AI paranoia grips the City as chatbots take over

Melissa Lawford

Fri 13 February 2026 at 9:00 pm GMT+9 6 min read

iLexx

Amadeo Alentorn still remembers the nervous questions he was asked when he began to let computer algorithms dictate stock market trades more than 20 years ago.

He says some investors “would come to us and say, ‘What? You let computers decide which stocks to buy?’” says Alentorn, the head of systematic equities at Jupiter Asset Management.

“We said, ‘Yes, that’s exactly what we do. We build investment strategies that get coded up and then computers make those decisions.’”

Algorithmic trading has become the norm today for asset managers and other professional investors. But computers could soon be taking over even more of our financial lives.

Billions have been wiped off the market value of wealth management stocks this week as investors panic that artificial intelligence (AI) chatbots and programmes will soon be able to manage people’s money.

The sector is the latest to be hit by an AI panic – with software, law and accounting all suffering similar crashes in recent days.

More than £1bn has been wiped off the value of St James’s Place, the biggest wealth manager in Britain, this week, while rivals such as Quilter also tumbled. Stockbroking platforms have also crashed, with AJ Bell also falling.

The latest turmoil was triggered on Tuesday, when Altruist, a “unicorn” Los Angeles start-up, put out a press release announcing the launch of a new AI tax-strategy planner.

The programme, called Hazel, can write personalised tax strategies in minutes and can run interactive modelling on everything from the impact of a bonus to a home sale or retirement.

Jason Wenk, Altruist’s founder, says it “expands what a single advisor can handle, raises the bar on outcomes, and makes average advice a lot harder to justify”.

The tool has triggered mass panic in the stock market.

In the US, shares in wealth management and investment companies Charles Schwab, Raymond James and Morgan Stanley all tumbled. European equivalents Julius Baer, UBS and Amundi were also hit by the blanket selling.

“When you have something as fundamental as a rewriting of the economic landscape, driven by AI, the winners will only be known in years to come,” says Martin Frandsen, a portfolio manager at Principal Asset Management.

“Right now the market is being very non-discriminatory in terms of which companies will actually be the winners and losers.”

Feverish markets

The sell-off in wealth management is just the latest tremor of a broader AI earthquake hitting stock markets.

Software companies shed $830bn (£609bn) in six days this month after Anthropic announced a new plug-in for its Claude agent that can complete tasks across data analysis, marketing, legal and sales.

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In turn came new fears for the private credit sector, which has invested heavily in software companies.

On Monday, insurance stocks tumbled after OpenAI approved the first AI insurance app on ChatGPT.

On Wednesday and Thursday, property companies companies similarly saw their share prices plummet on fears bots may replace estate agents.

Even the trucking and deliver industry has been hit. Shares were sent into tailspin after Algorhythm Holdings, a former maker of karaoke systems for cars, unveiled an AI tool designed to optimise freight efficiencies. The business triggered turmoil despite having a valuation of just $6m (£4.4m).

Christian Dery, of Capital Fund Management, warns: “Firms with generic business models, low barriers to entry and high risk of automation will not survive.”

The wealth sell-off is not so much because Hazel is a seismic technological breakthrough – it’s more because markets are feverish.

“You have all the fast money hedge funds selling whoever is seen as the next AI loser straight away,” says Emmanuel Cau, the head of European equity strategy at Barclays.

Analysts think the AI tool itself is not necessarily revolutionary.

Its updated software may be able to read payslips, bank statements, meeting notes, email and customer data but it is designed to help human advisors create personalised tax strategies, not replace them.

“It is very much fear driving this rather than fundamentals,” says Cau. “The market is moving to who is the next loser, the next victim, of this AI disruption phase.

“Things are moving very fast, and it’s very hard to keep pace and a lot of investors are getting hit. It is a massive pain trade.”

AI ‘reality is dawning’

While the tool itself may not be revolutionary, investors and the industry are alarmed at the pace at which the technology is evolving.

Dery says: “It’s not like the warning signs haven’t been here.

“It’s just that I don’t think the wider industry really believed that they could work quite so quickly, or couldn’t really understand exactly how they would be disruptive. I think that that reality is dawning right now.”

For wealth managers and advisers, the fear is AI could ultimately drive down fees, which are typically opaque and vary significantly between firms. Analysts do not think that companies will go under, but their ability to charge may be significantly degraded and that has massive implications for their share prices.

“I think it has sent a bit of a shiver through the industry, this feeling that fees may be compressed in the future, this feeling that it’s going to be a lot harder to win customers and charge substantial fees for it,” says Streeter.

Wealth managers are trying to put a brave face on it.

Speaking at UBS’s Financial Services Conference on Tuesday, Jed Finn, the head of wealth management at Morgan Stanley, said: “It is the opposite. I think AI is going to enhance the quality of advice, and it’s going to help advisors scale and be able to serve more clients more effectively with the same set of resources.”

Human element trust

City folk argue that there are limits on how far people will be willing to use ChatGPT or other AI tools to make investment decisions.

“Everyone has heard about the so-called hallucinations of large language models, that ChatGPT-type applications can sometimes give you a very incorrect answer with a lot of confidence,” says Alentorn.

“When it comes to important, potentially life-changing decisions like the deployment of capital, a catastrophic error would really have a big impact on someone’s life.”

He adds: “Clearly what’s important there is the role of the human being in creating and designing those tools and making sure that the right safeguards are in place.”

There is more to the human element than just making sure AI is fit for purpose, too.

“For all of the technological and efficiency improvements that AI has the potential to bring to the wealth industry, we don’t think it, or other automated solutions, can ever fully replace the ‘human empathy’ and ‘trust’ side of being a financial adviser,” says David McCann, an analyst at Deutsche Bank.

However, he acknowledges that “hand holding” during market downturns may be less important to “more digitally native, younger individuals” – especially as they become more confident and trusting of AI.

It is a possibility that a 25-year-old who is starting to build a portfolio today may never feel they need a human wealth manager.

“Think about all of those people who’ve already got a relationship with their chatbot. They’re asking them for relationship advice, for health advice,” says Streeter.

“It’s not a great leap to expect them to be trusting a chatbot to give them the best financial advice.”

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