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 guess-work out of your bottom line.

Gross Dealer Concession (GDC)* $250,000   $500,000   $750,000   $1,000,000  
Production GDC** (GDC less 12b1 revenue) $210,000   $420,000   $630,000   $840,000  
Commissions and Service Fees $151,250 60.5% $343,700 68.7% $547,500 73.0% $766,000 76.6%
President's Council Bonus² $0   $0   $0   $10,000  
Equity Compensation $0   $12,500   $18,750   $25,000  
Total Cash/Equity Compensation $151,250 60.5% $356,200 71.2% $566,250 75.5% $801,000 80.1%
PLUS:
Licensing Fee3
$500   $500   $500   $500  
OSJ/Compliance Fees4 $12,500   $20,000   $30,000   $30,000  
Health Insurance Subsidy5 $11,364   $11,364   $11,364   $11,364  
Convention Meetings/Trips6 $2,500   $12,000   $12,000   $20,500  
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 $40,864   $58,864   $69,864   $79,364  
Total Compensation $192,114 76.8% $415,064 83.0% $636,114 84.8% $880,364 88.0%
LESS:
Transaction Fees9
$6,300   $12,600   $18,900   $25,200  
E&O coverage10 $1,200   $1,200   $1,200   $1,200  
Technology Fees10 $2,520   $2,520   $2,520   $2,520  
Advertising (Co Op) - Advisor Match7 $2,000   $3,000   $4,000   $5,000  
Health Insurance5 $6,276   $6,276   $6,276   $6,276  
Total expenses not covered by W&R $18,296   $25,596   $32,896   $40,196  
Net Compensation to Advisor $173,818 69.5% $389,468 77.9% $603,218 80.4% $840,168 84.0%
  1. Assumes the following product mix: Fee Based - 33% (MAPChoice - 5%, MAPFlex/MAPLatitude/MAPSelect - 28%), Mutual Funds - 20%, Trails - 16%, Variable Annuities - 12%, General Securities - 10%, Financial Planning - 5%, Insurance - 4%.
  2. The top six Choice advisors earn President’s Council Bonus.
  3. Advisors initial licensing fees paid for in their resident state (and one non-resident state if advisor lives within 100 miles) based upon production GDC.
  4. Independent Firms may charge an OSJ / Compliance Fee that generally ranges from 3% to 10% of GDC. 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.
  5. A portion of your health insurance is subsidized based upon TGR . Amounts shown include advisor, spouse and children.
  6. Chairman’s Cabinet Platinum trip (value $8,500), Crest trip (value $8,500), Circle of Champions meeting (value w/ guest $3,500, value w/o guest $2,500).
  7. Advisor reimbursed for advertising up to 50% of covered program expenses.
  8. For advisors working in a division or district, 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.
  9. Transactions Fees: fully chargeable $7/trade; general securities $20/trade; systematic $2/trade. Analysis estimates fees based on 3% of production GDC.
  10. E&O Insurance: $100/month: Technology Fee: $210/month.

*Also referred to as gross revenue.
**Also referred to as production gross revenue.

As you are weighing the benefits of Waddell & Reed among other firms, it is important to remember that Waddell & Reed offers a highly competitive compensation package with a high level of built-in, firmwide support for your business. We believe that this is a unique model for the industry and one that wirehouses or independent firms cannot offer.