Shares in UK wealth managers hit as AI contagion spreads

Shares in the UK’s largest wealth managers tumbled on Wednesday over concerns about potential disruption from a new AI-led investment tool.

St James’s Place, Britain’s biggest wealth group, fell more than 13 per cent after US-based fintech Altruist launched a tool to help financial advisers personalise clients’ investment strategies.

The development has spooked investors, sparking fears about how the technology might undermine the traditional industry. In the US, Charles Schwab was down 3.8 per cent on Wednesday, extending the previous session’s 7.4 per cent drop.

As the fears spread to the UK, AJ Bell fell 8 per cent while Quilter and Aberdeen Group both lost more than 5 per cent.

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Technology and financial stocks were the worst performers in Europe on Wednesday, with the financials sub-index of the Stoxx Europe 600 down 2 per cent.

Swiss wealth manager Julius Baer fell 3 per cent, and UBS — whose wealth management business is Europe’s biggest — dropped 2.8 per cent. French asset manager Amundi fell 2 per cent.

The abrupt decline in shares of wealth managers underlines how companies regarded as potential losers from AI are now suddenly in the crosshairs of investors.

The sell-off echoes similar pressures on software, data and analytics stocks, which fell steeply last week when fears about disruption from Anthropic’s new coding plug-in tools hit the sector.

Shares in some of those companies lost more ground on Wednesday. Relx, the FTSE 100 business data provider, was among the fallers, down more than 6 per cent.

Emmanuel Cau, head of European equities strategy at Barclays, said: “The pace of AI innovation is so fast that basically every week there’s a new tool being launched — the market is looking for the next AI loser.”

The size of the move suggested a “sell first, see later” attitude from investors, he added, with the perceived losers being “indiscriminately” sold.

Los Angeles-based Altruist said on Tuesday its new planning tool could help create personalised tax strategies “within minutes” by analysing tax returns, payslips and meeting notes. It could also explore “what-if” scenarios, including property sales or retirement transitions.

“It expands what a single adviser can handle, raises the bar on outcomes and makes average advice a lot harder to justify,” Altruist’s founder and chief executive Jason Wenk said of the company’s AI platform called Hazel.

As the shares of UK wealth managers remained under pressure on Wednesday, Paul Manduca, chair of St James’s Place, described the declines as “surprising and almost certainly an overreaction”.

He said that “face-to-face advice is in high demand in a fast-changing world”, adding that the company used AI tools to help provide services to clients.

Altruist’s announcement of a new planning tool has catapulted the previously little-known company into the spotlight. The group was valued at $1.9bn last April in a funding round led by GIC, Singapore’s sovereign wealth fund.

Groups including Salesforce Ventures, Geodesic Capital and Baillie Gifford also participated.

Rae Maile, analyst at Panmure Liberum, said that so-called robo-advice had existed for some time and that providers solely using such models had failed.

He questioned whether individuals with complex financial planning needs, from pensions to inheritance tax, would “trust all of that to a computer to solve”.

“Would you even know which questions to ask? The really wealthy will always want a personal service.”

Quilter’s chief executive Steven Levin said the UK wealth market remained a “hugely attractive structural growth opportunity”.

“For the past few years we have been investing in an adviser and technology proposition to enhance adviser productivity, allowing us to serve more clients efficiently,” he said.

Levin said the “vast majority” of Quilter’s revenues and profits were generated from platform administration charges and asset management fees, and not from adviser charges.

AJ Bell said it regarded AI as an opportunity to both improve efficiency and enhance the customer and adviser experience, and was using GenAI, particularly in customer service applications.