Shares of financial services firms plunged Tuesday following the launch of a new AI-powered tax planning tool that promises to deliver personalized tax strategies in minutes. LPL Financial dropped nearly 11%, while Charles Schwab and Raymond James Financial both fell more than 9%, and Morgan Stanley declined by 4%. The market reaction was triggered by Altruist’s introduction of Hazel, an AI platform designed to help financial advisors quickly analyze complex client data. Hazel can process 1040 tax forms, paystubs, account statements, meeting notes, emails, and data from custodial and CRM systems, applying advanced tax logic to generate tailored tax plans. The technology aims to automate tasks that traditionally require hours of manual work by human advisors. Investors are now expressing concern that AI could disrupt the financial advisory industry by reducing the need for costly human expertise. Fears are mounting that AI tools could erode profit margins for established firms or even displace some of their most lucrative services, such as tax planning and portfolio management. This follows a similar pattern seen earlier this year, when software stocks took a hit after Anthropic’s latest AI model demonstrated the ability to perform legal work and software development tasks previously outsourced to expensive licensed tools. That shift led to steep declines in the iShares Expanded Tech-Software ETF (IGV), which is down 19% year-to-date, with companies like ServiceNow and LegalZoom suffering significant losses. The iShares U.S. Broker-Dealers and Securities ETF also fell 4% on Tuesday, reflecting broader anxiety about AI’s potential to reshape the financial services landscape. As AI continues to advance, the industry is facing a pivotal moment—balancing innovation with the risk of disruption to long-standing business models.