T. Rowe Price Review 2020: Is It the Right Brokerage for You?

Does the storied Wall Street firm earn its reputation?

Clearly, when it comes to the low- to no-cost revolution sweeping across the brokerage industry, T. Rowe Price did not get the memo. The company has a long-standing reputation in the financial community that tracks back to its founding in 1937, but unfortunately its current $19.95 commission fee for stocks is better suited for, well, 1937. This is not to say T. Rowe Price is a poor choice for investors — many, in fact, could find the brokerage’s services and offerings superior to that of its competitors. In particular, access to trading T. Rowe Price’s highly rated mutual funds without commissions might very well be all some investors need.

But, with high account minimums, annual fees and enormous per-trade commissions, active investors are likely going to shell out more by trading with T. Rowe Price. As such, it’s important to understand what the firm offers and how that fits into your investing behavior. Because while this storied Wall Street firm has plenty to offer a certain class of investors, its fee structure makes it essentially a non-starter for many others.

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Here’s a look at what this T. Rowe Price Review covers:

Who Is T. Rowe Price Best For?

If you have a substantial retirement fund that needs a home and you’re primarily focused on investing through mutual funds and ETFs, the downsides of T. Rowe Price are mostly mitigated and there’s a range of clear benefits. T. Rowe Price has a number of additional client services they offer to accounts with $250,000 worth of assets or more, including halving their per-trade commission to $9.95 and waiving the account service and brokerage maintenance fees.

What’s more, you can avoid steep commissions by sticking to those highly rated mutual funds the firm is known for or one of the approximately 300 commission-free ETFs. That can be especially important if you’re closer to retirement and already have $250,000 socked away. Likewise, even if you can’t qualify for T. Rowe Price’s Select Client Services program, you can avoid those hefty fees by staying away from stock picking and sticking to ETFs and low-cost mutual funds — an investment strategy that’s most likely in your best interests anyway.

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Who May Want To Skip T. Rowe Price?

It’s hard not to notice just how much more expensive T. Rowe Price is in many cases, particularly if you’re just starting out and aren’t anywhere near that $250,000 in assets. You can also get the $9.95 commission rate if you made 30 trades or more last year, but $9.95 is also an indefensible rate for a stock trading fee in this day and age. Add to that the $2,500 minimum you’ll need to open an account and it’s hard to see why any novice investor would choose T. Rowe Price over any of the low-cost alternatives. Even if you’re really dead set on T. Rowe Price’s mutual funds, you might still be able to trade those without commissions at several other brokerages.

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Types of Accounts Available

T. Rowe Price offers all of the standard tax-advantaged retirement accounts and individual brokerage accounts you might expect from an investment company.

Taxable Brokerage Account

A taxable brokerage account is the standard brokerage offering for an individual. It allows you to invest money, though it notably lacks the tax advantages of retirement accounts like an IRA. Setting up a brokerage account is relatively simple and can be done either online or by phone. You will need at least $2,500 to open an account, but once you’ve funded it you can use it for trading stocks, options, bonds, mutual funds, ETFs and several other types of investments.

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That said, while you can make withdrawals from your taxable brokerage account on your own schedule, any and all profits are subject to capital gains taxes. In particular, investments you own for less than a year will get taxed at the higher, short-term capital gains rate.

Tax-Advantaged Retirement Accounts

For the vast majority of investors, though, the tax advantages provided by a traditional or Roth IRA are too good to pass up. And T. Rowe Price offers a full slate of accounts in that regard, meaning that you have every option to open a taxable brokerage account alongside a traditional and Roth IRA, as long as you have the money to meet the account minimums for each.

While T. Rowe Price still has account minimums for its tax-advantaged retirement accounts, they’re just $1,000 instead of the $2,500 threshold for a taxable brokerage account.

Learn: Traditional IRA vs. Roth IRA: What’s the Difference?

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How To Invest With T. Rowe Price

Setting up an account with T. Rowe Price is simple.

