Shares in wealth manager St James’s Place (STJ) slumped 12% to £12.74 on fears AI could disrupt its business. The FTSE 100 firm was among a group of European asset managers suffering losses including France’s Amundi and Germany’s DWS.
| Share price: £12.74 (-12%) | PE: 19.5x |
| Market cap: £6.6bn | Yield: 1.4% |
Broad sell-off
After software companies were pummelled last week on fears of their business models being upended by AI, this week it was the turn of financial stocks. On Wall Street, shares in firms like Charles Schwab (SCHW) and Raymond James (RJF) have suffered a major sell-off.
Schwab CEO Rick Wurster said the selling was surprising as AI is beneficial to the firm rather than a threat. ‘We are benefiting from and using AI with clients,’ said Wurster, whose offering includes AI-driven Wealth.com.
While St James’s Place was the biggest casualty, it wasn’t alone with AJ Bell (AJB), Quilter (QLT) and Rathbones (RAT) also trading lower. Analysts at RBC said the sell-off would ‘reignite the “man vs machine” debate in the delivery of financial advice’.
Investors are becoming increasingly nervous that AI will undermine a wide range of business models. On Tuesday, US wealth management start-up Altruist said it would introduce AI-enabled tax planning.
Wealth managers sell a range of services to their customers, who are typically high net worth. Advisers generate fat fees, which could be at risk if rivals roll out low-cost AI-enabled advisory services.
It’s hard to know which industries are safe from the threat of AI and which ones aren’t. At the moment, the market seems to be moving from sector to sector and ‘stress-testing’ business models.
There is no question the trend in fees for advice is ultimately downward, but it has been a ‘managed’ process. No-one dares contemplate that a start-up might offer rock-bottom fees, creating a ‘cliff edge’ in revenues.
Asset manager Schroders (SDR) reports earnings tomorrow, and no doubt analysts will quiz the firm on its relationship with AI. So far today, Schroders shares haven’t taken a bath, but we’ll see where they are 24 hours from now.
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