AI tax tool triggers $830 billion wealth management stock selloff

Altruist's Hazel AI platform automates tax planning "within minutes," sending financial services stocks into freefall as investors fear AI disruption spreading beyond software

Financial services stocks crashed on February 10, 2026, after tech startup Altruist unveiled an AI-powered tax planning tool that promises to automate work that traditionally takes financial advisors hours or days. The announcement triggered panic selling across wealth management firms, with LPL Financial plunging 11%, Charles Schwab falling 10%, and Raymond James dropping 9%.

The selloff wiped billions from brokerage valuations and marked the latest sector to face investor fears about AI disruption. Just last week, global software stocks lost over $830 billion after concerns that AI coding tools could commoditize enterprise applications. Now those fears have spread to financial services—an industry that generates high-margin revenue from advisory work that AI increasingly threatens to automate.

For wealth managers and financial advisors, the message is stark: AI isn't just coming for software developers and knowledge workers. It's targeting the specialized expertise that justifies premium fees in financial planning.

What Altruist's Hazel AI does—and why it spooked Wall Street

Altruist, a tech platform serving independent financial advisors, integrated AI-powered tax planning into its Hazel AI assistant on February 10, 2026. The new feature analyzes client documents including tax returns (Form 1040), pay stubs, account statements, and meeting notes to automatically generate personalized tax strategies.

According to Altruist founder and CEO Jason Wenk—a former Morgan Stanley advisor—the tool completes work that previously required hours of manual analysis "within minutes." Hazel can identify tax-loss harvesting opportunities, evaluate Roth conversion strategies, recommend charitable giving structures, and project the tax impact of different financial decisions.

The automation isn't limited to calculations. Hazel generates client-ready documentation explaining recommended strategies in plain language, essentially replacing both the analytical work and client communication tasks that advisors typically perform.

Why this triggered a market panic: Investors immediately recognized that if AI can automate complex tax planning—one of the highest-value services advisors provide—then large portions of the wealth management business model face compression or elimination. Tax planning often justifies the 1% annual fees that advisors charge on assets under management. Remove that differentiation, and fee pressure accelerates.

The market carnage: Who got hit hardest

The February 10 selloff hit wealth management and brokerage stocks across the board:

LPL Financial (LPLA): -11%, closing at its lowest level in six months. LPL operates a platform supporting 23,000+ independent financial advisors—precisely the market segment most vulnerable to AI-powered automation.

Charles Schwab (SCHW): -10%, erasing $15 billion in market capitalization. Despite Schwab's scale and diversified business model, investors questioned whether AI could disintermediate advisor relationships that drive the company's asset custody business.

Raymond James (RJF): -9%, with analysts noting the firm's advisor-centric model faces direct threat from tools like Hazel.

Stifel Financial (SF): -5%, outperforming peers but still caught in the broader selloff.

The iShares U.S. Broker-Dealers & Securities Exchanges ETF fell 4%, reflecting sector-wide concerns rather than company-specific weakness.

Notably, the selloff affected even firms with minimal exposure to tax planning services, suggesting investors adopted a "sell now, ask questions later" mentality reminiscent of January's software stock rout.

Why financial services was vulnerable to AI disruption

The wealth management industry generates high margins by bundling advisory services—financial planning, tax strategies, estate planning, investment management—into annual fees typically ranging from 0.75% to 1.25% of assets under management.

This model worked when human expertise was the only way to deliver personalized advice. But several factors make financial advisory work particularly susceptible to AI automation:

Standardizable workflows: Despite appearing customized, most tax planning follows predictable decision trees. If client's income exceeds X and they have Y in taxable accounts, evaluate Roth conversion. If they hold losing positions, harvest tax losses before year-end. AI excels at these structured analyses.

Document-heavy processes: Tax planning requires analyzing returns, pay stubs, investment statements, and estate documents—all tasks where large language models demonstrate strong performance in extracting and synthesizing information.

Regulatory constraints: Financial advice operates within defined legal frameworks (tax code, securities regulations, estate law) that AI can learn and apply consistently, unlike creative fields where rules constantly evolve.

Fee pressure: The rise of robo-advisors already demonstrated that investment management could be automated at scale. Tax planning was supposed to be the human-only differentiator. Now that's threatened too.

Industry response: Dismissal or defensive repositioning?

Financial services executives moved quickly to downplay disruption concerns, though their responses revealed underlying anxiety.

Morgan Stanley's head of wealth management, Jed Finn, told investors that his firm has "more than 3,500 individual tools and capabilities" including several for tax planning, suggesting Morgan Stanley isn't vulnerable to a single AI entrant. But this response sidesteps the question: if Morgan Stanley advisors also adopt AI tools that dramatically improve productivity, does the firm need 15,000+ advisors, or could it serve the same client base with 10,000?

Dennis Dick, chief market strategist at Stock Trader Network, captured the strategic threat: "Looks like it could potentially disrupt some of the retail brokerages. That's why the stocks are selling off here right now."

