When it comes to high-quality, low-cost mutual funds that deliver superior long-term performance, Vanguard may be the crowd favorite, but T. Rowe Price deserves a round of equally enthusiastic applause. The broker is great for investors who want to build a fund-only — and T. Rowe funds, specifically — portfolio. That’s why it’s one of our top recommendations for best brokers for mutual funds.
It’s a different story for stock investors, though, where on the brokerage side trading costs and account fees are less appealing compared to other brokers that cater to the stock jock crowd. (For guidance see NerdWallet’s roundup of best online brokers for stock trading.)
T. Rowe Price is best for:
- Long-term mutual fund investors.
- Direct access to T. Rowe Price funds.
- Free retirement planning tools.
T. Rowe Price at a glance
|Account minimum||$1,000 for IRAs; $2,500 for brokerage account.|
|Stock trading costs||$19.95; $9.95 for active traders and Select Client Services members.|
|Options trades||$19.95 + $1 per contract; $9.95 + $1 per contract for qualifying accounts.|
|Account fees (annual, transfer, closing, inactivity)||$30 annual fee on brokerage, waived if certain conditions are met; $50 account transfer or termination fee.|
|Mutual funds||2,800 no-transaction-fee mutual funds.|
|Trading platform||Basic research, analysis and screening tools.|
|Mobile app||Standard mobile app to view accounts, investment returns and perform mutual fund and workplace retirement plan transactions. Transactions not available for brokerage accounts.|
|Research and data||Free data with basic research and charting capabilities, market news, analyst upgrades and downgrades; quotes are delayed.|
|Customer support/branches||Email; Phone support Monday-Friday 8 a.m-8 p.m. ET.
Technical phone support 7 a.m.-10 p.m. ET on weekdays, 9 a.m.-5 p.m. ET on weekends.
Six local branches.
Where T. Rowe Price shines
High-quality, low-cost mutual funds: Price and performance go hand in hand. More specifically, a fund’s cost — the expense ratio — is tied inextricably to the returns it delivers to investors. On both these measures, T. Rowe Price funds shine, even — and most notably — in its actively managed mutual fund lineup.
Based on fiscal year-end data as of September 30, 2017, 168 of 213 T. Rowe funds that are more than 6 months old were found to have expense ratios below the category average of their peers, according to Lipper Inc. And as of Nov. 30, 2017, 72 of the company’s 118 rated funds have four- or five-star overall ratings from fund tracker Morningstar.
Robust selection of no-load and no-transaction-fee mutual funds: T. Rowe touts its lineup of 130 no-load mutual funds, which is in keeping with founder Thomas Rowe Price Jr.’s position that fees should be based on the assets under management, not charged as a commission — that is, an upfront or back-end sales load.
Short pause for a teaching moment: Investors should never pay a sales load for any mutual fund unless its investment objective is so specialized that you can’t get the coverage with a no-load fund or ETF. Research consistently shows that the majority of mutual funds that charge a sales load deliver no additional value to shareholders, and, in fact, the compounding cost of those fees ends up harming investors’ returns over the long term.
Another attractive feature is the firm’s selection of no-transaction-fee (commission-free) mutual funds, which totals 2,800 when you include the non-T. Rowe funds available. (For extra credit here’s a rundown of investment fees to watch out for and how they affect returns.)
Direct investment access to T. Rowe’s fund lineup: A bonus for T. Rowe customers: Buying the company’s own funds right from the source, instead of through another brokerage, means you avoid paying a transaction fee and any markup charged by a middleman.
Note on account setup for new customers: T. Rowe Price funds are sold directly, not through the company’s brokerage, and held in a separate retail account. If you want to buy non-T. Rowe funds and any stocks or ETFs through the company, you’ll need to set up a T. Rowe brokerage account.
Fund screening and retirement planning tools: We gave a nod to T. Rowe Price in our roundup of best brokers for mutual funds because of its lineup of research tools for mutual fund investors. Morningstar’s Portfolio Manager allows customers to create a portfolio or watch list to monitor and dig deep into a fund’s performance and underlying holdings. T. Rowe’s Mutual Fund Research Tool makes it easy to research funds by family, ratings/rankings, management and objective and prices/yields.
Particularly noteworthy are a few retirement tools that can help you figure out retirement income needs and test the overall health of your retirement savings. They’re available to the public for free, though you must register as a guest on the site, which will save your inputs:
- The retirement income calculator projects your monthly spending money in retirement based on your current savings and other inputs.
- FuturePath is a sophisticated but easy-to-use retirement planning simulator that offers an impressive level of customization. T. Rowe’s standout tool starts with all the standard inputs: salary, current retirement savings and contributions, desired retirement age. It then uses Monte Carlo analysis, running 1,000 market performance simulations, to calculate the probability that you’ll achieve your financial goals. What makes FuturePath better than similar calculators is that it allows users to add important plan-changing events such as future income streams, like a one-time windfall from selling a business or home; ongoing income from employment or a rental; and future expenses such as major purchases, health care costs and college tuition.
Where T. Rowe Price falls short
Stock and ETF trading costs: The company’s $19.95 stock and ETF trading commissions are at the high end of the spectrum, even when compared with other fund-centric companies like Fidelity and Charles Schwab, that charge just $4.95 per trade.
Investors can cut the commission in half to $9.95 a trade by making more than 30 trades a year or being enrolled in T. Rowe Price Select Client Services (which requires having at least $250,000 in assets in T. Rowe accounts.
Mutual fund commissions: Compared with the competition, T. Rowe’s $35 fund transaction cost, for non-T. Rowe transaction-fee funds, falls in the middle. At the high end, Charles Schwab, TD Ameritrade and Fidelity charge from $49.95 to $76. At the low end is Ally Invest, which charges a $9.95 commission for no-load funds.
Minimum initial investment requirements: There’s no reason to delay investing because you can’t meet a firm’s minimum initial investment requirement. If T. Rowe’s $1,000 initial deposit to open an IRA (and $100 minimum to add to an existing account) or $2,500 to open a nonretirement brokerage account is too big a hurdle, there are other brand-name options with a lower bar.
Account fees: Here again, T. Rowe’s terms and conditions are a turnoff. The company charges a $30 annual fee on brokerage accounts and a $20 annual service fee on T. Rowe Price mutual fund accounts with balances below $10,000. You can avoid the mutual fund account fee by signing up for electronic delivery of statements, confirmations, prospectuses and shareholder reports, keeping $50,000 in combined account balances with the company or if you qualify for Select Client Services ($250,000 minimum).
To avoid the brokerage fee, you must have made five or more commission-generating trades in the previous year, hold $50,000 or more in T. Rowe mutual funds or, for households, have at least $100,000 in qualifying assets with the company.
Is T. Rowe Price right for you?
T. Rowe Price’s mutual funds are its bread and butter, and that’s where the company shines. If you’re primarily a mutual fund investor, the company’s array of no-load, low-expense-ratio funds can deliver a “whole portfolio” solution at a low cost — especially if you meet the terms to waive annual account fees, which is as easy as signing up for electronic paperwork delivery.
What T. Rowe doesn’t offer is the free-range environment you can find at brokerage firms that cater to investors also interested in stocks, options and ETFs. For that you want a broker that offers lower commission costs, account fees and minimums and, depending on your portfolio-building strategy, a lineup of no-commission ETFs.
Updated Jan. 19, 2018