Private equity investors stall as AI deals grow

The impact that Artificial Intelligence (AI) could have on the business models of wealth managers is holding up fresh private equity (PE) investment into the sector. Potential wealth deals have failed to secure approvals from private equity investment committees, which are increasingly running tougher screens on how protected wealth firms are from AI threats, according to corporate finance advisors.
“There’s definitely a bit of apprehension,” said one dealer. “There’s a blood bath in certain sectors and it happened very, very quickly. People just want to feel like they are not going to get totally blindsided.”
Renewed anxiety comes as sale processes for once white-hot software businesses have been put on pause, with investors scrutinising valuations following a technology stocks sell-off in February. Shares in top wealth managers, including St. James’s Place, Quilter and Rathbones, took a beating when US fintech Altruist unveiled a new tax planning tool during the same month.
Rapid progress made by AI has made it harder for investors to reliably predict a company’s growth prospects, with some fearing that the technology could render human advisors obsolete. AI also poses a risk to businesses with legacy operating systems vulnerable to cyber-attacks.
Anthropic has restricted use of its mythos AI model following the potential threat it poses to companies’ cybersecurity, due to its ability to spot weaknesses in IT systems.
“If you have got a three-to five-year hold, you have got to sell it to somebody who also believes in a three-to five-year hold,” said one private equity lawyer. “Can you, hand on heart, say that for the next 10 years the business model is not going to be undermined?”
Managing director, Fred Hansson at M&A advisory firm MarshBerry UK, said the visibility on holding periods has been “disrupted” with the rapid growth of A1, as investors perceive higher risks.
“The average (leveraged buyout fund) out there is more nervous now about what impact (A1) will have over the next decade that could potentially impact quite severely their earnings, because they could have an impact on fees,” he said. “If the market perceives (wealth management) services being delivered by machines, they will probably depress the fee rates that people can change.”
Nordic Capital, which backs advice firm Ascot Lloyd, said last month that it now looks at a wealth manager’s “moat” against AI competition when assessing potential investment opportunities.
“We are probably at the point now where business models are not being truly disrupted just yet, but I don’t think it is going to be very long until they are,” said co-head of financial services at the private equity firm, Emil Anderson.
Growing anxiety could add to the downward trend in the UK wealth management M&A, which has already seen deals reduce from 193 in 2023 to 157 in 2025, data compiled by wealth consultancy Solve Partners shows.
However, investor concerns have not yet meaningfully impacted deal flow or valuations, bankers and lawyers said, with buyers bearish on the sector still in the minority.
With the average wealth management client aged around 60, MarshBerry UK’s Hansson noted that this cohort of investors values personal contact. Personal relationships are also important for a chunk of new business flow, particularly among advisors.
“At the end of the day, these are regulated businesses, and, as such, there will have to be individuals responsible for it,” he added.
Proskauer’s private equity M&A partner Andrew Wingfield said AI is not “replacing” wealth management, but rather “stripping out” a lot of the “lower-value work” around it.
“You can already use fairly basic AI tools to put together a decent portfolio, which tells you where the pressure is going to sit,” he added.