Waddell & Reed Financial (WDR) 10-Q 29 Jul 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 15, 2016
Document and Entity Information
Entity Registrant Name	WADDELL & REED FINANCIAL INC
Entity Central Index Key	1,052,100
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		82,840,733
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q2

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets:
Cash and cash equivalents	$ 467,458	$ 558,495
Cash and cash equivalents - restricted	33,200	66,880
Investment securities	361,615	291,743
Receivables:
Funds and separate accounts	26,090	34,399
Customers and other	166,656	220,660
Income taxes receivable	4,701	10,594
Prepaid expenses and other current assets	24,042	34,800
Total current assets	1,083,762	1,217,571
Property and equipment, net	105,871	105,434
Deferred sales commissions, net	6,783	24,262
Goodwill and identifiable intangible assets	158,318	158,118
Deferred income taxes	31,319	32,692
Other non-current assets	20,185	17,074
Total assets	1,406,238	1,555,151
Liabilities:
Accounts payable	25,397	32,858
Payable to investment companies for securities	48,838	113,648
Payable to third party brokers	34,458	49,848
Payable to customers	84,635	120,420
Accrued compensation	75,861	69,335
Other current liabilities	63,093	57,104
Total current liabilities	332,282	443,213
Long-term debt	189,519	189,432
Accrued pension and postretirement costs	29,408	48,810
Other non-current liabilities	26,605	27,241
Total liabilities	577,814	708,696
Commitments and contingencies
Redeemable noncontrolling interests	10,865
Stockholders' equity:
Preferred stock-$1.00 par value: 5,000 shares authorized; none issued
Class A Common stock-$0.01 par value: 250,000 shares authorized; 99,701 shares issued; 82,870 shares outstanding (82,850 at December 31, 2015)	997	997
Additional paid-in capital	279,206	331,611
Retained earnings	1,135,646	1,141,608
Cost of 16,831 common shares in treasury (16,851 at December 31, 2015)	(540,782)	(566,256)
Accumulated other comprehensive loss	(57,508)	(61,505)
Total stockholders' equity	817,559	846,455
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$ 1,406,238	$ 1,555,151

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Jun. 30, 2016	Dec. 31, 2015
Consolidated Balance Sheets
Preferred stock-par value (in dollars per share)	$ 1	$ 1
Preferred stock-shares authorized	5,000	5,000
Preferred stock-shares issued	0	0
Class A Common stock-par value (in dollars per share)	$ 0.01	$ 0.01
Class A Common stock-shares authorized	250,000	250,000
Class A Common stock-shares issued	99,701	99,701
Class A Common stock-shares outstanding	82,870	82,850
Common shares in treasury	16,831	16,851

Consolidated Statements of Inco

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenues:
Investment management fees	$ 140,880	$ 185,914	$ 285,658	$ 368,019
Underwriting and distribution fees	146,312	171,508	292,970	338,486
Shareholder service fees	32,016	36,568	64,396	72,943
Total	319,208	393,990	643,024	779,448
Operating expenses:
Underwriting and distribution	181,245	195,762	355,081	391,182
Compensation and related costs (including share-based compensation of $12,625, $11,333, $26,147 and $23,806, respectively)	58,341	52,829	111,281	106,324
General and administrative	19,276	27,897	38,428	53,575
Subadvisory fees	2,325	2,394	4,418	4,781
Depreciation	4,260	4,064	8,622	8,098
Total	265,447	282,946	517,830	563,960
Operating income	53,761	111,044	125,194	215,488
Investment and other income (loss)	687	9	(9,531)	3,981
Interest expense	(2,776)	(2,765)	(5,544)	(5,531)
Income before provision for income taxes	51,672	108,288	110,119	213,938
Provision for income taxes	18,101	40,843	39,079	79,380
Net income	33,571	67,445	71,040	134,558
Net income (loss) attributable to redeemable noncontrolling interests	(124)		377
Net income attributable to Waddell & Reed Financial, Inc.	$ 33,695	$ 67,445	$ 70,663	$ 134,558
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted:
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share)	$ 0.41	$ 0.80	$ 0.86	$ 1.61
Weighted average shares outstanding, basic and diluted:
Weighted average shares outstanding, basic and diluted (in shares)	82,947	84,079	82,526	83,831

Consolidated Statements of Inc5

Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements of Income
Compensation and related costs, share-based compensation	$ 12,625	$ 11,333	$ 26,147	$ 23,806

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements of Comprehensive Income
Net income	$ 33,571	$ 67,445	$ 71,040	$ 134,558
Other comprehensive income:
Unrealized appreciation (depreciation) of available for sale investment securities during the period, net of income tax expense (benefit) of $0, $(8), $0, and $5, respectively	1,884	(4,974)	1,960	(3,164)
Pension and postretirement benefits, net of income tax expense of $566, $397, $1,185 and $951, respectively	960	933	2,037	1,876
Comprehensive income	36,415	63,404	75,037	133,270
Comprehensive income (loss) attributable to redeemable noncontrolling interests	(124)		377
Comprehensive income attributable to Waddell & Reed Financial, Inc.	$ 36,539	$ 63,404	$ 74,660	$ 133,270

Consolidated Statements of Com7

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements of Comprehensive Income
Unrealized appreciation of available for sale investment securities during the period, income tax expense (benefit)	$ 0	$ (8)	$ 0	$ 5
Pension and postretirement benefits, income tax expense	$ 566	$ 397	$ 1,185	$ 951

Consolidated Statement of Stock

Consolidated Statement of Stockholders’ Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income(Loss)	Total
Balance at the beginning of the period at Dec. 31, 2014					$ (50,443)
Increase (Decrease) in Stockholders' Equity
Net income						$ 134,558
Other comprehensive income					(1,288)
Balance at the end of the period at Jun. 30, 2015					(51,731)
Balance at the beginning of the period at Mar. 31, 2015					(47,690)
Increase (Decrease) in Stockholders' Equity
Net income						67,445
Other comprehensive income					(4,041)
Balance at the end of the period at Jun. 30, 2015					(51,731)
Balance at the beginning of the period at Dec. 31, 2015	$ 997	$ 331,611	$ 1,141,608	$ (566,256)	(61,505)	846,455
Balance (in shares) at Dec. 31, 2015	99,701
Increase (Decrease) in Stockholders' Equity
Net income			70,663			70,663
Recognition of equity compensation		26,147				26,147
Net issuance/forfeiture of nonvested shares		(72,935)		72,935
Dividends accrued, $0.92 per share			(76,625)			(76,625)
Tax impact of share-based payment arrangements		(5,617)				(5,617)
Repurchase of common stock				(47,461)		(47,461)
Other comprehensive income					3,997	3,997
Balance at the end of the period at Jun. 30, 2016	$ 997	279,206	1,135,646	(540,782)	(57,508)	817,559
Balance (in shares) at Jun. 30, 2016	99,701
Increase (Decrease) in Redeemable Noncontrolling Interest
Adoption of consolidation guidance on January 1, 2016 - redeemable noncontrolling interests in sponsored funds						14,330
Net income						377
Net redemption of redeemable noncontrolling interests in sponsored funds						(3,842)
Balance at the end of the period at Jun. 30, 2016						10,865
Balance at the beginning of the period at Mar. 31, 2016					(60,352)
Increase (Decrease) in Stockholders' Equity
Net income						33,695
Other comprehensive income					2,844
Balance at the end of the period at Jun. 30, 2016	$ 997	$ 279,206	$ 1,135,646	$ (540,782)	$ (57,508)	817,559
Balance (in shares) at Jun. 30, 2016	99,701
Balance at the end of the period at Jun. 30, 2016						$ 10,865

