The wealth management industry is facing a reckoning. After years of rising valuations and robust returns, shares of major broker-dealers and financial advisory firms have stumbled in the first half of 2026, dragged down by mounting anxiety that low-cost artificial intelligence tools could eventually displace human advisors and compress the sector's lucrative revenue streams.
LPL Financial Holdings Inc., the industry bellwether with more than 30,000 affiliated advisors, saw its stock close the first six months at $281.68, a decline of 21.1% from year-end 2025. The drop marks a sharp reversal from July 30, 2025, when LPL shares hit an all-time high of $397.54. That represents an 11-month slide of 29.1%.
The broader brokerage sector also struggled. The NYSE ARCA Securities Broker/Dealer index finished June at 1,089.56, up just 4.6% over the first half—well below the S&P 500's 9.1% gain. Morgan Stanley shares fell 16.7% to $209.04, while Charles Schwab Corp. declined 7.65% to $92.27. Even Robinhood Markets Inc., which is building a fledgling advisor referral network, saw its stock drop 11.3% to $100.28.
Industry executives point to a shift in private-market sentiment. A senior industry source told InvestmentNews that privately owned, private-equity-backed broker-dealers, which had seen price-to-earnings multiples rise into the high teens, are now being valued in the mid-teens. “The rise in multiples has subsided,” the executive said. “Firms are going to have to figure out how to grow their way to higher valuations.”
The fear is that AI could erode the profit margins that have made wealth management a magnet for private equity investors over the past two decades. While corporate tax cuts under the Trump administration boosted earnings and valuations in prior years, the current market is dominated by uncertainty about technology's role in advice delivery.
In a sign of the shifting landscape, Oppenheimer this week downgraded major U.S. investment banks including Goldman Sachs and Morgan Stanley, according to Reuters. The firm recommended selling large-cap investment banks and buying alternative asset managers, which have been caught in a sharp selloff that many analysts view as overdone amid concerns about private-credit exposure. For context, a recent Coller survey found that LP appetite for private credit has dropped to 29% as zombie fund fears rise.
The valuation compression is not limited to public markets. Private-equity-backed advisory firms are also feeling the pinch, with deal multiples flattening after years of expansion. The industry now faces a critical question: can organic growth and operational efficiencies offset the margin pressure from AI-driven alternatives?
Meanwhile, the regulatory environment adds another layer of complexity. The Department of Labor's proposed 401(k) alternative investment rule has sparked litigation fears among fiduciaries, potentially chilling the use of private assets in retirement plans. And FINRA data shows a record 639,723 brokers in 2025, with dual registration surpassing 50%, suggesting that the advisor workforce is adapting even as technology threatens to disrupt traditional models.
For now, the market is signaling that the era of easy multiple expansion in wealth management may be over. Firms that can demonstrate sustainable growth—whether through advisor productivity, technology integration, or new revenue streams—will likely be rewarded, while those that rely on tailwinds from rising valuations may face continued headwinds.
