AI Tax Tool Rattles Financial Sector, Sparks Broad Sell-Off

A new artificial intelligence product sent shockwaves through financial services stocks on Tuesday, as investors bet the technology will reshape the advisory business. The trigger was the launch of an AI tax planning tool that its creator claims can generate personalized client strategies in minutes.

The reaction was swift and severe. LPL Financial shares fell 8.3%, after dropping as much as 11% during the session. Charles Schwab declined 7.4%, and Raymond James Financial lost 8.8%. Morgan Stanley saw a more modest 2.4% drop. The iShares U.S. Broker-Dealers and Securities ETF closed down over 3%.

The tool, named Hazel and launched by platform Altruist, analyzes a client's tax documents, financial statements, emails, and other data to construct tax strategies. The immediate fear on Wall Street is that such automation could displace lucrative human advisor services or severely pressure their pricing models.

This pattern mirrors a sell-off in software stocks earlier in the year, triggered by AI advances that threatened business software and legal service licenses. That sector remains down significantly. Tuesday's market movement suggests a growing conviction that AI's disruptive force is moving rapidly from back-office technology to core client-facing revenue centers in finance.

Source: CNBC