Consolidated Statement of Stoc9

Consolidated Statement of Stockholders’ Equity (Parenthetical) - $ / shares	Apr. 13, 2016	Jun. 30, 2016
Consolidated Statement of Stockholders’ Equity
Dividends accrued, per share (in dollars per share)	$ 0.46	$ 0.92

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net income	$ 71,040	$ 134,558
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,627	8,100
Amortization of deferred sales commissions	19,661	24,270
Share-based compensation	26,147	23,806
Excess tax benefits from share-based payment arrangements	(1,423)	(4,814)
Investments gain, net	(8,560)	(2,804)
Net purchases and sales or maturities of trading securities	(24,996)	56
Deferred income taxes	187	(2,130)
Net change in trading securities held by consolidated sponsored funds	(45,455)
Other	328	81
Changes in assets and liabilities:
Cash and cash equivalents - restricted	33,680	16,660
Customer and other receivables	54,004	65,293
Payable to investment companies for securities and payable to customers	(100,595)	(83,835)
Receivables from funds and separate accounts	8,309	5,288
Other assets	6,560	(7,887)
Deferred sales commissions	(2,182)	(6,752)
Accounts payable and payable to third party brokers	(22,852)	(15,814)
Other liabilities	(4,034)	1,768
Net cash provided by operating activities	18,446	155,844
Cash flows from investing activities:
Purchases of available for sale and equity method securities	(104)	(25,891)
Proceeds from sales and maturities of available for sale and equity method securities	17,986	29,778
Additions to property and equipment	(9,265)	(14,078)
Net cash of sponsored funds on consolidation	6,887
Other	(196)
Net cash provided by (used in) investing activities	15,308	(10,191)
Cash flows from financing activities:
Dividends paid	(76,616)	(72,219)
Repurchase of common stock	(47,461)	(30,004)
Net subscriptions from (redemptions and distributions to) redeemable noncontrolling interests in sponsored funds	(2,224)
Excess tax benefits from share-based payment arrangements	1,423	4,814
Other	87
Net cash used in financing activities	(124,791)	(97,409)
Net increase (decrease) in cash and cash equivalents	(91,037)	48,244
Cash and cash equivalents at beginning of period	558,495	566,621
Cash and cash equivalents at end of period	$ 467,458	$ 614,865

Description of Business and Sig

Description of Business and Significant Accounting Policies	6 Months Ended
	Jun. 30, 2016
Description of Business and Significant Accounting Policies
Description of Business and Significant Accounting Policies	1. Description of Business and Significant Accounting Policies Waddell & Reed Financial, Inc. and Subsidiaries Waddell & Reed Financial, Inc. and subsidiaries (hereinafter referred to as the “Company,” “we,” “our” and “us”) derive revenues from investment management and advisory services, investment product underwriting and distribution, and/or shareholder services administration provided to the Waddell & Reed Advisors group of mutual funds (the “Advisors Funds”), Ivy Funds (the “Ivy Funds”), Ivy Funds Variable Insurance Portfolios (the “Ivy Funds VIP”) and InvestEd Portfolios (“InvestEd”) (collectively, the Advisors Funds, Ivy Funds, Ivy Funds VIP and InvestEd are referred to as the “Funds”), the Ivy Global Investors Fund SICAV (the “SICAV”) and its sub-funds (the “IGI Funds”), and institutional and separately managed accounts. The Funds and the institutional and separately managed accounts operate under various rules and regulations set forth by the United States Securities and Exchange Commission (the “SEC”). The IGI Funds are regulated by Luxembourg’s Commission de Surveillance du Secteur Financier as an undertaking for collective investment in transferable securities (“UCITS”). Services to the Funds are provided under investment management agreements, underwriting agreements, and shareholder servicing and accounting service agreements that set forth the fees to be charged for these services. Services to the IGI Funds are provided under investment management and distribution agreements. The majority of these agreements are subject to annual review and approval by each Fund’s board of trustees. Our revenues are largely dependent on the total value and composition of assets under management. Accordingly, fluctuations in financial markets and composition of assets under management can significantly impact our revenues and results of operations. Basis of Presentation We have prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to enable a reasonable understanding of the information presented. The information in this Quarterly Report on Form 10-Q should be read in conjunction with Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”). Certain amounts in the prior years’ financial statements have been reclassified for consistent presentation. The accompanying unaudited consolidated financial statements are prepared consistent with the accounting policies described in Note 1 to the consolidated financial statements included in our 2015 Form 10-K except as noted below. In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only a normal and recurring nature) necessary to present fairly our financial position at June 30, 2016, the results of operations and cash flows for the six months ended June 30, 2016 and 2015 in conformity with accounting principles generally accepted in the United States. Investments Securities and Investments in Sponsored Funds Sponsored funds, which include the Funds, the IGI Funds and privately offered funds structured in the form of limited liability companies, are investments we have made for general corporate investment purposes and to provide seed capital for new investment products. The Company’s initial investment in a new investment product typically represents 100% ownership in that product. Sponsored funds are initially consolidated and are accounted for as trading securities. The Company has classified its investments in certain sponsored funds as either equity method investments (when the Company owns between 20% and 50% of the fund) or as available for sale investments (when the Company owns less than 20% of the fund) as described in Note 4. Investments held by our broker-dealer entities or certain investments that are anticipated to be purchased and sold on a more frequent basis are classified as trading.

Cash and Cash Equivalents

Cash and Cash Equivalents	6 Months Ended
	Jun. 30, 2016
Cash and Cash Equivalents
Cash and Cash Equivalents	2. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and short-term investments. We consider all highly liquid investments with maturities upon acquisition of 90 days or less to be cash equivalents. Cash and cash equivalents - restricted represents cash held for the benefit of customers segregated in compliance with federal and other regulations.

