Waddell & Reed Financial (WDR) 10-Q 5 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 30, 2017
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	Mar. 31, 2017
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		83,614,514
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Assets:
Cash and cash equivalents	$ 565,171	$ 555,102
Cash and cash equivalents - restricted	45,533	31,137
Investment securities	309,303	328,750
Receivables:
Funds and separate accounts	23,948	27,181
Customers and other	111,025	128,095
Prepaid expenses and other current assets	28,587	21,574
Total current assets	1,083,567	1,091,839
Property and equipment, net	99,070	102,449
Goodwill and identifiable intangible assets	147,969	148,569
Deferred income taxes	29,512	31,430
Other non-current assets	27,910	31,985
Total assets	1,388,028	1,406,272
Liabilities:
Accounts payable	25,281	28,023
Payable to investment companies for securities	69,819	53,691
Payable to third party brokers	27,601	31,735
Payable to customers	60,294	82,918
Short-term notes payable	94,920
Accrued compensation	32,980	38,764
Other current liabilities	69,883	61,847
Total current liabilities	380,778	296,978
Long-term debt	94,729	189,605
Accrued pension and postretirement costs	30,215	38,379
Other non-current liabilities	24,906	26,655
Total liabilities	530,628	551,617
Commitments and contingencies
Redeemable noncontrolling interests	8,516	10,653
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; 83,709 shares outstanding (83,118 at December 31, 2016)	997	997
Additional paid-in capital	274,146	291,908
Retained earnings	1,127,735	1,135,694
Cost of 15,991 common shares in treasury (16,583 at December 31, 2016)	(505,050)	(531,268)
Accumulated other comprehensive loss	(48,944)	(53,329)
Total stockholders' equity	848,884	844,002
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$ 1,388,028	$ 1,406,272

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2017	Dec. 31, 2016
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	83,709	83,118
Common shares in treasury	15,991	16,583

Consolidated Statements of Inco

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenues:
Investment management fees	$ 130,436	$ 144,778
Underwriting and distribution fees	128,831	146,658
Shareholder service fees	27,297	32,380
Total	286,564	323,816
Operating expenses:
Underwriting and distribution	150,324	173,836
Compensation and related costs (including share-based compensation of $14,185 and $13,522, respectively)	49,406	52,940
General and administrative	25,724	19,152
Subadvisory fees	2,697	2,093
Depreciation	5,221	4,362
Intangible asset impairment	600
Total	233,972	252,383
Operating income	52,592	71,433
Investment and other income (loss)	2,129	(10,218)
Interest expense	(2,786)	(2,768)
Income before provision for income taxes	51,935	58,447
Provision for income taxes	18,399	20,978
Net income	33,536	37,469
Net income attributable to redeemable noncontrolling interests	480	501
Net income attributable to Waddell & Reed Financial, Inc.	$ 33,056	$ 36,968
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share)	$ 0.39	$ 0.45
Weighted average shares outstanding, basic and diluted (in shares)	84,077	82,104

Consolidated Statements of Inc5

Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements of Income
Compensation and related costs, share-based compensation	$ 14,185	$ 13,522

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements of Comprehensive Income
Net income	$ 33,536	$ 37,469
Other comprehensive income:
Unrealized appreciation of available for sale investment securities during the period, net of income tax expense (benefit) of $(1,481) and $0, respectively	3,599	76
Pension and postretirement benefit, net of income tax expense of $465 and $619, respectively	786	1,077
Comprehensive income	37,921	38,622
Comprehensive income attributable to redeemable noncontrolling interests	480	501
Comprehensive income attributable to Waddell & Reed Financial, Inc.	$ 37,441	$ 38,121

Consolidated Statements of Com7

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements of Comprehensive Income
Unrealized appreciation of available for sale investment securities during the period, income tax expense (benefit)	$ (1,481)	$ 0
Pension and postretirement benefits, income tax expense	$ 465	$ 619

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, 2015					$ (61,505)
Increase (Decrease) in Stockholders' Equity
Net income						$ 36,968
Other comprehensive income					1,153
Balance at the end of the period at Mar. 31, 2016					(60,352)
Balance at the beginning of the period at Dec. 31, 2016	$ 997	$ 291,908	$ 1,135,694	$ (531,268)	(53,329)	844,002
Balance (in shares) at Dec. 31, 2016	99,701
Increase (Decrease) in Stockholders' Equity
Adoption of share-based compensation guidance on January 1, 2017		3,504	(2,200)			1,304
Net income			33,056			33,056
Recognition of equity compensation		12,928	228			13,156
Issuance of restricted share and other		(34,194)		34,194
Dividends accrued, $0.46 per share			(39,043)			(39,043)
Repurchase of common stock				(7,976)		(7,976)
Other comprehensive income					4,385	4,385
Balance at the end of the period at Mar. 31, 2017	$ 997	$ 274,146	$ 1,127,735	$ (505,050)	$ (48,944)	848,884
Balance (in shares) at Mar. 31, 2017	99,701
Balance at the beginning of the period at Dec. 31, 2016						10,653
Increase (Decrease) in Redeemable Noncontrolling Interest
Net income						480
Net redemption and deconsolidation of redeemable noncontrolling interests in sponsored funds						(2,617)
Balance at the end of the period at Mar. 31, 2017						$ 8,516

Consolidated Statement of Stoc9

Consolidated Statement of Stockholders’ Equity (Parenthetical) - $ / shares	Feb. 14, 2017	Mar. 31, 2017
Consolidated Statement of Stockholders’ Equity
Dividends accrued, per share (in dollars per share)	$ 0.46	$ 0.46

