Will T. Rowe Price’s Growth Plan Counterbalance Increasing Costs?

Rising Costs Shape T. Rowe Price Group’s Outlook

Increasing expenses are becoming a significant influence on the future prospects of T. Rowe Price Group (TROW). The company remains resilient, supported by its reputable brand, broad asset base, and ongoing strategic initiatives. However, the impact of higher costs is starting to affect its profitability. Investors are now focused on whether T. Rowe Price’s long-term growth strategies can counterbalance these mounting expenses.

Revenue and Expense Trends

Between 2020 and 2025, T. Rowe Price achieved consistent revenue gains, posting a compound annual growth rate (CAGR) of 5.6% in net revenues. This was primarily driven by increased investment advisory fees and the expansion of its investment services. Despite this, operating expenses grew at a much faster rate, with a five-year CAGR of 13.9%. The surge in costs is largely attributed to greater investments in technology, higher employee compensation, and expanded distribution efforts. While these expenditures are intended to enhance the company’s competitive edge, they are also putting pressure on short-term results.

Technology upgrades have become a major contributor to rising costs, as T. Rowe Price invests in digital platforms, analytics, and client service tools to keep pace with industry changes. Additionally, the need to attract and retain talented portfolio managers, analysts, and technology professionals is pushing compensation expenses higher.

Strategic Growth Initiatives

Despite these headwinds, T. Rowe Price remains committed to pursuing long-term expansion. The company has broadened its capabilities through acquisitions, partnerships, and new product launches. A key move was the acquisition of Oak Hill Advisors in February 2025, strengthening T. Rowe Price’s presence in alternative investments such as private credit—a sector drawing increased interest from institutional and high-net-worth clients. The firm has also entered into collaborations to diversify its investment offerings and extend its distribution network, while enhancing retirement solutions with advanced planning tools and fintech innovations.

Industry Shifts and Future Outlook

The asset management sector is undergoing significant transformation, with more investors favoring passive strategies like ETFs and index funds. In this evolving landscape, T. Rowe Price’s investments in technology, partnerships, and product development could be pivotal in attracting new assets and expanding its client base. If these efforts succeed, they may help the company manage current cost pressures and support sustainable growth.

Expense Challenges Among TROW’s Peers

Other major players in the industry, such as Franklin Resources (BEN) and First Horizon (FHN), are also experiencing rising expenses.

Franklin Resources reported a three-year CAGR of 7.9% in expenses through fiscal 2025, with this trend continuing into early 2026. While acquisitions, organic growth, and steady asset growth are expected to support Franklin’s long-term performance, ongoing technology investments, fundraising costs, and integration expenses from specialist managers are likely to weigh on near-term results.

Similarly, First Horizon’s non-interest expenses grew at a CAGR of 8.9% from 2019 to 2025. Although the company’s diverse product lineup and strategic acquisitions are positive for its long-term outlook, increased spending on technology and personnel is expected to keep costs elevated in the short term.

TROW’s Stock Performance and Analyst Rating

Over the past six months, T. Rowe Price’s share price has dropped by 15.2%, while the broader industry declined by 19.6%.

Source: Zacks Investment Research

Currently, TROW holds a Zacks Rank #3 (Hold).

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