New Accounting Guidance

New Accounting Guidance	6 Months Ended
	Jun. 30, 2016
New Accounting Guidance
New Accounting Guidance	3. New Accounting Guidance In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers, ” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This standard also specifies the accounting for certain costs to obtain or fulfill a contract with a customer. This ASU will supersede much of the existing revenue recognition guidance in accounting principles generally accepted in the United States and is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period; early application is permitted for the first interim period within annual reporting periods beginning after December 15, 2016. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating which transition method to apply and the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In January 2016, the FASB issued ASU 2016-01, “ Recognition and Measurement of Financial Assets and Financial Liabilities, ” which provides updated guidance on the recognition, measurement, presentation and disclosure of certain financial assets and financial liabilities. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, “ Leases, ” which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU will be presented using a modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. The Company is evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-07,“ Simplifying the Transition to the Equity Method of Accounting. ” The amendments in this ASU eliminate the requirement that when an investment qualifies for the use of equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2016-07 also requires that an entity that has an available for sale equity security that becomes qualified for the equity method recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. ASU 2016-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company is evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, “ Improvements to Employee Share-Based Payment Accounting, ” which recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, with classifying excess tax benefits along with other income tax cash flows as an operating activity; allows an entity to either estimate the number of awards that are expected to vest or account for forfeitures when they occur; and permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The Company is evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The ASU changes the impairment model for most financial assets, and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures.

Investment Securities

Investment Securities	6 Months Ended
	Jun. 30, 2016
Investment Securities
Investment Securities	4. Investment Securities Investment securities at June 30, 2016 and December 31, 2015 are as follows: June 30, December 31, 2016 2015 (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds Total available for sale securities Trading securities: Mortgage-backed securities Corporate bond Common stock Consolidated sponsored funds — Sponsored funds Total trading securities Equity method securities: Sponsored funds Sponsored privately offered funds Total equity method securities Total securities $ The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at June 30, 2016: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $ The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2015: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $ A summary of available for sale sponsored funds with fair values below carrying values at June 30, 2016 and December 31, 2015 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized June 30, 2016 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ Sponsored privately offered funds — — $ Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2015 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ Based upon our assessment of these sponsored funds, we wrote-off $0.1 million at June 30, 2016. The corporate bond accounted for as trading matures in 2018. Mortgage-backed securities accounted for as trading and held as of June 30, 2016 mature in 2022. Sponsored funds The Company has classified its investments in the Advisor Funds, Ivy Funds and IGI Funds as either trading, equity method investments (when the Company owns between 20% and 50% of the fund) or as available for sale investments (when the Company owns less than 20% of the fund). These entities do not meet the criteria of a variable interest entity (“VIE”) and are considered to be voting interest entities (“VOE”). The Company has determined the Advisor and Ivy Funds are VOEs because the structure of the investment products is such that the voting rights held by the equity holders provide for equality among equity investors. The Company has determined that the IGI Funds are VOEs as its legal structure and the powers of its equity investors prevent the IGI Funds from meeting characteristics of being a VIE. Sponsored privately offered funds The Company holds interests in privately offered funds structured in the form of limited liability companies. The members of these entities have the substantive ability to remove the Company as managing member or dissolve the entity upon a simple majority vote. These entities do not meet the criteria of a variable interest entity and are considered to be voting interest entities. Consolidated sponsored funds The following table details the balances related to consolidated sponsored funds at June 30, 2016, as well as the Company’s net interest in these funds: June 30, 2016 (in thousands) Cash $ Investments Other assets Other liabilities Redeemable noncontrolling interests Net interest in consolidated sponsored funds $ During the six months ended June 30, 2016, we consolidated Ivy Funds and IGI Funds in which we provided initial seed capital at the time of the funds formation. When we no longer have a controlling financial interest in a sponsored fund, it is deconsolidated from our financial statements. We deconsolidated $44.2 million of these investments from our consolidated balance sheet during the first quarter of 2016. There was no impact to the consolidated statement of income as a result of this deconsolidation. Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of the asset. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset. An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs that are significant to the overall valuation. The three-level hierarchy of inputs is summarized as follows: · Level 1 – Investments are valued using quoted prices in active markets for identical securities. · Level 2 – Investments are valued using other significant observable inputs, including quoted prices in active markets for similar securities. · Level 3 – Investments are valued using significant unobservable inputs, including the Company’s own assumptions in determining the fair value of investments. Assets classified as Level 2 can have a variety of observable inputs. These observable inputs are collected and utilized, primarily by an independent pricing service, in different evaluated pricing approaches depending upon the specific asset to determine a value. The fair value of municipal bonds is measured based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-wants lists, offerings, market movements, the callability of the bond, state of issuance and benchmark yield curves. The fair value of corporate bonds is measured using various techniques, which consider recently executed trades in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads and fundamental data relating to the issuer. Securities’ values classified as Level 3 are primarily determined through the use of a single quote (or multiple quotes) from dealers in the securities using proprietary valuation models. These quotes involve significant unobservable inputs, and thus, the related securities are classified as Level 3 securities. The following tables summarize our investment securities as of June 30, 2016 and December 31, 2015 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs. June 30, 2016 Level 1 Level 2 Level 3 Total (in thousands) Available for sale securities: Sponsored funds $ — — Sponsored privately offered funds measured at net asset value (2) — — — Trading securities: Mortgage-backed securities — — Corporate bonds — — Common stock — — Consolidated sponsored funds (2) — — — Sponsored funds — — Equity method securities: (1) Sponsored funds — — Sponsored privately offered funds measured at net asset value (2) — — — Total $ — December 31, 2015 Level 1 Level 2 Level 3 Total (in thousands) Available for sale securities: Sponsored funds $ — — Sponsored privately offered funds measured at net asset value (2) — — — Trading securities: Mortgage-backed securities — — Corporate bonds — — Common stock — — Sponsored funds — — Equity method securities: (1) Sponsored funds — — Sponsored privately offered funds measured at net asset value (2) — — — Total $ — (1) Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value. Fair value is measured using the Company’s share of the investee’s underlying net income or loss, which is predominantly representative of fair value adjustments in the investments held by the investee. (2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

