T. Rowe Price’s (TROW) recent ban on trading for 401k participants following a newsletter aimed at improving returns — as reported this morning by the AP, “T. Rowe bans some American Airlines employees from fund trading” — is highly unusual for a company that I thought understood the need for outside, independent investment advice.
That the fund company’s administrator, JPMorgan (JPM), sells its own investment-advice services smacks of a more heavy-handed motive, though they deny it.
Roughly 2,000 subscribers out of 80,000-plus in the American Airlines 401k plan is less than 3% of participants in the plan. No figures are given as to the size of the trades that T. Rowe is upset about, but given the size of the T. Rowe Price funds in the plan, I find it hard to believe that the trading activity is disruptive. And, assuming T. Rowe Price subscribed to the newsletter, at a reported cost of $89.95 annually, it would have a front-row seat on trading recommendations and could prepare accordingly.
|T. Rowe Price Tax-Free High Yield Fund||PRFHX||$2.3|
|T. Rowe Price Science & Technology Fund||PRSCX||$2.9|
|T. Rowe Price Mid-Cap Growth Fund||RPMGX||$21.4|
|T. Rowe Price New Horizons Fund||PRNHX||$13.2|
I don’t know anything about EZTracker’s track record as an investment adviser, but if its recommendations have improved returns for subscribers, then T. Rowe Price could be setting itself up for a nasty fight in court, or at a minimum in the popular press. I can only imagine the headlines:
- “The Newsletter T. Rowe Price Doesn’t Want You To Read”
- “The T. Rowe Price Newsletter JPMorgan Doesn’t Want You To See”
- “Banned In Baltimore — What T. Rowe Doesn’t Want You To Read”
It amounts to T. Rowe Price taking a chainsaw to an ingrown toenail, and the results could be bloody.
Editor Dan Wiener and Research Director Jeffrey DeMaso publish The Independent Adviser for Vanguard Investors, a monthly newsletter that keeps abreast of recent developments at Vanguard, and the annual FFSA Independent Guide to the Vanguard Funds.