T. Rowe Price of Baltimore, Md. recently filed with the SEC to offer a new class of shares in an effort to improve distribution of ten funds to variable annuities, defined contribution plans and wrap programs, according to a company spokesperson. The new shares will include a 12b-1 fee of 25 basis points.
"You are seeing more brokerage houses switching to a fee-based relationship with individuals," said Steven Norwitz, the company spokesperson. " We think there is a good opportunity in distributing funds through financial intermediaries."
But T. Rowe Price is getting into the game late, according to Burton Greenwald, president of Burton J. Greenwald of Philadelphia.
"I think T. Rowe is coming along the scene playing catch-up ball," he said. "Increasingly, the advisers are wrapping their own fees into these plans so how much attention and marketing infrastructure [T.Rowe Price] will dedicate to this and how much attention they place on building on this is what's interesting. Will they [T. Rowe Price] wholesale to them [brokers]?"
Greenwald said he suspects T. Rowe Price will.
"Vanguard is the model that T. Rowe Price replicates and they tend to do similar things," Greenwald said. "Vanguard recognized the opportunity available [in fee-based intermediaries] and as of late they have stepped up their efforts. They have increasingly built up their support and services and they have gotten a much greater degree of distribution in this channel."
However, T. Rowe Price does not have immediate plans to add marketing staff to promote the new share class and Norwitz said the new share class is designed to build on established channels in the fee-based advice business.
"We've actually been quite successful in those markets," he said. "We've been doing business in these markets, but we feel we could do more."
T. Rowe Price has filed for the new share class for just one fund, but plans to file for nine additional funds. The company wants to make the new shares available for the ten funds by March 31, according to Norwitz. The funds that will offer the new share class are; Blue Chip Growth, High Yield, International Stock, International Bond, Mid-Cap Growth, Science & Technology, Small-Cap Stock, Value and Small-Cap Value.