of advice.
Independent research suggests the potential is material. McKinsey estimates that across asset management broadly, AI-enabled workflow redesign could address 25% to 40% of the cost base, contingent on significant operating-model change. The firm emphasizes that gains depend on reorganizing processes, not simply deploying tools. BCG has found that roughly 70% of AI’s value creation stems from changes in workflows and behavior rather than from the models themselves. Those estimates suggest that meaningful efficiency gains are possible if firms redesign workflows around AI.
In that framework, AI becomes an operating leverage tool. Whether it results in lower advisory fees or higher margins depends on who controls distribution and how firms implement the technology.
Asset growth across the industry has continued. Morgan Stanley reported in its most recent earnings release that its wealth and investment management division oversees $9.3 trillion in client assets, driven by $122 billion in net new assets during the quarter. Public filings following the Feb. 10 selloff did not report AI-driven outflows or announce advisory fee revisions. Robo-advisory assets remain below $1 trillion compared with roughly $36 trillion in retail advised assets at year-end 2024, according to data cited by Morningstar.
Incumbent Scale vs. Platform Growth
Large firms operate inside concentrated custodial ecosystems. Morgan Stanley’s wealth division oversees $9.3 trillion in client assets. Charles Schwab, LPL Financial, Raymond James and Ameriprise each report client asset bases in the trillions. Schwab’s most recent disclosures show total client assets exceeding $7 trillion. That scale provides distribution control and operating leverage that smaller platforms do not yet have.
These firms provide account custody, trading, reporting and compliance infrastructure at scale.
Altruist operates at a smaller magnitude. The company states that it supports more than 5,500 advisors and that Hazel is used by over 1,000 wealth managers. It reported 119% growth in platform assets in 2025, without disclosing total assets under custody. In January, Altruist announced it had been selected as custodian for Lifeworks Advisors, a $900 million RIA. The company has not publicly reported its aggregate custody assets. The company is growing quickly, but its asset base remains small relative to established custodians.
The independent channel has been expanding. Schwab’s 2025 RIA Benchmarking Study reported double-digit asset and revenue growth among participating firms. Industry research from ISS Market Intelligence documents ongoing advisor movement toward independent models. Independent advisors rely heavily on technology platforms for custody and workflow, which makes software differentiation central to competition in that segment.
Incumbents are also investing in AI. Morgan Stanley’s earnings release states that non-compensation expenses increased year over year, primarily driven by higher technology spend. The firm has deployed internal AI tools to automate meeting notes and CRM updates for financial advisors. LPL Financial’s earnings call referenced initiatives “from an automation standpoint, from an AI standpoint,” tying expense plans to workflow modernization. Charles Schwab reported that 63% of RIAs surveyed are using AI tools and launched Schwab Advisor AI in Action to support adoption. That suggests AI capability is developing across the industry, not confined to new entrants.
The Feb. 10 selloff resulted from concern that automation could alter the economics of advice. AI has the potential to reduce cost-to-serve. Incumbents control trillions in client assets and are integrating AI into their own workflows. Independent platforms are building AI directly into their infrastructure. The question is whether efficiency gains will translate into pricing pressure or reinforce the margins of firms that already control scale and distribution.