After St James's Place PLC, Quilter PLC, AJ Bell PLC and other wealth managers and savings platforms were caught in a sharp sector sell-off after the launch of an AI-powered tax planning tool in the US, analysts argued the market reaction may be overdone.
Shares fell more than 13% after startup Altruist unveiled an AI-driven tool platform designed to help advisors create fully personalised tax strategies for clients within minutes.
JPMorgan said: "While AI innovation can’t be downplayed, we see value in trying to frame the conversation and highlight specific points of weakness and strength within our coverage."
The bank's analysts said they believe "the market generally underestimates the importance that clients of financial advisers place on the personal relationship with their advisers, we note that different market structures across regions could lead to different levels of penetration of AI solutions, and we believe that financial advice firms will have to be proactive in adjusting their business models to cater for the needs of younger cohorts of clients, who are more likely to use technology to manage their finances, and are the recipients of the ongoing generational transfer of wealth".
With a more "bull-case" hat on, they also believe that AI could "contribute to meaningfully increasing adviser productivity".
Others, including Citi, noted that standalone robo-advice firms have failed to scale up, seeing the technology as more likely to benefit existing adviser networks or D2C platforms, while also bringing down the unit cost of advice and thus contributing to increasing adoption from current low levels.
Focusing on St James's Place, UBS acknowledged “potential further risks of AI disruption”, particularly if clients adopt AI tools instead of face-to-face advice.
However, with the shares retreating 15% over the past two days from their recent four-year high, the risk is now “marginally skewed to the upside”, UBS feels.
While still retaining its 'neutral' rating, the Swiss bank highlighted that the stock trades on 12.5 times 2027 earnings, the lowest multiple in the sector, with “double digit (up to 25% yoy) growth in earnings” expected from 2027 levels
The Swiss bank expects the firm to unveil a £50 million special buyback alongside the standard 50% payout ratio when it reports final results on 25 February.