Derivative Financial Instrument

Derivative Financial Instruments	6 Months Ended
	Jun. 30, 2016
Derivative Financial Instruments
Derivative Financial Instruments	5. Derivative Financial Instruments In January 2016, the Company implemented an economic hedge program that uses total return swap contracts to hedge market risk with its investments in certain sponsored funds. As of June 30, 2016, we had 91% of our investments in sponsored funds, excluding our available for sale portfolio, hedged, 82% of which were hedged with total return swap contracts. Certain of the consolidated sponsored funds may utilize derivative financial instruments within their portfolios in pursuit of their stated investment objectives. We do not hedge for speculative purposes. As of June 30, 2016, excluding derivative financial instruments held in certain consolidated sponsored funds, the Company was party to three total return swap contracts with a combined notional value of $200.7 million. These derivative instruments are not designated as hedges for accounting purposes. Changes in fair value of the total return swap contracts are recognized in investment and other income (loss), net on the Company’s consolidated statement of income. The Company posted $8.2 million in cash collateral with the counterparties of the total return swap contracts as of June 30, 2016. The cash collateral is included in customers and other receivables on the Company’s consolidated balance sheet. The company does not record its fair value in derivative transactions against the posted collateral. The following table presents the fair value of the derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds as of June 30, 2016: June 30, 2016 Balance sheet location Fair value (in thousands) Total return swap contracts Other current liabilities $ The following is a summary of net losses recognized in income for the three and six months ended June 30, 2016: Income statement Three months ended Six months ended location June 30, 2016 June 30, 2016 (in thousands) (in thousands) Total return swap contracts Investment and other income (loss) $ $

Goodwill and Identifiable Intan

Goodwill and Identifiable Intangible Assets	6 Months Ended
	Jun. 30, 2016
Goodwill and Identifiable Intangible Assets
Goodwill and Identifiable Intangible Assets	6. Goodwill and Identifiable Intangible Assets Goodwill represents the excess of purchase price over the tangible assets and identifiable intangible assets of an acquired business. Our goodwill is not deductible for tax purposes. Goodwill and identifiable intangible assets (all considered indefinite lived) at June 30, 2016 and December 31, 2015 are as follows: June 30, December 31, 2016 2015 (in thousands) Goodwill $ Mutual fund management advisory contracts Mutual fund management subadvisory contracts Other — Total identifiable intangible assets Total $

Indebtedness

Indebtedness	6 Months Ended
	Jun. 30, 2016
Indebtedness
Indebtedness	7. Indebtedness Debt is reported at its carrying amount in the consolidated balance sheet. The fair value of the Company’s outstanding indebtedness is approximately $20 4.4 million at June 30, 2016 compared to the carrying value net of debt issuance costs of $189 .5 million. Fair value is calculated based on Level 2 inputs.

Income Tax Uncertainties

Income Tax Uncertainties	6 Months Ended
	Jun. 30, 2016
Income Tax Uncertainties
Income Tax Uncertainties	8. Income Tax Uncertainties As of January 1, 2016 and June 30, 2016, the Company had unrecognized tax benefits, including penalties and interest, of $11.9 million ($8.7 million net of federal benefit) and $12.5 million ($9.1 million net of federal benefit), respectively, that if recognized, would impact the Company’s effective tax rate. In the accompanying consolidated balance sheet, unrecognized tax benefits that are not expected to be settled within the next 12 months are included in other liabilities; unrecognized tax benefits that are expected to be settled within the next 12 months are included in income taxes payable; unrecognized tax benefits that reduce a net operating loss, similar tax loss, or tax credit carryforward are presented as a reduction to noncurrent deferred income taxes. The Company’s accounting policy with respect to interest and penalties related to income tax uncertainties is to classify these amounts as income taxes. As of January 1, 2016, the total amount of accrued interest and penalties related to uncertain tax positions recognized in the consolidated balance sheet was $3.4 million ($2.8 million net of federal benefit). The total amount of penalties and interest, net of federal benefit, related to income tax uncertainties recognized in the statement of income for the six month period ended June 30, 2016 was $0.3 million. The total amount of accrued penalties and interest related to uncertain tax positions at June 30, 2016 of $3.8 million ($3.1 million net of federal benefit) is included in the total unrecognized tax benefits described above. In the ordinary course of business, many transactions occur for which the ultimate tax outcome is uncertain. In addition, respective tax authorities periodically audit our income tax returns. These audits examine our significant tax filing positions, including the timing and amounts of deductions and the allocation of income among tax jurisdictions. The 2012 through 2015 federal income tax returns are open tax years that remain subject to potential future audit. State income tax returns for all years after 2011 and, in certain states, income tax returns for 2011, are subject to potential future audit by tax authorities in the Company’s major state tax jurisdictions.

Pension Plan and Postretirement

Pension Plan and Postretirement Benefits Other Than Pension	6 Months Ended
	Jun. 30, 2016
Pension Plan and Postretirement Benefits Other Than Pension
Pension Plan and Postretirement Benefits Other Than Pension	9. Pension Plan and Postretirement Benefits Other Than Pension We provide a non-contributory retirement plan that covers substantially all employees and certain vested employees of our former parent company (the “Pension Plan”). Benefits payable under the Pension Plan are based on employees’ years of service and compensation during the final 10 years of employment. We also sponsor an unfunded defined benefit postretirement medical plan that covers substantially all employees, as well as our advisors, who are independent contractors. The medical plan is contributory with participant contributions adjusted annually. The medical plan does not provide for post age 65 benefits with the exception of a small group of employees that were grandfathered when such plan was established. The components of net periodic pension and other postretirement costs related to these plans were as follows: Other Other Pension Benefits Postretirement Benefits Pension Benefits Postretirement Benefits Three months ended June 30, Three months ended June 30, Six months ended June 30, Six months ended June 30, 2016 2015 2016 2015 2016 2015 2016 2015 (in thousands) (in thousands) Components of net periodic benefit cost: Service cost Interest cost Expected return on plan assets — — — — Actuarial (gain) loss amortization — — Prior service cost amortization Transition obligation amortization — — — — Total (1) $ (1) Approximately 60% of net periodic pension and other postretirement benefit costs are included in compensation and related costs on the consolidated statements of income, while the remainder is included in underwriting and distribution expense. During the first quarter of 2016, we contributed $20.0 million to the Pension Plan.

