AI will bring ‘carnage’ to wealth management, strategist says

It’s the rise of the robo-money manager: Artificial intelligence stands to bring major disruption to a wealth management industry already locked in a heated competitive battle for fees and inflows.

A new PwC survey of asset managers and institutional investors warns that 1 in 6 asset and wealth management companies will be bought or shut down in the next five years.

“The tech carnage should be significant,” Paul Meeks, a portfolio manager at Independent Solutions Wealth Management, told Yahoo Finance about AI’s looming impact on the wealth management industry.

Meeks, who has been plowing forward in the industry since the late 1980s, noted that smaller shops will be “forced to consolidate” and spend heavily on “game-changing technology that will replace existing firms if they don’t ‘circle the wagons.'”

Digitally-generated image of artificial intelligence robot. (Getty Creative)

Digitally-generated image of artificial intelligence robot. (Getty Creative)

Robo-advising — where sSophisticated AI-powered models prepare investors for wealth-building actions today and retirement planning for tomorrow — are starting to see that game-changing technology.

Vanguard, Schwab (SCHW), Fidelity (FIS), Betterment, and Acorns are among the companies already offering and investing in robo-advising services.

“The strong will get stronger not only because they have the technology vision but because they have the tremendous resources to execute it,” Meeks said. “Schwab and its big peers should have the edge here, but will they deliver?”

PwC sees these investments fueling the rise of the robots: The outfit forecasts robo-advisors will grow to manage a whopping $6 trillion by 2027.

And as more investors embrace this digital investment advice, it’s becoming clear from recent dealmaking activity that money management firms are feeling pressure to bulk up to pool investments in tech and ride out the storm.

There were 341 M&A deals last year in the wealth management industry, up 11% from 2021 and the most in at least a decade, according to investment bank and consulting firm Echelon Partners.

Notable transactions include Royal Bank of Canada’s takeover of wealth management firm Brewin Dolphin, HUB International’s acquisition of WealthPlan Advisors, and Alera Group Wealth Services’ buyout of Johnson Brunetti.

Consolidation has pushed on this year, headlined by JPMorgan’s acquisition of stricken First Republic Bank, First Citizens Bank’s (FCNCA) rescue deal for Silicon Valley Bank, and UBS’s (UBS) emergency takeover of Credit Suisse.

All three of these crisis-moment deals have consolidated wealth management operations as the industry eyes an AI-fueled future, pros say.

Stephen Dover, head of the Franklin Templeton Institute, told Yahoo Finance he sees wealth management becoming reshaped via a “barbell approach,” where large players continue to scale, and smaller, specialized groups will need to be “creative and idiosyncratic” to be successful.

In the end, it will prove to be survival of the fittest — i.e., embrace the robots or get eaten alive.

“Remember what happened when investors threw in the towel and started to invest passively through ETFs?” Meeks said. “It killed many actively managed funds and those who ran and supported them. Those players were forced to consolidate to survive by scaling their expenses.”

Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email

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