Altruist itself positions Hazel as augmenting advisors rather than replacing them. CEO Jason Wenk said the tool "redefines what tax planning means for advisors" by enabling them to deliver higher-value strategies faster. This framing—AI as productivity enhancer rather than job destroyer—mirrors how every AI vendor describes its products.

The reality likely falls between these extremes. AI won't eliminate financial advisors overnight, but it will enable firms to serve more clients with fewer advisors, compress fees as automated advice becomes commoditized, and shift remaining human advisors toward relationship management rather than technical analysis.

The pattern: AI disruption spreading across knowledge work sectors

The wealth management selloff follows a troubling pattern for investors trying to identify which industries face AI disruption:

January 2026: Global software stocks lost over $830 billion after Anthropic launched workplace automation plugins and concerns grew that AI could replace specialized enterprise applications. Companies like Salesforce, Thomson Reuters, and LegalZoom saw shares crater as investors questioned whether AI would commoditize their products.

Early February 2026: Databricks CEO Ali Ghodsi declared that traditional SaaS business models face extinction within years as AI agents automate workflows currently requiring specialized applications. The prediction accelerated software stock declines.

February 10, 2026: Altruist's tax planning tool triggers wealth management selloff, demonstrating that AI disruption fears now extend beyond technology companies to professional services.

The connecting thread: industries that generate high margins by selling expertise face compression when AI can replicate that expertise at scale. Software companies, legal services, financial advisory, accounting, consulting—all face versions of the same threat.

What this means for financial advisors and wealth management firms

For individual financial advisors, the Altruist announcement represents both opportunity and threat:

Opportunity: Advisors who adopt AI tools like Hazel can dramatically increase productivity, serving more clients and delivering faster responses to complex planning questions. Early adopters may capture market share from slower-moving competitors.

Threat: As AI-powered tax planning becomes standard, clients will expect faster turnaround and may question whether they should pay premium fees for advice that's increasingly automated. Fee compression seems inevitable.

For wealth management firms, strategic decisions loom:

Invest in AI: Build or acquire AI capabilities to maintain competitive advantage. Morgan Stanley, Goldman Sachs, and JPMorgan have all announced major AI initiatives, viewing automation as necessary for margin protection.

Focus on relationship management: Position human advisors as relationship managers and behavioral coaches rather than technical analysts. This assumes clients value human connection over analytical precision—an assumption younger, tech-savvy clients may not share.

Consolidate or exit: Smaller advisory firms without resources to compete on technology may face acquisition or closure as the industry consolidates around firms that can afford AI infrastructure investment.

The counterargument: Why AI won't destroy wealth management

Not everyone accepts the disruption narrative. Several factors could limit AI's impact on financial advisory:

Behavioral finance: Humans make emotional decisions about money. A good advisor provides accountability and prevents clients from panic-selling during market downturns. AI can analyze tax strategies but can't (yet) talk clients off ledges during volatility.

Trust and liability: Clients trust advisors built on years of relationship. Many wealthy clients prefer human judgment for high-stakes decisions, even if AI recommendations are technically superior. Regulatory liability also matters—if AI gives bad advice, who's responsible?

Complexity and edge cases: While standard tax planning follows predictable patterns, wealthy clients often have complex situations involving trusts, business ownership, alternative investments, and international tax issues. These edge cases may resist automation longer than routine advisory work.

Compliance and regulation: Financial advice is heavily regulated. AI tools must navigate complex legal requirements, and regulators may slow adoption by requiring human oversight of AI-generated recommendations.

These counterarguments suggest AI will augment rather than replace advisors, at least in the medium term. But "augmentation" still means fewer advisors needed to serve the same number of clients—which is exactly what spooked investors on February 10.

FAQ: AI disruption in wealth management

What is Altruist's Hazel AI platform?

Hazel is an AI assistant integrated into Altruist's platform for independent financial advisors. It automates tax planning by analyzing client documents and generating personalized tax strategies "within minutes" according to the company.

Why did wealth management stocks crash on February 10, 2026?

Investors feared that AI automation of tax planning—a high-value advisory service—threatens the wealth management business model that justifies premium fees. LPL Financial fell 11%, Charles Schwab 10%, and Raymond James 9%.

Will AI replace human financial advisors?

Unlikely in the near term. AI will probably augment advisors by automating routine analysis, but human judgment, relationship management, and behavioral coaching retain value. However, firms may need fewer advisors to serve the same client base.

How much revenue is at risk from AI automation in financial services?

Difficult to quantify, but tax planning and financial planning services represent significant portions of the advisory fees that generate tens of billions annually for wealth management firms. Even modest automation could compress margins substantially.

What should financial advisors do about AI disruption?

Adopt AI tools to increase productivity, focus on relationship management and behavioral coaching, and specialize in complex planning situations that resist automation. Advisors who view AI as competitor rather than tool risk being left behind.

Which wealth management firms are most vulnerable to AI disruption?

Firms focused on mass-affluent clients with straightforward planning needs face greater risk than those serving ultra-high-net-worth clients with complex situations. Independent advisor platforms like LPL Financial may be more exposed than integrated firms with diversified revenue sources.