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Rating:Did TD Give T. Rowe a Deal? Not Rated 4.0 Email Routing List Email & Route  Print Print
Friday, August 06, 2010

Did TD Give T. Rowe a Deal?

Reported by Sean Hanna, Editor in Chief

Once a holdout from the supermarkets, T. Rowe Price [see profile] seems to be having a distribution change of heart. The Baltimore-based fund firm has recently joined the no-transaction-fee (NTF) mart run by TD Ameritrade. The move increases the number of NTF platforms that carry T. Rowe's Investor Class funds to three. The funds are already a part of the E*Trade and Pershing NTF programs.

The deal brought 88 T. Rowe Price Investor Class funds over from the transaction fee platform to the no-transaction-fee side of the fence at TD Ameritrade two weeks ago, company officials confirmed.

In the past, T. Rowe Price has been reticent to join the NTF platforms, preferring to have shareholders who purchase shares through the marts to pay the transaction fee thereby keeping shareholders who buy directly from subsidizing the sales.

T. Rowe Price's brand is popular with advisors, which may give it a leg up in negotiations with the mutual fund supermarkets, say industry insiders.

A source familiar with the situation said T. Rowe Price is paying "significantly less than 40 bps" TD Ameritrade has been charging other mutual fund firms since early this year when it raised its fee from 35 bps. Just how much less than 40 bps the fund firm is paying could not be learned.

"The specifics of our relationship with TD is not something we can disclose," T. Rowe spokesman Brian Lewbart told The MFWire.

"Contracts are confidential and unfortunately we cannot disclose this information," according to TD spokeswoman Christina Goethe.

Though the funds are still not officially on the NTF platforms at Charles Schwab and Fidelity, the Schwab case does provide an example of T. Rowe Price's leverage. Two of its funds -- the Advisor Class T. Rowe Price Mid Cap Growth (PAMCX) and T. Rowe Price Small-Cap Value (PASVX) -- can be purchased on Schwab's OneSource supermarket without transaction fees. Those funds likely appear on the platform due to requests from advisors who Schwab considers important to please.

T. Rowe's Lewbart described the mutual fund sponsor's decision to move to the NTF side at TD Ameritrade "as a way to strengthen our relationship with TD and its clients."

For her part, TD's Goethe said the move is "aligned with our goal of bringing the best offering to our clients."

T. Rowe's funds, she said, are "used frequently by clients."

"We are continuously reviewing our relationship with providers," she added.

[Armie Margaret Lee contributed reporting for this story]. 

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