Stockholders' Equity

Stockholders' Equity	6 Months Ended
	Jun. 30, 2016
Stockholders' Equity
Stockholders' Equity	10. Stockholders’ Equity Earnings per Share The components of basic and diluted earnings per share were as follows: Three months ended Six months ended June 30, June 30, 2016 2015 2016 2015 (in thousands, except per share amounts) Net income attributable to Waddell & Reed Financial, Inc. $ Weighted average shares outstanding, basic and diluted Earnings per share, basic and diluted $ Dividends On April 13, 2016, the Board of Directors approved a dividend on our common stock in the amount of $0.46 per share to stockholders of record on July 11, 2016 to be paid on August 1, 2016. The total dividend to be paid is approximately $38.1 million and is included in other current liabilities as of June 30, 2016. Common Stock Repurchases The Board of Directors has authorized the repurchase of our common stock in the open market and/or private purchases. The acquired shares may be used for corporate purposes, including shares issued to employees in our stock-based compensation programs. There were 1,075,826 shares and 516,533 shares repurchased in the open market or privately during the three months ended June 30, 2016 and 2015, respectively, which includes 300,826 shares and 306,533 shares, respectively, repurchased from employees who tendered shares to cover their minimum income tax withholdings with respect to vesting of stock awards during these same reporting periods. There were 2,201,497 shares and 622,591 shares repurchased in the open market or privately during the six months ended June 30, 2016 and 2015, respectively, which includes 304,497 shares and 312,091 shares, respectively, repurchased from employees who tendered shares to cover their minimum income tax withholdings with respect to vesting of stock awards during each of these two periods. Accumulated Other Comprehensive Income (Loss) The following tables summarize other comprehensive income (loss) activity for the three and six months ended June 30, 2016 and June 30, 2015. Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended June 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at March 31, 2016 $ Other comprehensive income before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income Balance at June 30, 2016 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended June 30, 2015 securities securities gains (losses) income (loss) (in thousands) Balance at March 31, 2015 $ Other comprehensive loss before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Balance at June 30, 2015 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Six months ended June 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ Other comprehensive income before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income Balance at June 30, 2016 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated (gains) losses (losses) on benefits other on investment investment unrealized comprehensive Six months ended June 30, 2015 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2014 $ Other comprehensive loss before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Balance at June 30, 2015 $ $ Reclassifications from accumulated other comprehensive income (loss) and included in net income are summarized in the tables that follow. For the three months ended June 30, 2016 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ For the three months ended June 30, 2015 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Realized gain on sale of sponsored investment securities $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ For the six months ended June 30, 2016 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ For the six months ended June 30, 2015 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Realized gain on sale of sponsored investment securities $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $

Redeemable noncontrolling Inter

Redeemable noncontrolling Interests	6 Months Ended
	Jun. 30, 2016
Redeemable noncontrolling Interests.
Redeemable noncontrolling Interests	11. Redeemable Noncontrolling Interests Redeemable noncontrolling interests in net income for the three and six months ended June 30, 2016 was $(0.1 ) million and $0.4 million, respectively. Noncontrolling interests in consolidated sponsored funds may fluctuate from period to period and are impacted by changes in the Company’s percentage of ownership in sponsored funds, changes in third party investment in sponsored funds and market volatility in the sponsored funds’ underlying investments. The following table details a rollforward of redeemable noncontrolling interests in consolidated sponsored funds for the six months ended June 30, 2016: Six months ended June 30, 2016 (in thousands) Redeemable noncontrolling interests in sponsored funds upon adoption of new consolidation accounting guidance on January 1, 2016 $ Redeemable noncontrolling interests in sponsored funds consolidated during the period Redeemable noncontrolling interests ownership change during the period Redeemable noncontrolling interests deconsolidation Net income attributable to redeemable noncontrolling interests Ending balance of redeemable noncontrolling interest in consolidated sponsored funds $

Share-Based Compensation

Share-Based Compensation	6 Months Ended
	Jun. 30, 2016
Share-Based Compensation
Share-Based Compensation	12. Share-Based Compensation In the second quarter of 2016, we granted 2,213,850 shares of restricted stock with an average fair value of $22.27 per share under the Company’s 1998 Stock Incentive Plan, as amended and restated (the “SI Plan”). The value of those shares at the grant date, aggregating to $49.3 million, will generally be amortized to expense over a four -year vesting period.

Contingencies

Contingencies	6 Months Ended
	Jun. 30, 2016
Contingencies
Contingencies	13. Contingencies The Company is involved from time to time in various legal proceedings, regulatory investigations and claims incident to the normal conduct of business, which may include proceedings that are specific to us and others generally applicable to business practices within the industries in which we operate. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and on the results of operations in a particular quarter or year. The Company establishes reserves for litigation and similar matters when those matters present material loss contingencies that management determines to be both probable and reasonably estimable in accordance with ASC 450, "Contingencies." These amounts are not reduced by amounts that may be recovered under insurance or claims against third parties, but undiscounted receivables from insurers or other third parties may be accrued separately. The Company regularly revises such accruals in light of new information. The Company discloses the nature of the contingency when management believes it is reasonably possible the outcome may be significant to the Company’s consolidated financial statements and, where feasible, an estimate of the possible loss. For purposes of our litigation contingency disclosures, “significant” includes material matters as well as other items that management believes should be disclosed. Management’s judgment is required related to contingent liabilities because the outcomes are difficult to predict. In an action filed on February 18, 2016 in the United States District Court for the District of Kansas, Saket Kapor [sic], Peter Brockett and Hieu Phan v. Ivy Investment Management Company, et. al. (Case No. 2:16-cv-02106-JWL-TJJ), the Company's registered investment advisor subsidiaries, the trustees of two of the Company’s affiliated mutual funds, and an officer of a Company subsidiary were sued in a putative derivative action by three mutual fund shareholders alleging breach of fiduciary duty and breach of contract claims relating to investments held in the affiliated mutual funds. On behalf of the mutual funds, the plaintiffs seek monetary damages and demand a jury trial. On April 18, 2016, the plaintiffs dismissed the complaint in the United States District Court for the District of Kansas and filed a similar complaint against the same defendants, regarding the same substantive allegations and causes of action, in the District Court of Johnson County, Kansas (Case No. I6CV02338 Div.4). On April 25, 2016, the plaintiffs voluntarily dismissed the officer of a Company subsidiary as a defendant. On June 30, 2016, the remaining defendants filed a Motion to Dismiss the complaint. To date, no discovery has taken place. In the opinion of management, the ultimate resolution and outcome of this matter is uncertain. Given the preliminary nature of the proceedings and the Company's dispute over the merits of the claims, the Company is unable to estimate a range of reasonably possible loss, if any, that such matter may represent. While the ultimate resolution of this matter is uncertain, an adverse determination against the Company could have a material adverse impact on our business, financial condition and results of operations.

