T. Rowe Price

Chapter EightTHE FIRM'S ADOLESCENCE AND WORLD WAR II, 1938–1942

Despite the founders' initial optimism, business was disappointingly slow in the beginning. The large fluctuations of the stock market in 1938 didn't help and the economy remained weak. Still, by the end of the year, the new firm had accumulated $2.3 million in assets under management, which was entirely made up of Mr. Price's old clients. Most of these accounts were accepted at low, beginning fees. At that time, Mr. Price said, a $6,000 account and/or a $250 annual fee were gratefully accepted. In fact, the firm would frequently take on a new account and manage it for free in order to demonstrate to a reluctant potential client that the value they added more than justified the fee. Revenues for 1938 were only $6,090, Walter would recall in an interview, which took place as part of a series of interviews conducted for the firm's fiftieth anniversary. Fortunately, these fees were paid in at the inception of the management contract for work to be performed during following twelve months. But this income, and any further new accounts, had to cover the rent, a small amount of advertising, general office expenses, and salaries for the whole year.

Living expenses were low. As Walter said in the same interview, Mr. Price had been making $12,000 at Mackubin, Legg, which was considered a generous executive compensation, but that first year he did not pay himself a salary. Walter was paid $3,400, a little less than the $3,600 ...