We’re used to hearing about bond vigilantes, with their noses pressed to their terminals, trying to keep a lid (and threaten punishment) on sovereign nations out there that step out of line with their fiscal ambitions.
Yet what we have seen this week (and as a partial follow-up to Software-as-a-Selloff) is the rise of what we’re calling the AI disruption vigilantes. This new breed of hungry equity traders has been out in full force this week, targeting various areas of the market where a high-fee, labour-intensive operating model could prove ripe for disruption.
Three key areas have been targeted this week, but the consensus trade for each one is different, as AI nuances are already becoming apparent.
Financial Services (Tuesday)
The market reaction to Altruist’s latest release underscores growing investor concern that generative AI is encroaching on bespoke advice in the sector, one of the most defensible layers of the wealth management value chain.
The firm announced that its Hazel AI platform can now construct client-specific tax strategies by ingesting 1040s, payroll data, and account-level information and produce actionable recommendations within minutes. What has historically been a manual, high-labour component of advisory work is being reframed as a data-processing problem, and markets immediately priced in the implications for operating leverage across the sector.
Two companies we noted that took a hit (which has been exacerbated as the week has gone on) are LPL Financial and Charles Schwab.
In our view, the hit to both reflects fears that AI-enabled workflow compression could erode both pricing power and the perceived scarcity value of human advice.
If a single advisor can service materially more households (Altruist CEO Jason Wenk suggested as much when he said Hazel “expands what a single advisor can handle”), then revenue per advisor may rise, but industry-wide fee pools risk dilution as capacity expands faster than demand.
Tax optimisation has long been one of the most defensible justifications for advisory fees because of its complexity, regulatory sensitivity, and the need for cross-account coordination. By automating this function, AI threatens to commoditise what was previously a high-margin, expertise-heavy offering.
To clarify, we believe the concern is less about outright disintermediation and more about margin normalisation. Simply put, advisory firms may retain clients, but with lower incremental economics per relationship.
As far as the vigilante pursuit goes, we don’t see this area of the market posing serious risks relating to a complete decimation of related stocks. But we do believe the move lower is justified based on repricing long-term earnings expectations.
Real-Estate Services (Wednesday)
The vigilantes turned to real estate services the following day, using the same argument as they had used against finance firms.
The narrative that AI-driven workflow automation is migrating from back-office experimentation into core transaction functions caused significant hits to the likes of CBRE and JLL.