Description of Business and S24

Description of Business and Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2016
Description of Business and Significant Accounting Policies
Basis of Presentation	Basis of Presentation We have prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to enable a reasonable understanding of the information presented. The information in this Quarterly Report on Form 10-Q should be read in conjunction with Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”). Certain amounts in the prior years’ financial statements have been reclassified for consistent presentation. The accompanying unaudited consolidated financial statements are prepared consistent with the accounting policies described in Note 1 to the consolidated financial statements included in our 2015 Form 10-K except as noted below. In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only a normal and recurring nature) necessary to present fairly our financial position at June 30, 2016, the results of operations and cash flows for the six months ended June 30, 2016 and 2015 in conformity with accounting principles generally accepted in the United States.
Investment Securities and Investments in Sponsored Funds	Investments Securities and Investments in Sponsored Funds Sponsored funds, which include the Funds, the IGI Funds and privately offered funds structured in the form of limited liability companies, are investments we have made for general corporate investment purposes and to provide seed capital for new investment products. The Company’s initial investment in a new investment product typically represents 100% ownership in that product. Sponsored funds are initially consolidated and are accounted for as trading securities. The Company has classified its investments in certain sponsored funds as either equity method investments (when the Company owns between 20% and 50% of the fund) or as available for sale investments (when the Company owns less than 20% of the fund) as described in Note 4. Investments held by our broker-dealer entities or certain investments that are anticipated to be purchased and sold on a more frequent basis are classified as trading.

Investment Securities (Tables)

Investment Securities (Tables)	6 Months Ended
	Jun. 30, 2016
Investment Securities
Schedule of investment securities	June 30, December 31, 2016 2015 (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds Total available for sale securities Trading securities: Mortgage-backed securities Corporate bond Common stock Consolidated sponsored funds — Sponsored funds Total trading securities Equity method securities: Sponsored funds Sponsored privately offered funds Total equity method securities Total securities $
Summary of the gains (losses) related to securities	The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at June 30, 2016: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $ The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2015: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $
Summary of available for sale sponsored funds with fair values below carrying values	Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized June 30, 2016 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ Sponsored privately offered funds — — $ Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2015 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $
Summary of balances related to consolidated sponsored funds as well the company’s net interest in these funds	June 30, 2016 (in thousands) Cash $ Investments Other assets Other liabilities Redeemable noncontrolling interests Net interest in consolidated sponsored funds $

Derivative Financial Instrume26

Derivative Financial Instruments (Tables)	6 Months Ended
	Jun. 30, 2016
Derivative Financial Instruments
Schedule of fair value of derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds	June 30, 2016 Balance sheet location Fair value (in thousands) Total return swap contracts Other current liabilities $
Schedule of net losses recognized in income of derivative financial instrument	Income statement Three months ended Six months ended location June 30, 2016 June 30, 2016 (in thousands) (in thousands) Total return swap contracts Investment and other income (loss) $ $

Goodwill and Identifiable Int27

Goodwill and Identifiable Intangible Assets (Tables)	6 Months Ended
	Jun. 30, 2016
Goodwill and Identifiable Intangible Assets
Schedule of goodwill and identifiable intangible assets	June 30, December 31, 2016 2015 (in thousands) Goodwill $ Mutual fund management advisory contracts Mutual fund management subadvisory contracts Other — Total identifiable intangible assets Total $

Pension Plan and Postretireme28

Pension Plan and Postretirement Benefits Other Than Pension (Tables)	6 Months Ended
	Jun. 30, 2016
Pension Plan and Postretirement Benefits Other Than Pension
Schedule of components of net periodic pension and other postretirement costs	Other Other Pension Benefits Postretirement Benefits Pension Benefits Postretirement Benefits Three months ended June 30, Three months ended June 30, Six months ended June 30, Six months ended June 30, 2016 2015 2016 2015 2016 2015 2016 2015 (in thousands) (in thousands) Components of net periodic benefit cost: Service cost Interest cost Expected return on plan assets — — — — Actuarial (gain) loss amortization — — Prior service cost amortization Transition obligation amortization — — — — Total (1) $ (1) Approximately 60% of net periodic pension and other postretirement benefit costs are included in compensation and related costs on the consolidated statements of income, while the remainder is included in underwriting and distribution expense.

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	6 Months Ended
	Jun. 30, 2016
Stockholders' Equity
Components of basic and diluted earnings per share	Three months ended Six months ended June 30, June 30, 2016 2015 2016 2015 (in thousands, except per share amounts) Net income attributable to Waddell & Reed Financial, Inc. $ Weighted average shares outstanding, basic and diluted Earnings per share, basic and diluted $
Summary of other comprehensive income (loss) activity	Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended June 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at March 31, 2016 $ Other comprehensive income before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income Balance at June 30, 2016 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended June 30, 2015 securities securities gains (losses) income (loss) (in thousands) Balance at March 31, 2015 $ Other comprehensive loss before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Balance at June 30, 2015 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Six months ended June 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ Other comprehensive income before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income Balance at June 30, 2016 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated (gains) losses (losses) on benefits other on investment investment unrealized comprehensive Six months ended June 30, 2015 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2014 $ Other comprehensive loss before reclassification — Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Balance at June 30, 2015 $ $
Summary of reclassifications from accumulated other comprehensive income (loss) and included in net income	For the three months ended June 30, 2016 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ For the three months ended June 30, 2015 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Realized gain on sale of sponsored investment securities $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ For the six months ended June 30, 2016 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ For the six months ended June 30, 2015 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Realized gain on sale of sponsored investment securities $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $

Redeemable Noncontrolling Int30

Redeemable Noncontrolling Interests (Tables)	6 Months Ended
	Jun. 30, 2016
Redeemable noncontrolling Interests.
Schedule of rollforward of redeemable noncontrolling interests in consolidated sponsored funds	Six months ended June 30, 2016 (in thousands) Redeemable noncontrolling interests in sponsored funds upon adoption of new consolidation accounting guidance on January 1, 2016 $ Redeemable noncontrolling interests in sponsored funds consolidated during the period Redeemable noncontrolling interests ownership change during the period Redeemable noncontrolling interests deconsolidation Net income attributable to redeemable noncontrolling interests Ending balance of redeemable noncontrolling interest in consolidated sponsored funds $

Description of Business and S31

Description of Business and Significant Accounting Policies (Details)	6 Months Ended
	Jun. 30, 2016
Description of Business and Significant Accounting Policies
Ownership interest of seed investment in new product (as a percent)	100.00%

Investment Securities - Investm

Investment Securities - Investment securities and summary of the gains (losses) related to securities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Available for sale securities:
Amortized cost	$ 89,778	$ 47,300
Unrealized gains	2,296	759
Unrealized losses	(6,259)	(6,682)
Fair value	85,815	41,377
Equity method securities	133,957	220,553
Trading securities:
Fair value	141,843	29,813
Investment securities	361,615	291,743
Equity method securities	133,957	220,553
Sponsored funds
Available for sale securities:
Amortized cost	89,278	46,800
Unrealized gains	1,928	434
Unrealized losses	(6,259)	(6,682)
Fair value	84,947	40,552
Equity method securities	130,898	217,380
Trading securities:
Fair value	29,924	29,701
Equity method securities	130,898	217,380
Sponsored privately offered funds measured at net asset value
Available for sale securities:
Amortized cost	500	500
Unrealized gains	368	325
Fair value	868	825
Equity method securities	3,059	3,173
Trading securities:
Equity method securities	3,059	3,173
Mortgage-backed securities
Trading securities:
Fair value	16	20
Corporate bonds
Trading securities:
Fair value	3	5
Common Stock
Trading securities:
Fair value	97	$ 87
Consolidated Sponsored Funds
Trading securities:
Fair value	$ 111,803