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 33,536	$ 37,469
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,221	4,367
Write down of impaired assets	600
Amortization of deferred sales commissions	1,436	7,635
Share-based compensation	13,156	13,522
Excess tax benefits from share-based payment arrangements		(312)
Investments gain, net	(2,975)	(5,144)
Net purchases and sales or maturities of trading securities		(25,000)
Deferred income taxes	4,239	2,350
Net change in trading securities held by consolidated sponsored funds	12,434	(43,991)
Other	43	118
Changes in assets and liabilities:
Cash and cash equivalents - restricted	(14,396)	27,539
Customer and other receivables	17,070	30,484
Payable to investment companies for securities and payable to customers	(6,496)	(71,613)
Receivables from funds and separate accounts	3,233	5,890
Other assets	(5,307)	(4,565)
Accounts payable and payable to third party brokers	(6,876)	(22,483)
Other liabilities	(5,749)	(3,547)
Net cash provided by (used in) operating activities	49,169	(47,281)
Cash flows from investing activities:
Proceeds from sales of available for sale and equity method securities	12,105	100
Additions to property and equipment	(1,885)	(5,741)
Net cash of sponsored funds on consolidation		6,887
Other		(298)
Net cash provided by investing activities	10,220	948
Cash flows from financing activities:
Dividends paid	(38,771)	(38,115)
Repurchase of common stock	(7,976)	(25,598)
Net redemptions, distributions and deconsolidations of redeemable noncontrolling interests in sponsored funds	(2,617)	(1,692)
Excess tax benefits from share-based payment arrangements		312
Other	44	43
Net cash used in financing activities	(49,320)	(65,050)
Net increase (decrease) in cash and cash equivalents	10,069	(111,383)
Cash and cash equivalents at beginning of period	555,102	558,495
Cash and cash equivalents at end of period	$ 565,171	$ 447,112

Description of Business and Sig

Description of Business and Significant Accounting Policies	3 Months Ended
	Mar. 31, 2017
Description of Business and Significant Accounting Policies
Description of Business and Significant Accounting Policies	1. Waddell & Reed Financial, Inc. and Subsidiaries Waddell & Reed Financial, Inc. (hereinafter referred to as the “Company,” “we,” “our” or “us”) is a holding company, incorporated in the state of Delaware in 1981, that conducts business through its subsidiaries. Founded in 1937, we are one of the oldest mutual fund complexes in the United States, having introduced the Waddell & Reed Advisors group of mutual funds (the “Advisors Funds”) in 1940. Over time, we added additional mutual funds: Ivy Funds (the “Ivy Funds”); Ivy Variable Insurance Portfolios, our variable product offering (“Ivy VIP”); InvestEd Portfolios, our 529 college savings plan (“InvestEd”); Ivy High Income Opportunities Fund, a closed-end mutual fund (“IVH”); and the Ivy Global Investors Fund Société d’Investissement à Capital Variable ( the “SICAV”) and its Ivy Global Investors sub‑funds (the “IGI Funds”), an undertaking for the collective investment in transferable securities (“UCITS”). In 2016, we introduced the Ivy NextShares ® exchange-traded managed funds (“Ivy NextShares”) (collectively, the Advisors Funds, Ivy Funds, Ivy VIP, InvestEd, IVH and Ivy NextShares are referred to as the “Funds”). As of March 31, 2017, we had $81.1 billion in assets under management. We derive our revenues from providing investment management, investment advisory, investment product underwriting and distribution, and shareholder services administration to the Funds, the IGI Funds, and institutional and separately managed accounts. Investment management fees are based on the amount of average assets under management and are affected by sales levels, financial market conditions, redemptions and the composition of assets. Our underwriting and distribution revenues consist of fees earned on fee‑based asset allocation products and related advisory services, asset‑based service and distribution fees promulgated under Rule 12b-1 of the Investment Company Act of 1940, as amended (“Rule 12b-1”), commissions derived from sales of investment and insurance products, and distribution fees on certain variable products. The products sold have various commission structures and the revenues received from those sales vary based on the type and dollar amount sold. Shareholder service fee revenue includes transfer agency fees, custodian fees from retirement plan accounts, and portfolio accounting and administration fees, and is earned based on assets under management or number of client accounts. 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, 2016 (the “2016 Form 10-K”). Certain amounts in the prior year’s 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 2016 Form 10-K with the exception of the adoption of Accounting Standards Update (“ASU”) 2016-09, “ Improvements to Employee Share-Based Payment Accounting, ” effective January 1, 2017. As required by this ASU, excess tax benefits and tax shortfalls are recognized as income tax benefit or expense in the income statement on a prospective basis. Additionally, excess tax benefits or shortfalls recognized on share-based compensation are classified as an operating activity in the statement of cash flows. The Company has applied this provision prospectively, and thus, the prior period presented in the statement of cash flows has not been adjusted. This ASU allows entities to withhold shares issued during the settlement of a stock award or option, as means of meeting minimum tax withholding due by the employee, in an amount up to the employees’ maximum individual tax rate in the relevant jurisdiction without resulting in a liability classification of the award (versus an equity classification). The value of the withheld shares is then remitted by the Company in cash to the taxing authorities on the employees’ behalf. The Company’s historical policy to withhold shares equivalent to the minimum individual tax rate is consistent with the thresholds meeting the classification of an equity award and, therefore, a retrospective classification adjustment was not required. This ASU requires that all cash payments made to taxing authorities on the employees’ behalf for withheld shares be presented as financing activities on the statement of cash flows. As this requirement is consistent with the Company’s historical accounting policy, a retrospective adjustment to presentation of the statement of cash flows was not required. This standard also allows for the option to account for forfeitures as they occur when determining the amount of share-based compensation expense to be recognized, rather than estimating expected forfeitures over the course of a vesting period. The Company elected to account for forfeitures as they occur. The net cumulative effect to the Company from the adoption of this ASU was an increase to additional paid-in capital of $3.5 million, a reduction to retained earnings of $2.2 million and an increase to the non-current deferred tax asset of $1.3 million as of January 1, 2017. 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 March 31, 2017, and the results of operations and cash flows for the three months ended March 31, 2017 and 2016 in conformity with accounting principles generally accepted in the United States.