  • Ensure you have the appropriate funds available. You’ll need $2,500 to open a taxable brokerage account or $1,000 for a tax-advantaged retirement account.
  • Visit T. Rowe Price’s website for personal investors and follow the simple steps to open your account.
  • If you have questions, you can call 1-800-537-1936 to speak with a customer service representative.

Resources and Technology

Your T. Rowe Price brokerage account comes with access to a number of tools that should help you better understand your investments and allow you to make smarter decisions:

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  • There’s a tool that lets you compare mutual funds, providing you a chance to see which fund best serves your needs. The tool provides a summary of each mutual fund’s overall performance and also compares Morningstar ratings and risk potential, among many other metrics.
  • There are several calculators specifically relevant to retirement investors:
    • FuturePath, a retirement calculator, helps you stay on track with your saving and investing based on your planned retirement age and income.
    • A retirement income calculator helps you understand how your decisions now might affect your lifestyle and retirement later.
    • A required minimum distribution tool helps you better plan around when you’ll have to take taxable income from your 401(k) or IRA.
  • T. Rowe Price’s Investment Allocation Tool provides advice on asset allocation and offers mutual fund recommendations.
  • You can also access and manage your account on the go by downloading the T. Rowe Price mobile app, available on Android and iPhone.

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Fees

When it comes to its fee structure, T. Rowe Price lags well behind the competition. Even before Fidelity and Charles Schwab bit the bullet and accepted that per-trade commissions were a thing of the past, most brokerages were charging $5 to $7 per trade. As such, that makes the reduced $9.95 rate for select clients exorbitant, let alone the $19.95 you’ll pay if you haven’t cleared 30 trades in the previous year or have $250,000 in your account.

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The one counter-argument would be that commission-free brokerages operate by selling order flow — a practice that can ultimately increase the price you pay for a purchased stock. However, there are two reasons such a practice doesn’t help T. Rowe Price. The first is that — given you’re likely not paying more than an additional penny a share — you would need to be purchasing in blocks of 1,995 shares or more before you would pay less with the up-front commission. The second reason, which renders the first moot, is that T. Rowe Price also sells its order flow in spite of the fact that they’re already charging such a high commission. As such, T. Rowe Price is really soaking consumers coming and going, charging one of the highest commissions in the industry while simultaneously profiting from the sale of order flow.

However, it is once again worth noting that there’s a variety of ETFs and mutual funds you can trade through T. Rowe Price commission-free. But, even if you are a passive investor who sticks to these products, you’ll get hit with a $30 annual account fee if you don’t make at least five commission trades in the prior year or qualify for Select Client Services.

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Summary

In terms of what really makes T. Rowe Price notable as a financial company, the quality of its mutual funds is the major selling point. However, when it comes to its brokerage services, it’s clearly offering a product that only appeals to a niche audience. If you’re intent on sticking to T. Rowe Price mutual funds and commission-free ETFs, you might decide that the annual account fee is worth the price. In particular, if you have a large enough deposit to qualify for its Select Client Services program and avoid trades with commissions, the fees could remain in line with those of other brokerages.

However, for most other customers, T. Rowe Price’s costs are just too high to justify giving them serious consideration. At about $20 a trade, T. Rowe Price appears to be lodged in a past era where that sort of commission was justifiable. In this day and age, when other big-name brokers have embraced the zero-commission model, T. Rowe Price’s fees are simply too high. And, in spite of this, they’re still selling order flow just like the other brokerages that have those $0 commissions.

All told, if you’re already well along the way toward your retirement saving and want a chance at trading T. Rowe Price mutual funds, you might have a great experience with them. But, for most other investors — and especially someone just getting started with investing — T. Rowe Price’s, well, prices are just too high.

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About the Author

Joel Anderson is a business and finance writer with over a decade of experience writing about the wide world of finance. Based in Los Angeles, he specializes in writing about the financial markets, stocks, macroeconomic concepts and focuses on helping make complex financial concepts digestible for the retail investor.