Investment Securities - Availab

Investment Securities - Available for sale sponsored funds with fair values below carrying values (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Fair value
Less than 12 months	$ 9,259
12 months or longer	33,859
Total temporarily impaired securities	43,118
Unrealized losses
Less than 12 months	(222)
12 months or longer	(6,037)
Total Unrealized losses on temporarily impaired securities	(6,259)
Sponsored funds
Fair value
Less than 12 months	2,258	$ 3,476
12 months or longer	33,859	33,619
Total temporarily impaired securities	36,117	37,095
Unrealized losses
Less than 12 months	(44)	(166)
12 months or longer	(6,037)	(6,516)
Total Unrealized losses on temporarily impaired securities	(6,081)	$ (6,682)
Write-off of sponsored funds
Sponsored funds wrote-off	100
Sponsored privately offered funds measured at net asset value
Fair value
Less than 12 months	7,001
Total temporarily impaired securities	7,001
Unrealized losses
Less than 12 months	(178)
Total Unrealized losses on temporarily impaired securities	$ (178)

Investment Securities - Consoli

Investment Securities - Consolidated sponsored funds (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Investment Securities
Cash		$ 467,458	$ 558,495	$ 614,865	$ 566,621
Redeemable noncontrolling interests		(10,865)
Deconsolidated sponsored funds value	$ 44,200
Consolidated Sponsored Funds
Investment Securities
Cash		7,801
Investments		111,803
Other assets		2,014
Other liabilities		(955)
Redeemable noncontrolling interests		(10,865)
Net interest in consolidated sponsored funds		$ 109,798

Investment Securities - Fair va

Investment Securities - Fair value of investment securities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair value of investments
Available-for-sale Securities	$ 85,815	$ 41,377
Trading Securities	141,843	29,813
Equity method securities	133,957	220,553
Total investment securities	361,615	291,743
Total
Fair value of investments
Total investment securities	361,615	291,743
Sponsored funds
Fair value of investments
Available-for-sale Securities	84,947	40,552
Trading Securities	29,924	29,701
Equity method securities	130,898	217,380
Sponsored funds | Total
Fair value of investments
Available-for-sale Securities	84,947	40,552
Trading Securities	29,924	29,701
Equity method securities	130,898	217,380
Sponsored privately offered funds measured at net asset value
Fair value of investments
Available-for-sale Securities	868	825
Equity method securities	3,059	3,173
Sponsored privately offered funds measured at net asset value | Total
Fair value of investments
Available-for-sale Securities	868	825
Equity method securities	3,059	3,173
Mortgage-backed securities
Fair value of investments
Trading Securities	16	20
Mortgage-backed securities | Total
Fair value of investments
Trading Securities	16	20
Corporate bonds
Fair value of investments
Trading Securities	3	5
Corporate bonds | Total
Fair value of investments
Trading Securities	3	5
Common Stock
Fair value of investments
Trading Securities	97	87
Common Stock | Total
Fair value of investments
Trading Securities	97	87
Consolidated Sponsored Funds
Fair value of investments
Trading Securities	111,803
Consolidated Sponsored Funds | Total
Fair value of investments
Trading Securities	111,803
Level 1
Fair value of investments
Total investment securities	245,866	287,720
Level 1 | Sponsored funds
Fair value of investments
Available-for-sale Securities	84,947	40,552
Trading Securities	29,924	29,701
Equity method securities	130,898	217,380
Level 1 | Common Stock
Fair value of investments
Trading Securities	97	87
Level 2
Fair value of investments
Total investment securities	19	25
Level 2 | Mortgage-backed securities
Fair value of investments
Trading Securities	16	20
Level 2 | Corporate bonds
Fair value of investments
Trading Securities	$ 3	$ 5

Derivative Financial Instrume36

Derivative Financial Instruments (Details) - Not designated as a hedge $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016USD ($)contract	Jun. 30, 2016USD ($)contract
Total return swap contracts
Derivative Financial Instruments
Number of contracts | contract	3	3
Notional value	$ 200,700	$ 200,700
Cash collateral with the counterparties	8,200	8,200
Total return swap contracts | Investment and other income (loss)
Derivative Financial Instruments
Net gains (losses) recognized in income	(6,707)	(21,929)
Total return swap contracts | Other current liabilities
Derivative Financial Instruments
Fair value	$ 793	$ 793
Sponsored funds
Derivative Financial Instruments
Investment ownership interest (as a percent)		91.00%
Sponsored funds | Total return swap contracts
Derivative Financial Instruments
Investment ownership interest (as a percent)		82.00%

Goodwill and Identifiable Int37

Goodwill and Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Goodwill and Identifiable Intangible Assets
Goodwill	$ 106,970	$ 106,970
Mutual fund management advisory contracts	42,748	42,748
Mutual fund management subadvisory contracts	8,400	8,400
Other	200
Total identifiable intangible assets	51,348	51,148
Total goodwill and identifiable intangible assets	$ 158,318	$ 158,118

Indebtedness (Details)

Indebtedness (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Indebtedness
Fair value of outstanding indebtedness	$ 204,400
Long-term debt	$ 189,519	$ 189,432

Income Tax Uncertainties (Detai

Income Tax Uncertainties (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Income Tax Uncertainties
Unrecognized tax benefits, including penalties and interest that if recognized would impact effective tax rate	$ 12.5	$ 11.9
Unrecognized tax benefits, including penalties and interest, net of federal tax benefit that if recognized would affect effective tax rate	9.1	8.7
Accrued interest and penalties related to uncertain tax positions	3.8	3.4
Accrued interest and penalties related to uncertain tax positions, net of federal benefit	3.1	$ 2.8
Total expense of interest and penalties, net of federal benefit related to uncertain tax positions	$ 0.3

