The Bottom Line: T. Rowe makes a fine choice for investors who want to build a fund-only portfolio. But stock investors will be turned off by the firm's trading costs and account fees on the brokerage side.
T. Rowe Price
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Pros & Cons
Low-fee mutual funds.
Fund screening tools.
Free retirement investing tools.
High account minimums.
Compare to Similar Brokers
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. Add in the firm's sophisticated retirement planning calculators and T. Rowe makes a fine choice for investors out to build a fund-only portfolio.
It's a completely different story for stock investors. Trading costs and account fees on the brokerage side make T. Rowe a much less appealing choice compared to other brokers that cater to the stock jock crowd. To be fair, this is not the firm's target audience. Therefore, equities-focused investors should point their browsers elsewhere (starting with NerdWallet's roundup of best online brokers for stock trading) to find a more appropriate provider.
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
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, 2018, 175 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 September. 31, 2018, 76 of the company’s 134 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 more than 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 exchange-traded fund (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 mutual funds, which totals 2,800 when you include the non-T. Rowe funds available, and its line-up of commission-free ETFs (174 as of this writing).
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 any transaction fee (no commissions!) 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: This is where T. Rowe Price really shines 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).
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 for brokerage clients could be a turnoff. The company charges a $30 annual fee on brokerage accounts to customers who do not qualify for Select Client Services. Otherwise, to avoid the fee, you must have made five or more commission-generating trades in the previous year or hold $50,000 or more in T. Rowe mutual funds.
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.
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 fees and minimums on these measures.