Alternatives and AI in focus for advisors at wirehouses in Q3

Merrill Lynch, Morgan Stanley and Wells Fargo, three of the major wirehouses, continue to boost and develop sales of alternative investments, along with artificial intelligence functions, for financial advisors in 2026.

Those three wirehouses have plenty of heft: among them, they employ or work with roughly 40,000 financial advisors, based on historic data. Those advisors on average also are the highest producers of annual revenue in the financial advice industry.

That means a boost in sales of real estate investment trusts or private credit funds, two popular alternative investments, is meaningful to the bottom line: alternative investments are typically more expensive than plain vanilla stock and bond funds, and advisors sell them to clients who are seeking higher yields as well as a way to diversify assets.

It’s clear from the release of third-quarter earnings this week that advisors’ sales of alternative investments at these firms is gaining traction. About a decade ago, alternative investment managers, including Blackstone, began their push into the wirehouse market to work with advisors’ wealthy, retail clients.

Meanwhile, big firms using AI represents a tremendous potential cost savings and boost to profits as new technologies replace back office workers.

“The next wave of alternative investments being offering by wirehouses is centered around private equity and infrastructure,” said a senior executive in the alternative investment industry who spoke privately to InvestmentNews about the matter.

“It’s also about model portfolios that make it easier to allocate the alternative investment without the advisor making a strict allocation,” the executive said. “That’s how the wires are driving the adoption of alts.”

Morgan Stanley on Wednesday morning reported that net flows to alternative investment during the quarter ending September 30 were $15.2 billion, down 8% from the end of September 2025 but up 20% from the end of the second quarter this June.

“While trading activity moderated from the second-quarter, retail engagement across our differentiated product offering remains healthy with alternatives delivering another quarter of record sales,” said Sharon Yeshaya, chief financial officer, during a conference call this morning with analysts.

“Anybody who works in a senior management role can tell you how much AI is fundamentally changing what our teams do,” she said. “Obviously there are controls in place, but the ability to see it with fewer errors and fewer mistakes and fewer checks, is real.”

At Merrill Lynch, client sales of alternative investments increased 19% in the quarter, said Eric Schimpf, president and co-head of Merrill Wealth Management, this morning during a conference call with reporters.

While the Merrill executive did not mention new AI tools, the message was clear that the firm would continue to invest in AI and digital capabilities.

And Wells Fargo is also focusing on its advisors selling more alternative investments to clients, as well as AI-powered work functions.

“We have also increased the number of alternative product offerings in our platform by over 30% this year,” said Charlie Scharf, CEO, on Tuesday during a conference call with analysts.

“In addition, we just launched an AI-powered tool for our financial advisors that streamlines routine work and helps them access the information they need to better serve clients,” Scharf said. “This is the first of several capabilities planned as part of our broader AI strategy in wealth and investment management.”

The wirehouses are reporting increased sales in alternatives even though 2026 has seen financial advisors and the firms they work for flee private credit funds and nontraded business development companies, high-yielding vehicles that invest in loans of private companies.

Sales of illiquid and nontraded BDCs have plummeted, just as investors are banging on their door asking to sell back or redeem a number of shares per quarter that often exceeds a fund’s standard limit of 5% per quarter.