New Accounting Guidance

New Accounting Guidance	3 Months Ended
	Mar. 31, 2017
New Accounting Guidance
New Accounting Guidance	2. Accounting Guidance Adopted During The First Quarter of 2017 On January 1, 2017 the Company adopted ASU 2016-07, “Investments-Equity Method and Joint Ventures” . This ASU eliminates 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. This ASU 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. We have concluded that the adoption of this ASU will have an immaterial impact on our consolidated financial statements and related disclosures. As disclosed in Note 1 above, on January 1, 2017, the Company adopted ASU 2016-09. This ASU requires recognition of all excess tax benefits and tax shortfalls as income tax expense or benefit in the income statement and classification of 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. The Company accounts for forfeitures when they occur. Recognition of excess tax benefits as income tax benefit and tax shortfalls as income tax expense in the income statement may result in increased volatility in our provision for income taxes and effective tax rate. See Note 1 – Description of Business and Significant Accounting Policies – Basis of Presentation for description of the financial statement impact of adopting this ASU. New Accounting Guidance Not Yet Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued 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. This ASU permits the use of either the retrospective or cumulative effect transition method. We have evaluated our population of contracts and concluded that the adoption of this ASU will have an immaterial impact on our consolidated financial statements and related disclosures. In February 2016, 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. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Although the Company is evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures, the Company currently believes the most significant changes will be related to the recognition of new right-of-use assets and lease liabilities on the Company’s consolidated balance sheet for real estate operating leases. In August 2016, FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This ASU eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. This ASU designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. This ASU i s effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We are evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In November 2016, FASB issued ASU 2016-18, “Statement of Cash Flows: Restricted Cash.” This ASU is intended to reduce diversity in practice by adding or clarifying guidance on classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all periods presented. We are evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In March 2017, FASB issued ASU 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment.” This ASU eliminates the second step from the goodwill impairment test. An entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss cannot exceed the total amount of goodwill allocated to the reporting unit. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We have concluded that the adoption of this ASU will have an immaterial impact on our consolidated financial statements and related disclosures. In March 2017, FASB issued ASU 2017-07, “Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU changes the income statement presentation of defined benefit plan expense by requiring separation between operating expense (service cost component) and non-operating expense (all other components, including interest cost, amortization of prior service cost, curtailments and settlements, etc.). The operating expense component is reported with similar compensation costs while the non-operating components are reported in a separate line item outside of operating items. In addition, only the service cost component is eligible for capitalization as part of an asset. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We are evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures.

Investment Securities

Investment Securities	3 Months Ended
	Mar. 31, 2017
Investment Securities
Investment Securities	3. Investment securities at March 31, 2017 and December 31, 2016 are as follows: March 31, December 31, 2017 2016 (in thousands) Available for sale securities: Sponsored funds $ 120,756 122,806 Sponsored privately offered funds — 570 Total available for sale securities 120,756 123,376 Trading securities: Mortgage-backed securities 12 13 Common stock 104 101 Consolidated sponsored funds 133,276 145,710 Sponsored funds 30,555 29,541 Sponsored privately offered funds 614 — Total trading securities 164,561 175,365 Equity method securities: Sponsored funds 20,441 26,775 Sponsored privately offered funds 3,545 3,234 Total equity method securities 23,986 30,009 Total securities $ 309,303 328,750 Mortgage-backed securities accounted for as trading and held as of March 31, 2017 mature in 2022. The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at March 31, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ 124,954 1,258 (5,456) 120,756 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2016: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ 129,427 828 (7,449) 122,806 Sponsored privately offered funds 265 305 — 570 $ 129,692 1,133 (7,449) 123,376 A summary of available for sale sponsored funds with fair values below carrying values at March 31, 2017 and December 31, 2016 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized March 31, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ 56,153 (1,268) 35,291 (4,188) 91,444 (5,456) Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2016 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ 71,051 (1,834) 34,182 (5,615) 105,233 (7,449) Based upon our assessment of these sponsored funds, the time frame the investments have been in a loss position and our intent to hold sponsored funds until they have recovered; we determined that a write-down was not necessary at March 31, 2017. Sponsored Funds The Company has classified its investments in the Advisors 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 Advisors 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 their legal structure and the powers of their 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 VIE and are considered to be VOEs. Consolidated Sponsored Funds The following table details the balances related to consolidated sponsored funds at March 31, 2017, and at December 31, 2016, as well as the Company’s net interest in these funds: March 31, December 31, 2017 2016 (in thousands) Cash $ 3,638 6,885 Investments 133,276 145,710 Other assets 3,346 763 Other liabilities (2,253) (390) Redeemable noncontrolling interests (8,516) (10,653) Net interest in consolidated sponsored funds $ 129,491 142,315 During the three months ended March 31, 2017, we consolidated certain of the Ivy Funds in which we provided initial seed capital at the time of the fund’s formation. When we no longer have a controlling financial interest in a sponsored fund, it is deconsolidated from our financial statements. During the first quarter of 2017, we closed three of the IGI Funds that were previously consolidated. Accordingly, we deconsolidated $2.6 million from Cash and cash equivalents and $2.6 million from Redeemable noncontrolling interests. There was no impact to the Consolidated Statements of Income as a result of this deconsolidation, as the IGI Funds were carried at fair value. 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 pricing approaches evaluated differently 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 March 31, 2017 and December 31, 2016 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs. March 31, 2017 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Sponsored funds $ 120,756 — — — 120,756 Trading securities: Mortgage-backed securities — 12 — — 12 Common stock 104 — — — 104 Consolidated sponsored funds 94,945 38,331 — — 133,276 Sponsored funds 30,555 — — — 30,555 Sponsored privately offered funds measured at net asset value (1) — — — 614 614 Equity method securities: (2) Sponsored funds 20,441 — — — 20,441 Sponsored privately offered funds measured at net asset value (1) — — — 3,545 3,545 Total $ 266,801 38,343 — 4,159 309,303 December 31, 2016 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Sponsored funds $ 122,806 — — — 122,806 Sponsored privately offered funds measured at net asset value (1) — — — 570 570 Trading securities: Mortgage-backed securities — 13 — — 13 Common stock 101 — — — 101 Consolidated sponsored funds 100,847 44,863 — — 145,710 Sponsored funds 29,541 — — — 29,541 Equity method securities: (2) Sponsored funds 26,775 — — — 26,775 Sponsored privately offered funds measured at net asset value (1) — — — 3,234 3,234 Total $ 280,070 44,876 — 3,804 328,750 (1) 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. (2) Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value.

