T. Rowe Price's Stock Drops As Concerns Over New Fiduciary Rule Prompts Downgrade

By Tomi KilgoreMarketsMarketWatch Pulse

Shares of T. Rowe Price Group Inc. slid 3.6% in morning trade Wednesday, after UBS flipped to bearish from bullish amid concerns over new regulatory rules going into effect next month. Analyst Brennan Hawken cut his rating on the provider of financial advisory services to sell from buy, and slashed his stock price target to $61, which is 11% below current levels, from $77. Based on the negative impact of the 2010 rule that increased transparency into 401K fees, the Labor Department's fiduciary rule, which is scheduled to go into effect June 9, should lead to outflows from target date funds, increase expenses and accelerate a shift toward passive investing. The fiduciary rule will require financial advisors to act in the clients' best interest. "TROW has a solid domestic franchise with strong investment performance but we see these positives as more than offset by the overhang from the DOL rule, headwinds from corporate 401K lawsuits and shifts toward passive," Hawken wrote in a note to clients.

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