Wall Street is getting extremely jumpy about the threat of AI disruption to a widening range of industries. That is the best explanation for the hammering that brokerage and wealth management stocks took this week, thanks to a little-known US fintech company called Altruist.
The idea that an upstart armed with better technology can threaten giants of the finance industry has fuelled various waves of fintech mania over the years. Generative AI has just given a new twist to this — as it has in other industries. As with previous waves of tech disruption, the most exposed are those whose basic product is information — finance, legal services, media and software.
Altruist hardly looks like a serious threat, though it is emblematic of how disruptive competition could intensify because of AI. The company last year launched a service to make investment advisers better at analysing portfolios and recommending investment strategies for their customers. This is the kind of thing fintechs have been doing for years, though services like these are now supercharged by drawing on large language models. The same AI capabilities, of course, are available to established brokers and wealth managers, which have used technology to transform their services. Control of customers and distribution channels, along with deep domain expertise, will continue to be their main defensive strategy.