Derivative Financial Instrument

Derivative Financial Instruments	3 Months Ended
	Mar. 31, 2017
Derivative Financial Instruments
Derivative Financial Instruments	4. In 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 March 31, 2017, we had 97% of our investments in sponsored funds, excluding our available for sale portfolio, hedged, 83% 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. 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 $153.1 million and $160.2 million as of March 31, 2017 and December 31, 2016, respectively. These derivative financial 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 $5.4 million and $7.1 million in cash collateral with the counterparties of the total return swap contracts as of March 31, 2017 and December 31, 2016, respectively. 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 March 31, 2017 and December 31, 2016: March 31, December 31, 2017 2016 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current liabilities $ 476 The following is a summary of net losses recognized in income for the three months ended March 31, 2017 and March 31, 2016: Income statement Three months ended Three months ended location March 31, 2017 March 31, 2016 (in thousands) Total return swap contracts Investment and other income (loss) $ (11,045) (15,222)

Goodwill and Identifiable Intan

Goodwill and Identifiable Intangible Assets	3 Months Ended
	Mar. 31, 2017
Goodwill and Identifiable Intangible Assets
Goodwill and Identifiable Intangible Assets	5. 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 March 31, 2017 and December 31, 2016 are as follows: March 31, December 31, 2017 2016 (in thousands) Goodwill $ 106,970 106,970 Mutual fund management advisory contracts 38,699 38,699 Mutual fund management subadvisory contract 2,100 2,700 Other 200 200 Total identifiable intangible assets 40,999 41,599 Total $ 147,969 148,569

Indebtedness

Indebtedness	3 Months Ended
	Mar. 31, 2017
Indebtedness
Indebtedness	6. Debt is reported at its carrying amount in the consolidated balance sheet. The fair value of the Company’s senior unsecured notes maturing January 13, 2018 is $97.0 million at March 31, 2017 compared to the carrying value net of debt issuance costs of $94.9 million, which is listed under short-term notes payable in the consolidated balance sheet. The fair value of the Company’s senior unsecured notes maturing January 13, 2021 is $103.0 million at March 31, 2017 compared to the carrying value net of debt issuance costs of $94.7 million, which is listed under long-term debt in the consolidated balance sheet. Fair value is calculated based on Level 2 inputs.