Pension Plan and Postretireme40

Pension Plan and Postretirement Benefits Other Than Pension (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Components of net periodic benefit cost:
Percentage of net periodic pension and other postretirement benefit costs included in Compensation and related costs				60.00%
Pension Benefits
Pension Plan and Postretirement Benefits Other than Pension
Final number of years of employee's compensation to determine the benefits payable				10 years
Employer contributions		$ 20,000
Components of net periodic benefit cost:
Service cost	$ 3,106		$ 2,994	$ 6,099	$ 6,041
Interest cost	2,277		2,056	4,716	4,210
Expected return on plan assets	(3,427)		(3,565)	(6,963)	(7,256)
Actuarial (gain) loss amortization	1,469		1,209	3,107	2,585
Prior service cost amortization	93		115	187	230
Transition obligation amortization	1		1	2	2
Total	3,519		2,810	$ 7,148	5,812
Other Postretirement Benefits
Pension Plan and Postretirement Benefits Other than Pension
Age of employees after which the plan does not provide benefits				65 years
Components of net periodic benefit cost:
Service cost	185		228	$ 370	456
Interest cost	92		99	184	198
Actuarial (gain) loss amortization	(38)			(77)
Prior service cost amortization	1		5	2	10
Total	$ 240		$ 332	$ 479	$ 664

Stockholders' Equity - Earnings

Stockholders' Equity - Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands	Apr. 13, 2016	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Components of basic and diluted earnings per share
Net income attributable to Waddell & Reed Financial, Inc.		$ 33,695	$ 67,445	$ 70,663	$ 134,558
Weighted average shares outstanding - basic and diluted		82,947,000	84,079,000	82,526,000	83,831,000
Earnings per share:
Earnings per share, basic and diluted (in dollars per share)		$ 0.41	$ 0.80	$ 0.86	$ 1.61
Dividends
Dividends accrued, per share (in dollars per share)	$ 0.46			$ 0.92
Dividends to be paid		$ 38,100		$ 38,100
Common stock repurchases
Shares repurchased in the open market or privately		1,075,826	516,533	2,201,497	622,591
Shares repurchased from employees to cover minimum income tax withholdings		300,826	306,533	304,497	312,091

Stockholders' Equity - Other co

Stockholders' Equity - Other comprehensive income (loss) activity (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period			$ 846,455
Net current period other comprehensive income (loss)			3,997
Balance at the end of the period	$ 817,559		817,559
Accumulated Other Comprehensive Income(Loss)
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(60,352)	$ (47,690)	(61,505)	$ (50,443)
Other comprehensive income (loss) before reclassification	2,473	(4,516)	2,467	(380)
Amount reclassified from accumulated other comprehensive income (loss)	371	475	1,530	(908)
Net current period other comprehensive income (loss)	2,844	(4,041)	3,997	(1,288)
Balance at the end of the period	(57,508)	(51,731)	(57,508)	(51,731)
Unrealized (gains) losses on investment securities
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(3,682)	421	(3,729)	(727)
Other comprehensive income (loss) before reclassification	1,554	(2,845)	1,550	(222)
Amount reclassified from accumulated other comprehensive income (loss)	(370)	(289)	(319)	(1,764)
Net current period other comprehensive income (loss)	1,184	(3,134)	1,231	(1,986)
Balance at the end of the period	(2,498)	(2,713)	(2,498)	(2,713)
Change in valuation allowance for unrealized gains (losses) on investment securities
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(3,211)	(809)	(3,240)	(1,471)
Other comprehensive income (loss) before reclassification	919	(1,671)	917	(158)
Amount reclassified from accumulated other comprehensive income (loss)	(219)	(169)	(188)	(1,020)
Net current period other comprehensive income (loss)	700	(1,840)	729	(1,178)
Balance at the end of the period	(2,511)	(2,649)	(2,511)	(2,649)
Pension and postretirement benefits
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(53,459)	(47,302)	(54,536)	(48,245)
Amount reclassified from accumulated other comprehensive income (loss)	960	933	2,037	1,876
Net current period other comprehensive income (loss)	960	933	2,037	1,876
Balance at the end of the period	$ (52,499)	$ (46,369)	$ (52,499)	$ (46,369)

Stockholders' Equity - Reclassi

Stockholders' Equity - Reclassifications from accumulated other comprehensive income (loss) and included in net income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	$ (937)	$ (871)	$ (2,714)	$ (23)
Tax (expense) benefit	566	396	1,184	931
Net of tax	(371)	(475)	(1,530)	908
Realized loss on sale of sponsored investment securities | Investment and other income (loss) | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	589	459	508	2,804
Tax (expense) benefit	(219)	(170)	(189)	(1,040)
Net of tax	370	289	319	1,764
Change in valuation allowance for unrealized gains (losses) on investment securities
Reclassifications included in net income:
Net of tax	219	169	188	1,020
Change in valuation allowance for unrealized gains (losses) on investment securities | Provision for income taxes | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Tax (expense) benefit	219	169	188	1,020
Net of tax	219	169	188	1,020
Pension and postretirement benefits
Reclassifications included in net income:
Net of tax	(960)	(933)	(2,037)	(1,876)
Pension and postretirement benefits | Underwriting and distribution expense and Compensation and related costs | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	(1,526)	(1,330)	(3,222)	(2,827)
Tax (expense) benefit	566	397	1,185	951
Net of tax	$ (960)	$ (933)	$ (2,037)	$ (1,876)

Redeemable Noncontrolling Int44

Redeemable Noncontrolling Interests (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016
Redeemable noncontrolling interests in consolidated sponsored funds
Net income (loss) attributable to redeemable noncontrolling interests	$ (124)	$ 377
Ending balance of redeemable noncontrolling interest in consolidated sponsored funds	10,865	10,865
Consolidated Sponsored Funds
Redeemable noncontrolling interests in consolidated sponsored funds
Redeemable noncontrolling interests in sponsored funds upon adoption of new accounting guidance on January 1, 2016		14,330
Redeemable noncontrolling interests in sponsored funds consolidated during the period		18,249
Redeemable noncontrolling interests ownership change during the period		22,143
Redeemable noncontrolling interests deconsolidation		(44,234)
Net income (loss) attributable to redeemable noncontrolling interests		377
Ending balance of redeemable noncontrolling interest in consolidated sponsored funds	$ 10,865	$ 10,865

Share-Based Compensation (Detai

Share-Based Compensation (Details) - Nonvested stock awards - 1998 Stock Incentive Plan ("SI Plan") $ / shares in Units, $ in Millions	3 Months Ended
	Jun. 30, 2016USD ($)$ / sharesshares
Nonvested Stock Shares
Number of restricted stocks granted (in shares) | shares	2,213,850
Fair value of shares granted (in dollars) | $	$ 49.3
Vesting period	4 years
Nonvested Stock Shares, Weighted Average Grant Date Fair Value
Granted (in dollars per share) | $ / shares	$ 22.27

Contingencies (Details)

Contingencies (Details)	Feb. 18, 2016item
Contingencies
Number of affiliated mutual fund trustees involved in litigation	2
Number of mutual fund shareholders involved in litigation	3