Meta’s newest consumer artificial intelligence offering is sending shockwaves through the financial markets, intensifying the long-standing rivalry between brokerage giants Charles Schwab and Robinhood.
Schwab shares declined 6% on Tuesday, hitting their lowest level since early July, and have fallen over 8% since Meta announced Muse. Conversely, Robinhood’s stock rose, reaching a new year-to-date high. This divergence comes after Robinhood launched AI agents in May capable of trading and managing portfolios on behalf of its users.
Broader wealth management stocks also felt the pressure. LPL Financial Holdings dropped 7%, Raymond James Financial fell 3.5%, and Interactive Brokers slipped 1%. The State Street Financial Select Sector SPDR ETF (XLF) declined 2% and is now 6% below its earlier monthly highs, a slide potentially exacerbated by rising interest rates.
This is not the first instance of AI disrupting the sector. In February, these same stocks declined when tech platform Altruist announced that its “Hazel” platform could generate tax-planning strategies for individuals and advisors. While Schwab recovered in the subsequent months, LPL has not.
“Schwab is an interesting entity,” said Jimmy Lee, founder and CEO of The Wealth Consulting Group, a Las Vegas-based advisor overseeing $8 billion in assets. “From our perspective as advisors, they remain relatively neutral while figuring out how to protect their market share. I don’t believe Meta poses a significant threat from a custodian perspective, as it differs from Altruist’s platform. However, significant disruption will undoubtedly occur among financial middlemen who charge fees for billing, reporting, and trading.”
Although Meta’s AI assistant states it will not execute trades or provide financial advice, its listed capabilities—such as tracking investments, monitoring progress toward goals, and analyzing how portfolio holdings interact—suggest it could mimic the functions of a financial advisor or broker.
Last week, Schwab Advisor Services announced a partnership with Anthropic to develop “Claude for Financial Advisors.” Additionally, the company launched an AI tool in May featuring tailored analysis from its research division. Representatives for Schwab did not respond to a request for comment, and Robinhood declined to participate in the story.
Robinhood’s Tuesday rebound places its stock up 10% for the year, recovering from a drop of over 40% in the first three months. This retail-focused brokerage, which also provides digital banking and advisory services, has surged 1,200% over the past three years. In comparison, Schwab stock is up 83%, and the XLF has risen 65%.
“AI and tokenization threaten to dismantle the frictions that legacy financial intermediaries have historically monetized,” wrote Piper Sandler analyst Patrick Moley in an April note. “Schwab’s reliance on low-yielding sweep cash puts it squarely in the crosshairs.”
Bets Increase Against Schwab
Options-market flows from Tuesday suggest the threat to Schwab may be enduring.
Options volume in Schwab exceeded its average by more than five times, with nearly twice as many puts purchased compared to calls, according to Cboe LiveVol data. The most popular contract was the 90-strike put expiring mid-January, representing a wager that the stock will drop another 13% over the next three months. However, there was a significant counter-trade sale of the Oct. 16 95-strike puts.
Charles Schwab corp, YTD
Perhaps most notably, options sentiment for Robinhood moved in the opposite direction. Traders purchased twice as many calls as puts, with over 80% of the $95 million in traded premium tied to calls. The most heavily traded contract was the 125-strike call expiring Friday.
“Gen Z and millennials gravitate towards platforms like Robinhood and Public, which is why those platforms ship products so quickly,” said Gav Blaxberg, founder of Wolf Financial, a popular online trader community. “Robinhood has built enough trust rebuilding its brand since GameStop, and they are allowing agents to trade literally everything.”