Income Tax Uncertainties

Income Tax Uncertainties	3 Months Ended
	Mar. 31, 2017
Income Tax Uncertainties
Income Tax Uncertainties	7. As of January 1, 2017 and March 31, 2017, the Company had unrecognized tax benefits, including penalties and interest, of $11.5 million ($8.4 million net of federal benefit) and $11.8 million ($8.6 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, 2017, the total amount of accrued interest and penalties related to uncertain tax positions recognized in the consolidated balance sheet was $3.8 million ($3.1 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 three month period ended March 31, 2017 was $0.1 million. The total amount of accrued penalties and interest related to uncertain tax positions at March 31, 2017 of $3.9 million ($3.2 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 Company is currently under federal audit for the 2014 tax year. Additionally, the Company is currently under audit in a state jurisdiction in which it operates. It is reasonably possible that the Company will settle the audits in these jurisdictions within the next 12-month period. The Company’s liability for unrecognized tax benefits, including penalties and interest, is not expected to decrease significantly upon settlement of these audits. Additionally, such settlements are not anticipated to have a significant impact on the results of operations. The 2013, 2015 and 2016 federal income tax returns are open tax years that remain subject to potential future audit. State income tax returns for all years after 2012 and, in certain states, income tax returns for 2012, 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	3 Months Ended
	Mar. 31, 2017
Pension Plan and Postretirement Benefits Other Than Pension
Pension Plan and Postretirement Benefits Other Than Pension	8. We provide a noncontributory 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. During the first quarter of 2017, we contributed $10.0 million to the Pension Plan. We also sponsor an unfunded defined benefit postretirement medical plan that previously covered substantially all employees, as well as financial advisors licensed with Waddell & Reed, Inc. 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. During the third quarter of 2016, the Company amended this plan to discontinue the availability of coverage for any individuals who retire after December 31, 2016. Qualified employees who retired on or before December 31, 2016 may continue to participate in retiree coverage under the plan. The components of net periodic pension and other postretirement costs related to these plans were as follows: Other Pension Benefits Postretirement Benefits Three months ended March 31, Three months ended March 31, 2017 2016 2017 2016 (in thousands) Service cost 2,726 2,993 — 185 Interest cost 1,654 2,439 15 92 Expected return on plan assets (2,559) (3,536) — — Actuarial (gain) loss amortization 1,265 1,638 (45) (39) Prior service cost amortization 31 94 (1) 1 Transition obligation amortization 1 1 — — Total (1) 3,118 3,629 (31) 239 (1) For the three months ended March 31, 2017, $1.9 million and $1.2 million of net periodic pension and other postretirement benefit costs were included in compensation and related costs and underwriting and distribution expense, respectively.

Stockholders' Equity

Stockholders' Equity	3 Months Ended
	Mar. 31, 2017
Stockholders' Equity
Stockholders' Equity	9. Earnings per Share The components of basic and diluted earnings per share were as follows: Three months ended March 31, 2017 2016 Net income attributable to Waddell & Reed Financial, Inc. $ 33,056 36,968 Weighted average shares outstanding, basic and diluted 84,077 82,104 Earnings per share, basic and diluted $ 0.39 0.45 Dividends On February 14, 2017, the Board of Directors approved a dividend on our common stock in the amount of $0.46 per share to stockholders of record on April 10, 2017 paid on May 1, 2017. The total dividend paid was approximately $38.5 million and was included in other current liabilities as of March 31, 2017. 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 issuing shares to employees in our stock-based compensation programs. There were 476,882 shares and 1,125,671 shares repurchased in the open market or privately during the three months ended March 31, 2017 and 2016, respectively, which includes 1,882 shares and 3,671 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. Accumulated Other Comprehensive Loss The following tables summarize other comprehensive loss activity for the three months ended March 31, 2017 and March 31, 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 March 31, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2016 $ (3,972) (3,388) (45,969) (53,329) Other comprehensive income before reclassification 1,423 2,324 — 3,747 Amount reclassified from accumulated other comprehensive income (loss) (92) (56) 786 638 Net current period other comprehensive income 1,331 2,268 786 4,385 Balance at March 31, 2017 $ (2,641) $ (1,120) (45,183) (48,944) 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 March 31, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ (3,729) (3,240) (54,536) (61,505) Other comprehensive loss before reclassification (4) (1) — (5) Amount reclassified from accumulated other comprehensive income 51 30 1,077 1,158 Net current period other comprehensive income 47 29 1,077 1,153 Balance at March 31, 2016 $ (3,682) $ (3,211) (53,459) (60,352) Reclassifications from accumulated other comprehensive loss and included in net income are summarized in the tables that follow. For the three months ended March 31, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ 148 (56) 92 Investment and other income (loss) Valuation allowance — 56 56 Provision for income taxes Amortization and settlement of pension and postretirement benefits (1,251) 465 (786) Underwriting and distribution expense and Compensation and related costs Total $ (1,103) 465 (638) For the three months ended March 31, 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 $ (81) 30 (51) Investment and other income (loss) Valuation allowance — (30) (30) Provision for income taxes Amortization of pension and postretirement benefits (1,696) 619 (1,077) Underwriting and distribution expense and Compensation and related costs Total $ (1,777) 619 (1,158)

Share-Based Compensation

Share-Based Compensation	3 Months Ended
	Mar. 31, 2017
Share-Based Compensation
Share-Based Compensation	10. During the fourth quarter of 2016, the Company established a Cash Settled RSU Plan (the “RSU Plan”), which allows the Company to grant cash-settled restricted stock units (“RSUs”) to attract and retain key personnel and enable them to participate in the long-term growth of the Company. Unvested RSUs have no purchase price and vest in 25% increments over four years, beginning on the first anniversary of the grant date. On the vesting date, RSU holders receive a lump sum cash payment equal to the fair market value of one share of the Company’s Class A common stock, par value $0.01, for each RSU that has vested, subject to applicable tax withholdings. Holders of unvested RSUs do not have stockholders’ rights, but are entitled to receive dividend equivalent payments for each RSU equal to the dividend paid on one share of our Class A common stock. Unvested RSUs are forfeited upon the termination of employment with, or service to, the Company, as applicable, dependent on the circumstances of termination. We treat RSUs as liability-classified awards and, therefore, account for them at fair value based on the closing price of our Class A common stock on the reporting date, which results in variable compensation expense over the vesting period. In the first quarter of 2017, we granted 1,131,538 RSUs under the RSU Plan. The aggregate value of unvested RSUs on March 31, 2017 was $18.8 million based on the closing price of our Class A common stock on that date. In the first quarter of 2017, we granted 1,179,443 shares of restricted stock with an average fair value of $19.29 per share under the Company’s 1998 Stock Incentive Plan, as amended and restated. The value of those shares at the grant date, aggregating to $22.8 million, will be amortized to expense over a four-year vesting period.

