Shares of Morgan Stanley declined 3.7% to $175.58 during Tuesday's session, part of a broader downturn affecting wealth management firms. The selloff was triggered by the launch of an artificial intelligence tax-planning feature by financial technology company Altruist, which stoked investor anxiety over potential disruption to the human-driven advisory business.
Analysts linked the market reaction to growing fears that AI could fundamentally alter the financial advice landscape. "The selloff appears tied to broader concerns about AI disrupting the financial advice and wealth-management model," noted Neil Sipes of Bloomberg Intelligence. For Morgan Stanley, this sentiment challenges the perception of its wealth division—including the E*TRADE platform—as a stable fee generator compared to more volatile trading and investment banking revenue.
Peers experienced even steeper declines. Charles Schwab fell 7.7%, while LPL Financial dropped 10.2% and Ameriprise Financial slipped 6.9%. Altruist's new platform, named Hazel, can analyze U.S. tax returns and client documents to produce personalized tax strategies within minutes, eliminating manual data entry. The company emphasized that the tool provides analysis, not formal tax advice, and uses zero-data-retention agreements with its AI providers.
The anxiety follows recent volatility in software stocks, with Morgan Stanley analyst Katy Huberty describing the selloff as "sentiment-driven, not fundamental." The bank also warned that similar concerns are affecting credit markets, where software comprises roughly 16% of the $1.5 trillion U.S. loan market, though it sees a low near-term risk of defaults.
Amid the turbulence, Morgan Stanley is bolstering its dealmaking capabilities, having rehired veteran banker Michael Grimes as chairman of investment banking to focus on technology listings anticipated in 2026. However, the immediate market reaction may be outpacing evidence of actual revenue impact, as it remains unclear how quickly advisers will adopt such tools and how regulators will oversee AI-driven tax analysis at scale.
Investors are now turning to macroeconomic indicators for direction. The U.S. Employment Situation report for January and the Consumer Price Index data due later this week are expected to influence interest rate expectations and risk appetite across financial stocks.
