T. Rowe Price’s Operating Expenses Increased: Here’s Why



Operating expenses

Between 2016 and 2017, T. Rowe Price’s (TROW) operating expenses rose 7.8% to $2.7 billion from $2.5 billion in 2016, and its compensation and related costs rose 11.4% to $1.7 billion from $1.5 billion. The increase was mainly due to higher salaries and related benefits and hiring employees. The company incurred compensation and related costs of $446.3 million in 4Q17, compared with $381.6 million in 4Q16.

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Advertising and promotion expenses

T. Rowe Price’s advertising and promotion costs rose 15.1% to $92 million in 2017 from $79.9 million in 2016 due to the company’s efforts to increase its reach and market momentum, and investor sentiment. Its operating expenses rose to $491.8 million in 2017 from $401.5 million in 2016.

Whereas T. Rowe Price has a last-12-month return on invested capital of 25.5%, peers (XLF) Franklin Resources (BEN), BlackRock (BLK), and Financial Engines (FNGN) have returns of 18.8%, 1.8%, and 8.6%, respectively.


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