Contingencies

Contingencies	3 Months Ended
	Mar. 31, 2017
Contingencies
Contingencies	11. 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 Topic.” 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 April 18, 2016 in the District Court of Johnson County, Kansas, Hieu Phan and Audrey Ohman v. Ivy Investment Management Company, et. al. (Case No. I6CV02338 Div. 4), two individuals who allegedly purchased shares of two affiliated registered investment companies (mutual funds) for which two of the Company’s subsidiaries provide investment management services filed a putative derivative action on behalf of the two nominal defendant affiliated mutual fund trusts alleging breach of fiduciary duty and breach of contract claims relating to investments held in the affiliated mutual funds by the Company's registered investment adviser subsidiaries, the two nominal defendant trusts, the current trustees and three retired trustees of the nominal defendant trusts, and an officer of the Company (who plaintiffs subsequently voluntarily dismissed). On behalf of the nominal defendant trusts, plaintiffs seek monetary damages and demand a jury trial. On April 6, 2017, the court granted one of the nominal defendant trust’s motion to dismiss the claims of plaintiff Ohman for lack of standing, without leave to amend. On May 2, 2017, the remaining nominal defendant filed a motion to stay the litigation pending the investigation and recommendation of special litigation committees of each of the nominal defendant trusts, a special committee of independent trustees established by the board of each trust and empowered to, among other things, investigate the claims alleged in the complaint; examine, and make recommendations to the board of trustees regarding, the merits of such alleged claims; and to make a recommendation to the court concerning the proper resolution of the litigation. Trial is currently set for July 16, 2018 through August 10, 2018, although there can be no assurance that the trial will take place on those dates. The Company denies that any of its subsidiaries breached their fiduciary duties to, or committed a breach of the investment management agreement with, the nominal defendant trusts. To date, only limited preliminary 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 S22

Description of Business and Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2017
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, 2016 (the “2016 Form 10-K”). Certain amounts in the prior year’s 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 2016 Form 10-K with the exception of the adoption of Accounting Standards Update (“ASU”) 2016-09, “ Improvements to Employee Share-Based Payment Accounting, ” effective January 1, 2017. As required by this ASU, excess tax benefits and tax shortfalls are recognized as income tax benefit or expense in the income statement on a prospective basis. Additionally, excess tax benefits or shortfalls recognized on share-based compensation are classified as an operating activity in the statement of cash flows. The Company has applied this provision prospectively, and thus, the prior period presented in the statement of cash flows has not been adjusted. This ASU allows entities to withhold shares issued during the settlement of a stock award or option, as means of meeting minimum tax withholding due by the employee, in an amount up to the employees’ maximum individual tax rate in the relevant jurisdiction without resulting in a liability classification of the award (versus an equity classification). The value of the withheld shares is then remitted by the Company in cash to the taxing authorities on the employees’ behalf. The Company’s historical policy to withhold shares equivalent to the minimum individual tax rate is consistent with the thresholds meeting the classification of an equity award and, therefore, a retrospective classification adjustment was not required. This ASU requires that all cash payments made to taxing authorities on the employees’ behalf for withheld shares be presented as financing activities on the statement of cash flows. As this requirement is consistent with the Company’s historical accounting policy, a retrospective adjustment to presentation of the statement of cash flows was not required. This standard also allows for the option to account for forfeitures as they occur when determining the amount of share-based compensation expense to be recognized, rather than estimating expected forfeitures over the course of a vesting period. The Company elected to account for forfeitures as they occur. The net cumulative effect to the Company from the adoption of this ASU was an increase to additional paid-in capital of $3.5 million, a reduction to retained earnings of $2.2 million and an increase to the non-current deferred tax asset of $1.3 million as of January 1, 2017. 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 March 31, 2017, and the results of operations and cash flows for the three months ended March 31, 2017 and 2016 in conformity with accounting principles generally accepted in the United States.

Investment Securities (Tables)

Investment Securities (Tables)	3 Months Ended
	Mar. 31, 2017
Investment Securities
Schedule of investment securities	March 31, December 31, 2017 2016 (in thousands) Available for sale securities: Sponsored funds $ 120,756 122,806 Sponsored privately offered funds — 570 Total available for sale securities 120,756 123,376 Trading securities: Mortgage-backed securities 12 13 Common stock 104 101 Consolidated sponsored funds 133,276 145,710 Sponsored funds 30,555 29,541 Sponsored privately offered funds 614 — Total trading securities 164,561 175,365 Equity method securities: Sponsored funds 20,441 26,775 Sponsored privately offered funds 3,545 3,234 Total equity method securities 23,986 30,009 Total securities $ 309,303 328,750
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 March 31, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ 124,954 1,258 (5,456) 120,756 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2016: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ 129,427 828 (7,449) 122,806 Sponsored privately offered funds 265 305 — 570 $ 129,692 1,133 (7,449) 123,376
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 March 31, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ 56,153 (1,268) 35,291 (4,188) 91,444 (5,456) Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2016 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ 71,051 (1,834) 34,182 (5,615) 105,233 (7,449)
Summary of balances related to consolidated sponsored funds as well the company’s net interest in these funds	March 31, December 31, 2017 2016 (in thousands) Cash $ 3,638 6,885 Investments 133,276 145,710 Other assets 3,346 763 Other liabilities (2,253) (390) Redeemable noncontrolling interests (8,516) (10,653) Net interest in consolidated sponsored funds $ 129,491 142,315
Schedule of fair value of investment securities	March 31, 2017 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Sponsored funds $ 120,756 — — — 120,756 Trading securities: Mortgage-backed securities — 12 — — 12 Common stock 104 — — — 104 Consolidated sponsored funds 94,945 38,331 — — 133,276 Sponsored funds 30,555 — — — 30,555 Sponsored privately offered funds measured at net asset value (1) — — — 614 614 Equity method securities: (2) Sponsored funds 20,441 — — — 20,441 Sponsored privately offered funds measured at net asset value (1) — — — 3,545 3,545 Total $ 266,801 38,343 — 4,159 309,303 December 31, 2016 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Sponsored funds $ 122,806 — — — 122,806 Sponsored privately offered funds measured at net asset value (1) — — — 570 570 Trading securities: Mortgage-backed securities — 13 — — 13 Common stock 101 — — — 101 Consolidated sponsored funds 100,847 44,863 — — 145,710 Sponsored funds 29,541 — — — 29,541 Equity method securities: (2) Sponsored funds 26,775 — — — 26,775 Sponsored privately offered funds measured at net asset value (1) — — — 3,234 3,234 Total $ 280,070 44,876 — 3,804 328,750 (1) 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. Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value.

