Waddell & Reed

Compensating Your Achievements

New Financial Advisor Transition Programs let you learn while you earn

No matter how you enter the field — as a recent college graduate pursuing your first career, a professional changing industries or an established financial services professional — we have a compensation plan designed to help you transition to your new role.

Entrepreneur (E-Bonus) Program
This program is designed to yield meaningful financial impact in your first year with Waddell & Reed while you learn and build your business. We will pay four quarterly bonuses -- in addition to your commission -- upon meeting very reasonable benchmarks that could result in a total bonus of $12,500 to $40,000.

Experienced Professional Program
As an experienced financial services professional, you will earn a stabilized income as you transition to Waddell & Reed. After meeting certain criteria, you will receive $3,000 or $4,000 per month for your first 12 months, with validation criteria. You also are eligible to receive escrowed commissions and applicable bonuses and service fees. Subject to executive approval.

Emerging Professional Program
As a recent college graduate or successful professional from another industry, you will earn a stabilized income as you launch your business and learn our unique and powerful systems for success. After meeting certain requirements, you will receive $2,000 per month for your first 12 months, with minimal validation criteria. You also are eligible to receive escrowed commissions and applicable bonuses and service fees. Subject to executive approval.

Understand the components of your income

Learn more about the components that contribute to your total compensation plan. A few terms that will be helpful are:


Gross Production – The revenue paid to the brokerage firm from the sale of an investment or insurance product. 12b-1 service and distribution fees are included in the gross production calculation.

  • Total Gross Revenue (TGR) - A proprietary term for gross production.
  • Production Gross Revenue (PGR) - A proprietary term for gross production less 12b-1 service and distribution fees.

Service Fees – Service fees are the portion of the 12b-1 fee paid to Waddell & Reed based on your clients' assets held within mutual funds. The larger your practice, the higher your service fee payout.

Distribution Fees – Fees that are paid to Waddell & Reed based on the average non-CDSC (contingent deferred sales charge) liable assets for C share class mutual funds.

Commissions
A highly competitive payout grid anchors the Waddell & Reed advisor compensation package. Payouts vary by product and your production tier. The basis of your compensation is earnings generated from sales.

Compensation Grid

Based on TGR Advisory
From To Tier # Financial
Planning
MAP SPA Investment
Products
Insurance Service Fees/
Distribution
Fees
0 74,999 1 45% 45% 30% 45% 45% 20%
75,000 99,999 2 54% 52% 32.5% 52% 52% 40%
100,000 174,999 3 58% 54% 35% 54% 54% 60%
175,000 249,999 4 62% 56% 35% 56% 56% 65%
250,000 349,999 5 66% 58% 35% 58% 58% 70%
350,000 499,999 6 70% 59% 35% 59% 59% 75%
500,000 624,999 7 72.5% 60% 35% 60% 60% 75%
625,000 749,999 8 75% 62% 35% 62% 62% 75%
750,000 + 9 80% 64% 35% 64% 64% 75%

New Advisors are guaranteed at the following rates, but may qualify for higher rates:

  • First Year Advisors = Tier 7
  • Second Year Advisors = Tier 6
  • Third Year Advisors = Tier 4

Bonus Grid
Earn an annual bonus based on your PGR during the year. Your PGR determines your tier, and payout varies by product.

Based on TGR Advisory
From To Tier # Financial
Planning
MAP SPA Investment
Products
Insurance Service Fees/
Distribution
Fees
100,000 174,999 1 4.0% 4.0% 0% 4.0% 4.0% 2.0%
175,000 249,999 2 4.5% 4.5% 4.5% 0% 4.5% 3.0%
250,000 324,999 3 5.0% 5.0% 0% 5.0% 5.0% 4.0%
325,000 449,999 4 5.5% 5.5% 0% 5.5% 5.5% 5.0%
450,000 599,999 5 6.0% 6.0% 0% 6.0% 6.0% 5.0%
600,000 749,999 6 6.5% 6.5% 0% 6.5% 6.5% 5.0%
750,000 + 7 7.0% 7/0% 0% 7.0% 7.0% 5.0%

Equity Compensation
As a Waddell & Reed advisor, you have an opportunity to receive an equity stake in the firm. Equity compensation is rewarded in the form of restricted shares of Waddell & Reed Financial, Inc. Class A common stock (NYSE: WDR). This incentive serves two purposes. First, it represents a significant opportunity for you to build wealth over time. Second, it aligns your success with that of the firm’s.

