How Good is T. Rowe Price’s Forecast?
T. Rowe Price recently announced a significant expansion of its advisor-focused Sales efforts. Per Ignites (subscription), the firm plans to:
- Double the size of the 32-person broker-dealer Sales force
- Add 4 internals to the RIA team in order to create a 1:1 external-to-internal ratio
These announcements always make a splash in the industry. People are interested in questions about the potential success of the effort – does a firm like T. Rowe Price have enough brand equity with advisors to warrant such an investment? does a 1:1 ratio make sense for RIA teams?
But the part that interests me most is the proposed timeframe of the build-out, which T. Rowe Price pegs as 2-3 years. Why? Because the time horizon:
- is not so short as to make the plan a sure thing, as firms can generally accomplish short-term initiatives with relatively high probability
- is not so long as to make the projection somewhat meaningless, as the specifics of a 10-year plan within a given firm tend to boil down to pure speculation
Three years is short enough for a firm to make a reasonable projection, and long enough where many things can change and impact the outcome. This makes the significant and public nature of T. Rowe Price’s plan interesting. Consider some of the things that could materially impact the expansion plan over 3 years:
- a bull or bear market
- strong or weak relative product performance
- shifts in advisors’ and investors’ product preferences toward or away from T. Rowe Price’s offerings
- management team stability or turnover
- operationalizing and managing a much bigger Sales team
I’d imagine T. Rowe Price has modeled the various scenarios and is committed to the plan. But I also think that the non-controllable (and even some of the controllable) variables are potentially-impactful. So, over the course of the proposed timeframe there is at least a decent chance that the firm will markedly deviate from the plan as it is defined today.
It will be interesting to see, 2-3 years down the road, just how good T. Rowe Price’s forecasting proves to be.