Derivative Financial Instrume24

Derivative Financial Instruments (Tables)	3 Months Ended
	Mar. 31, 2017
Derivative Financial Instruments
Schedule of fair value of derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds	March 31, December 31, 2017 2016 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current liabilities $ 476
Schedule of net losses recognized in income of derivative financial instrument	Income statement Three months ended Three months ended location March 31, 2017 March 31, 2016 (in thousands) Total return swap contracts Investment and other income (loss) $ (11,045) (15,222)

Goodwill and Identifiable Int25

Goodwill and Identifiable Intangible Assets (Tables)	3 Months Ended
	Mar. 31, 2017
Goodwill and Identifiable Intangible Assets
Schedule of goodwill and identifiable intangible assets	March 31, December 31, 2017 2016 (in thousands) Goodwill $ 106,970 106,970 Mutual fund management advisory contracts 38,699 38,699 Mutual fund management subadvisory contract 2,100 2,700 Other 200 200 Total identifiable intangible assets 40,999 41,599 Total $ 147,969 148,569

Pension Plan and Postretireme26

Pension Plan and Postretirement Benefits Other Than Pension (Tables)	3 Months Ended
	Mar. 31, 2017
Pension Plan and Postretirement Benefits Other Than Pension
Schedule of components of net periodic pension and other postretirement costs	Other Pension Benefits Postretirement Benefits Three months ended March 31, Three months ended March 31, 2017 2016 2017 2016 (in thousands) Service cost 2,726 2,993 — 185 Interest cost 1,654 2,439 15 92 Expected return on plan assets (2,559) (3,536) — — Actuarial (gain) loss amortization 1,265 1,638 (45) (39) Prior service cost amortization 31 94 (1) 1 Transition obligation amortization 1 1 — — Total (1) 3,118 3,629 (31) 239 For the three months ended March 31, 2017, $1.9 million and $1.2 million of net periodic pension and other postretirement benefit costs were included in compensation and related costs and underwriting and distribution expense, respectively.

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	3 Months Ended
	Mar. 31, 2017
Stockholders' Equity
Components of basic and diluted earnings per share	Three months ended March 31, 2017 2016 Net income attributable to Waddell & Reed Financial, Inc. $ 33,056 36,968 Weighted average shares outstanding, basic and diluted 84,077 82,104 Earnings per share, basic and diluted $ 0.39 0.45
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 March 31, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2016 $ (3,972) (3,388) (45,969) (53,329) Other comprehensive income before reclassification 1,423 2,324 — 3,747 Amount reclassified from accumulated other comprehensive income (loss) (92) (56) 786 638 Net current period other comprehensive income 1,331 2,268 786 4,385 Balance at March 31, 2017 $ (2,641) $ (1,120) (45,183) (48,944) 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 March 31, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ (3,729) (3,240) (54,536) (61,505) Other comprehensive loss before reclassification (4) (1) — (5) Amount reclassified from accumulated other comprehensive income 51 30 1,077 1,158 Net current period other comprehensive income 47 29 1,077 1,153 Balance at March 31, 2016 $ (3,682) $ (3,211) (53,459) (60,352)
Summary of reclassifications from accumulated other comprehensive income (loss) and included in net income	For the three months ended March 31, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ 148 (56) 92 Investment and other income (loss) Valuation allowance — 56 56 Provision for income taxes Amortization and settlement of pension and postretirement benefits (1,251) 465 (786) Underwriting and distribution expense and Compensation and related costs Total $ (1,103) 465 (638) For the three months ended March 31, 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 $ (81) 30 (51) Investment and other income (loss) Valuation allowance — (30) (30) Provision for income taxes Amortization of pension and postretirement benefits (1,696) 619 (1,077) Underwriting and distribution expense and Compensation and related costs Total $ (1,777) 619 (1,158)

Description of Business and S28

Description of Business and Significant Accounting Policies (Details) - USD ($) $ in Millions	Jan. 01, 2017	Mar. 31, 2017
Assets under management		$ 81,100
ASU 2016-09
Increase to additional paid-in capital	$ 3.5
Reduction to retained earnings	(2.2)
Increase to the non-current deferred tax asset	$ 1.3