Personal Office Support Program
You are welcome to establish an office in any of our branch locations at no cost. If you choose to operate from a personal stand-alone location, we offer direct financial support to establish and maintain your office.

Career Sales Volume1 Annual Support Based on Qualification Level
Annual Sales Convention
Achievement Honor Crest
$0 – $19,999,999 $0 $2,400 $4,800
$20,000,000 – $39,999,999 $2,400 $4,800 $6,000
$40,000,000 – $59,999,999 $4,800 $6,000 $12,000
$60,000,000 – $79,999,999 $6,000 $12,000 $18,000
$80,000,000 – $99,999,999 $7,200 $13,800 $21,000
$100,000,000 + $8.400 $15,600 $24,000

1 Based on volume of mutual fund and variable annuity sales.

Errors & Omissions (E&O) Insurance
E&O insurance covers your liability in the performance of professional services within the broker/dealer. Our group policy enables you to pay a significantly reduced rate compared to rates that fully independent advisors pay.

Fee Support and Reimbursement
Based on your level of production, you may qualify for reimbursement of initial licensing fees, licensing renewal fees and continuing education fees. In addition, based on minimum production requirements, we offer guidance, scholarship support and fee reimbursement for your pursuit of professional designations such as CFP®, CMFC®, ChFC®, CLF® and CLU®.

See the 2014 Classic Advisor Compensation and Incentive Guide for more detailed compensation information. This guide summarizes the commission and incentive compensation policies for Waddell & Reed’s independent contractor Classic advisors. Waddell & Reed, Inc. reserves the right to amend and administer its compensation and incentive policies.

Business Transition Program
When you’re ready to retire, this program provides a seamless transition for your clients and financial support for you. As you transition your clients to another Waddell & Reed advisor, you receive an income, the successor advisor builds his or her practice, and your clients receive uninterrupted service and support. In addition, you’ll have access to a variety of resources to guide you through the process.

Teams
Doing business as part of a team of financial advisors is one way to structure your business. The team model offers increased client service, provides a deeper bench for knowledge and succession planning and ultimately increases your production potential. Whether you’re interested in a solo or team model, your Managing Principal will provide insight and help guide you to the business structure that works best for you.

Personal Commitment Plus Prospecting Equals Greater Earnings
Experience has taught us that driving the right activity leads to success. Inherent in that truism is a mathematical best practice — 10-3-1. 10 represents the number of warm leads you need to contact to put 1 appointment with a prospective client on your calendar. 3 prospective client appointments lead to 1 client. Of course, 10-3-1 is a general rule, but a good one to keep in mind as you plan your activity, increase and fine tune your prospecting techniques and watch your fees and commissions grow.

First-Year Financial Advisor Activity Model – Hypothetical Illustration
Total Payout $50,813 $78,259 $104,318 $149,477
Activity1
Warm Prospects Contacted (week/year) 31/wk
1,500/yr
35/wk
1,700/yr
40/wk
1,900/yr
44/wk
2,100/yr
Appointments Held 3/wk
150/yr
4/wk
170/yr
4/wk
190/yr
4/wk
210/yr
Clients Gained 1.0/wk
50/yr
1.2/wk
57/yr
1.3/wk
63/yr
1.5/wk
70/yr
Average Client Profile:
Mutual Fund Class A & Variable Annuities $6,332 $8,406 $9,607 $12,969
Advisory Programs (MAP) $14,423 $19,231 $21,978 $29,670
Financial Planning Fees2 $400 $400 $400 $400
Life Insurance Premiums3 $1,200 $1,500 $1,800 $2,400
Total Average Client Investment Over 12 Months $22,355 $29,537 $33,785 $45,439

1Activity assumes 48 weeks worked per year.
2Financial Planning Fees: assumes $400 per plan.
3Life insurance premiums are $100 per month at the $50,813 level, $125 per month at the $78,259 level, $150 per month at the $104,318 level, and $200 per month at the $149,477 level.

Earnings and Rewards Help Put Your Income Goal Within Reach
Commissions and service fees create the foundation of your annual income. This model illustrates the foundation and additional rewards, such as bonuses, that can help you build toward your goals.

