T. Rowe Price is gaining new market share as banks and other intermediaries move to a fees-and-advice model, and as the mutual fund company makes a concentrated push overseas to rebuild its assets under management.
"The growth of advice has been awesome, and you couple that with the Boomer retirement wave," said George Riedel, head of intermediary distribution within T. Rowe's third-party distribution division. "I have to say, it's been a boon."
T. Rowe executives would not disclose asset figures for particular distribution channels. But its assets under management have been on the rise following the market crash.
By the end of 2008, assets under management had fallen to $276 billion from $400 billion a year earlier, despite clients largely leaving their money with the firm. Assets then grew 42% in 2009, to $391.3 billion, and at March 31, they stood at $419 billion.
And T. Rowe is reaching out in a new way to fee-based advisers. About nine months ago, it created a group of advisory services consultants, who focus exclusively on such advisers.
T. Rowe, which is based in Baltimore, has four externally focused advisory services consultants, and five who are focused internally, Riedel said. As a no-load group, the mutual fund company has never used the wholesaler distribution model common to firms that offer loaded shares.
It says the advisory services consultants are not wholesalers because they are not compensated directly based on sales.
"As financial advisers transfer from commissions to fee-based practices, they don't have time to meet anymore with legacy wholesalers," said Riedel, explaining the formation of the new group.
T. Rowe's consultants' outreach to distributors is meant to be "proactive but meaningful to our partners," Riedel said. External wholesalers travel to meet with advisers, and their internal counterparts use e-mail, the Web and the phone.
T. Rowe has not been absent entirely from brokerages. Its products have been in the mix for nearly two decades because it's a sub-adviser for many variable annuities sold by brokers.
Meanwhile, T. Rowe is on the move abroad. It is reportedly negotiating to buy part of China Asset Management, the largest asset management firm in that country.
That comes on the heels of two other recent deals early this year: A $142 million purchase of a minority interest in the Indian firm UTI Asset Management, and a distribution partnership with the Taiwanese financial consultant Marbo Securities.
It's not surprising that T. Rowe and other mutual fund companies would be looking to expand their overseas business, according to Denise Valentine, senior analyst at Aite Group.
A recent survey by the research firm found that asset managers' top priorities are retaining clients and building assets under management. "Big-firm infrastructures are built on economies of scale, which means they need assets to keep that machine moving," Valentine said.
Asia's potential for fund firms is evidenced by the fact that so many vendors are setting up operations there in anticipation of asset management taking off, she said. "This is typically what happens before a market takes off — law firms, fund administrators and other securities servicing firms start building up staff," Valentine said.
When it comes to overseas distribution, T. Rowe is up against a number of more established players. But it is steadily making up ground. T. Rowe started its current international distribution effort a decade ago, and it already accounts for 12% of the firm's assets under management.
T. Rowe has been overseas more than 10 years. In 1979 it entered a joint venture with the U.K. asset management firm Robert Fleming. The move was intended to provide T. Rowe clients in the U.S. with greater access to non-U.S. investments. The agreement precluded T. Rowe from distributing its products beyond its own shores.
In 2000, T. Rowe bought out the half of the joint venture that it did not already own, for $780 million. T. Rowe has started its overseas distribution with institutional relationships, including some intermediary business, rather than direct retail sales.
Riedel has an eye, meanwhile, on a growing challenge in the intermediary market: exchange-traded funds and passive investing in general have become a significant factor over the past five to 10 years, he said.
"I don't think [passive management] displaces active management," Riedel said. "But I do think that's a headwind."