Waddell & Reed

Compensation Analysis

Your net compensation is an amalgamation of dozens of factors beyond commission and 12b-1 fees. Incentives; perks; monetary support programs; subsidized fees, benefits and overhead; bonuses and equity compensation all factor heavily into your overall opportunity to build wealth. Conversely, at many firms the advisor pays a host of expenses that need to be taken into consideration as well. Below is an analysis of Waddell & Reed’s compensation package that will help take the guesswork out of your bottom line.

Trailing 12-Month Gross Production $250,000   $500,000   $750,000   $1,000,000  
Commissions and Service Fees¹ $150,050 60.4% $340,700 68.1% $542,700 72.4% $758,000 75.8%
President's Council Bonus² $0   $0   $0   $10,000  
Equity Compensation $0   $12,500   $18,750   $25,000  
Total Cash/Equity Compensation $151,250 60.4% $353,200 70.6% $561,450 74.9% $793,000 79.3%
PLUS:
Licensing Fee3 $1,000   $1,000   $1,000   $1,000  
OSJ/Compliance Fees4 $12,500   $20,000   $30,000   $30,000  
Health Insurance Subsidy5 $11,472   $11,472   $11,472   $11,472  
Convention Meetings/Trips6 $0   $3,750   $12,750   $21,750  
Advertising (Co Op) - W&R Match7 $2,000   $3,000   $4,000   $5,000  
Division Office Value8 $12,000   $12,000   $12,000   $12,000  
Total expenses covered by W&R $38,972   $51,222   $71,222   $81,222  
Total Compensation $190,022 76.0% $404,422 80.9% $632,672 84.4% $872.222 87.4%
LESS:
Transaction Fees9 $3,750   $7,500   $11,250   $15,000  
E&O Insurance10 $1,500   $1,500   $1,500   $1,500  
Technology Fees10 $2,820   $2,820   $2,820   $2,820  
Advertising (Co Op) - Advisor Match7 $2,000   $3,000   $4,000   $5,000  
Health Insurance5 $7,908   $7,908   $7,908   $7,908  
Total expenses not covered by W&R $17,978   $22,728   $27,478   $32,228  
Net Compensation to Advisor $172,044 68.8% $381,694 76.3% $605,194 80.7% $841,994 84.2%
1Assumes the following product mix: Advisory - 43% (Lockwood Advisory - 34%, MAP - 9%), Investment Products - 27% (Mutual Funds - 17%, Variable Annuities - 10%), General Securities - 10%, Service/Distribution Fees - 11%, Insurance - 4%, Financial Planning (other than Advisory) - 5%.
2The top six Choice advisors (based on gross production*) earn President’s Council bonus. There is no guarantee that $1,000,000 gross production will qualify.
3Advisors initial licensing fees paid for in their resident state (and any non-resident states) up to $1,000.
4Independent firms may charge an OSJ/Compliance Fee that generally ranges from 3% to 10% of gross production*. This analysis uses an estimated 5% at $250,000, 4% at $500,000 and $750,000, and 3% at $1,000,000. This represents the approximate value of services that Waddell & Reed covers on behalf of the advisor.
5A portion of your health insurance is subsidized based upon gross production*. Amounts shown include advisor, spouse and children. 6Chairman’s Cabinet Platinum trip (value $9,000), Crest trip (value $9,000), Circle of Champions meeting (value with guest $3,750, value without guest $2,750).
7Advisor reimbursed for advertising up to 50% of covered program expenses.
8For advisors working in a division or district office, office space expense is valued at $12,000/year and is covered by Waddell & Reed. If an advisor works in an independent office, he or she may qualify for office support up to $24,000/year.
9Transactions Fees: mutual funds, $7/trade; equities, $17/trade; fixed income, $25/trade; UITs, $20/trade; options, $17/trade + $1 per contract; options exercised, $30/position; systematic, $2/trade. Analysis estimates fees based on 1.5% of gross production*.
10E&O Insurance $125/month; Technology Fee: $235/month.
* Referred to as Total Gross Revenue in the 2015 Choice Advisor Compensation and Incentive Guide.