First-Year Financial Advisor Compensation Model – Hypothetical Illustration
Total Payout $50,813 $78,259 $104,318 $149,477
Gross Production by Product Type:
Mutual Fund Class A & Variable Annuities $18,206 $27,550 $34,800 $52,200
Advisory Programs (MAP) $28,125 $42,750 $54,000 $81,000
Financial Planning Fees $4,376 $6,650 $8,400 $12,600
Insurance Premiums $10,022 $15,200 $19,200 $28,800
Service Fee Revenue $1,771 $2,850 $3,600 $5,400
Total Gross Production $62,500 $95,000 $120,000 $180,000
Investment Volume Equivalent1 $1,307,492 $1,983,990 $2,506,092 $3,759,138
Commission Payout (as % of Gross Production; based on Tier7):
Mutual Fund Class A & Variable Annuities $10,923 $16,530 $20,880 $31,320
Advisory Programs (MAP)2 $16,875 $25,650 $32,400 $48,600
Financial Planning Fees $3,172 $4,821 $6,090 $9,135
Insurance Premiums $6,013 $9,120 $11,520 $17,280
Service Fee Revenue $1,328 $2,138 $2,700 $4,050
Total Commissions & Service Fees $38,313 61% $58,259 61% $73,590 61% $110,385 61%
Bonuses:
Investment Bonus3 $0 $0 $4,728 $7,092
Entrepreneur (E-Bonus) Program4 $12,500 $20,000 $26,000 $32,000
Equity Compensation $0 $0 $0 $0
President’s Council Bonus $0 $0 $0 $0
Total Bonuses5 $12,500 20% $20,000 21% $30,728 26% $39,092 22%
Total Payout
(Commissions, Service Fees & Bonuses)
$50,813 81% $78,259 82% $104,318 87% $149,477 83%
PLUS:
Licensing Fees6 $250 $250 $250 $250
OSJ/Compliance Fees7 $3,125 $4,750 $6,000 $9,000
Health Insurance Subsidy8 $9,132 $9,132 $9,132 $9,132
Convention Meetings / Trips9 $0 $3,500 $3,500 $3,500
Marketing/Advertising (Co-op) - W&R Match10 $1,500 $1,500 $1,500 $1,500
Division Office Value11 $12,000 $12,000 $12,000 $12,000
Total expenses covered by W&R $26,007 $31,132 $32,382 $35,382
Total Compensation $76,820 123% $109,391 115% $136,700 114% $184,859 103%
LESS:
Transaction Fees12 $0 $0 $0 $0
E & O Coverage13 $960 $960 $960 $960
Technology Fees14 $1,200 $1,200 $1,200 $1,200
Marketing/Advertising (Co-op) - Advisor Match10 $1,500 $1,500 $1,500 $1,500
Health Insurance8 $10,186 $10,186 $10,186 $10,186
Total expenses not covered by W&R $13,846 $13,846 $13,846 $13,846
Net Compensation $62,974 101% $95,545 101% $122,854 102% $171,013 95%

1Investment Volume is calculated as an estimate based on the gross production. It represents the amount the client invests into investment products.
2MAP sales are eligible for a prepayment of commission (3 years of annual fees) at point-of-sale. Financial planning is a component of MAP products.
3An annual calendar-year bonus based on specific requirements.
4Effective for 12 months and requires manager approval to participate.
5Other Bonus Opportunities: The top 80 advisors also receive Equity Compensation. The top 6 Classic advisors (based on gross production less 12b-1 fees)* earn President’s Council Bonus.
6Advisors licensing fees paid for in their resident state based on gross production less 12b-1 fees.*
7Some firms may charge an OSJ / Compliance Fee that generally ranges from 3 to 10% of gross production. This figure uses an estimated 5% of gross production and represents the approximate value of services that W&R covers on behalf of the advisor.
8A portion of your health insurance may be subsidized based on your production. Amounts shown are for enrollment in the CORE health plan for advisor plus two or more dependents.
9Chairman’s Cabinet Platinum trip (Value $8,000), Crest trip (Value 8,000), Circle of Champions meeting (Value w/ guest $3,500, Value w/o guest $2,500).
10Advisor reimbursed up to 50% of covered program expenses. Example shown is $3,000 with $1,500 reimbursed by W&R.
11For advisors in division or district office, space expense is $12,000 value and covered by W&R. Advisors in an independent office may qualify for office support up to $24,000 per year.
12Fee is covered by home office unless transaction is done through NetX360TM.
13E&O Premiums: $80 per month, first year advisors; $125 per month, second+ year advisors.
14$200 per month (beginning six months after activation date).

*Referred to as Production Gross Revenue in the 2014 Classic Advisor Compensation and Incentive Guide.