While President Donald Trump’s 60-day regulatory freeze has prompted some financial service leaders to push for a repeal of the Department of Labor’s fiduciary duty rule, T. Rowe Price CEO William J. Stromberg says the Baltimore money manager is on track to implement the rule by the April deadline.
“I would say, a couple of years have been put in by all players in the genre to get ready for it,” Stromberg said Thursday. “We’re on track for an April launch.”
The rule, which will require those who manage retirement funds to act as fiduciaries, will affect how companies such as T. Rowe interact with clients. Implementing the rule has involved training employees on what type of advice can be given and updating documentation requirements.
“We’re on track to deliver all that,” Stromberg said.
T. Rowe is also adding sales people to work with financial intermediaries at partner firms such as Morgan Stanley and UBS to fully implement the rule, Stromberg said.
Besides the impending rule, the firm is also continuing its investments in technology that began last year. T. Rowe invested $148 million in 2016 in technology and facilities with plans to spend $175 million on capital projects in 2017. Two-thirds of that money will go toward technology initiatives.
The firm is expanding its multi-asset solutions offerings by hiring investors to package fixed-income strategies. Outside the U.S., T. Rowe is expanding in Europe and Asia.
“Early indications are that we’re pleased with our progress so far,” said Stromberg.
In the fourth quarter of 2016, the firm spent $27 million on advertising and promotion, the same amount as was spent in the fourth quarter of 2015. The firm expects to see a 10 percent increase in those costs in 2017 to promote its new initiatives, T. Rowe said.
T. Rowe reported net revenues of $1.1 billion in the fourth quarter, net income of $379.8 million and diluted earnings per common share of $1.50. The firm’s assets under management decreased $2.1 billion in the fourth quarter of 2016, but increased $47.7 billion for the full year, ending the year with $810.8 billion.
The firm also received $100 million in insurance recovery before taxes in the fourth quarter, which was a partial offset to the $166.2 million the firm had to pay because of a proxy vote error.
In 2013, the firm mistakenly voted in favor of Dell Inc.’s buyout. T. Rowe announced last summer that it would pay $194 million to reimburse clients affected by the error. Dell paid T. Rowe about $25 million to settle a lawsuit and the Baltimore investment firm agreed that it would not appeal previous court rulings that could’ve resulted in a larger payday for the company.
The year ended on a strong note for the T. Rowe, as the financial industry remains optimistic about the new administration in Washington.
“Economic growth finished 2016 on a strong note and investors grew more optimistic that the incoming administration and Congress will succeed in reducing regulations and taxes,” Stromberg said, citing increases in CEO and consumer confidence.
However, Stromberg cautioned that over the long term the country needs to find a way to pay for Trump’s initiatives, which include more “protectionist measures.”
“Those things need to be worked out,” he said.