Investment Securities - Investm

Investment Securities - Investment securities and summary of the gains (losses) related to securities (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available for sale securities:
Amortized cost		$ 129,692
Unrealized gains		1,133
Unrealized losses		(7,449)
Fair value	$ 120,756	123,376
Trading securities:
Fair value	164,561	175,365
Equity method securities
Equity method securities	23,986	30,009
Total investment securities	309,303	328,750
Sponsored funds
Available for sale securities:
Amortized cost	124,954	129,427
Unrealized gains	1,258	828
Unrealized losses	(5,456)	(7,449)
Fair value	120,756	122,806
Trading securities:
Fair value	30,555	29,541
Equity method securities
Equity method securities	20,441	26,775
Sponsored privately offered funds
Available for sale securities:
Amortized cost		265
Unrealized gains		305
Fair value		570
Trading securities:
Fair value	614
Equity method securities
Equity method securities	3,545	3,234
Mortgage-backed securities
Trading securities:
Fair value	12	13
Common Stock
Trading securities:
Fair value	104	101
Consolidated Sponsored Funds
Trading securities:
Fair value	$ 133,276	$ 145,710

Investment Securities - Availab

Investment Securities - Available for sale sponsored funds with fair values below carrying values (Details) - Sponsored funds - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair value
Less than 12 months	$ 56,153	$ 71,051
12 months or longer	35,291	34,182
Total temporarily impaired securities	91,444	105,233
Unrealized losses
Less than 12 months	(1,268)	(1,834)
12 months or longer	(4,188)	(5,615)
Total Unrealized losses on temporarily impaired securities	$ (5,456)	$ (7,449)

Investment Securities - Consoli

Investment Securities - Consolidated sponsored funds (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Investment Securities
Cash	$ 565,171	$ 555,102	$ 447,112	$ 558,495
Redeemable noncontrolling interests	(8,516)	(10,653)
Consolidated Sponsored Funds
Investment Securities
Cash	3,638	6,885
Investments	133,276	145,710
Other assets	3,346	763
Other liabilities	(2,253)	(390)
Redeemable noncontrolling interests	(8,516)	(10,653)
Net interest in consolidated sponsored funds	129,491	$ 142,315
Deconsolidated sponsored funds value	2,600
Deconsolidated redeemable noncontrolling interest	$ 2,600

Investment Securities - Fair va

Investment Securities - Fair value of investment securities (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair value of investments
Available-for-sale Securities	$ 120,756	$ 123,376
Trading Securities	164,561	175,365
Equity method securities	23,986	30,009
Total investment securities	309,303	328,750
Total Estimated Fair Value
Fair value of investments
Total investment securities	309,303	328,750
Sponsored funds
Fair value of investments
Available-for-sale Securities	120,756	122,806
Trading Securities	30,555	29,541
Equity method securities	20,441	26,775
Sponsored funds | Total Estimated Fair Value
Fair value of investments
Available-for-sale Securities	120,756	122,806
Trading Securities	30,555	29,541
Equity method securities	20,441	26,775
Sponsored privately offered funds
Fair value of investments
Available-for-sale Securities		570
Trading Securities	614
Equity method securities	3,545	3,234
Sponsored privately offered funds | Total Estimated Fair Value
Fair value of investments
Available-for-sale Securities		570
Trading Securities	614
Equity method securities	3,545	3,234
Mortgage-backed securities
Fair value of investments
Trading Securities	12	13
Mortgage-backed securities | Total Estimated Fair Value
Fair value of investments
Trading Securities	12	13
Common Stock
Fair value of investments
Trading Securities	104	101
Common Stock | Total Estimated Fair Value
Fair value of investments
Trading Securities	104	101
Consolidated Sponsored Funds
Fair value of investments
Trading Securities	133,276	145,710
Consolidated Sponsored Funds | Total Estimated Fair Value
Fair value of investments
Trading Securities	133,276	145,710
Level 1
Fair value of investments
Total investment securities	266,801	280,070
Level 1 | Sponsored funds
Fair value of investments
Available-for-sale Securities	120,756	122,806
Trading Securities	30,555	29,541
Equity method securities	20,441	26,775
Level 1 | Common Stock
Fair value of investments
Trading Securities	104	101
Level 1 | Consolidated Sponsored Funds
Fair value of investments
Trading Securities	94,945	100,847
Level 2
Fair value of investments
Total investment securities	38,343	44,876
Level 2 | Mortgage-backed securities
Fair value of investments
Trading Securities	12	13
Level 2 | Consolidated Sponsored Funds
Fair value of investments
Trading Securities	38,331	44,863
Other Assets Not Held at Fair Value
Fair value of investments
Total investment securities	4,159	3,804
Other Assets Not Held at Fair Value | Sponsored privately offered funds
Fair value of investments
Available-for-sale Securities		570
Trading Securities	614
Equity method securities	$ 3,545	$ 3,234

Derivative Financial Instrume33

Derivative Financial Instruments (Details) - Not designated as a hedge $ in Thousands	3 Months Ended
	Mar. 31, 2017USD ($)contract	Mar. 31, 2016USD ($)	Dec. 31, 2016USD ($)
Total return swap contracts
Derivative Financial Instruments
Number of contracts | contract	3
Notional value	$ 153,100		$ 160,200
Cash collateral with the counterparties	5,400		7,100
Total return swap contracts | Investment and other income (loss)
Derivative Financial Instruments
Net gains (losses) recognized in income	(11,045)	$ (15,222)
Total return swap contracts | Other current liabilities
Derivative Financial Instruments
Fair value	$ 476		$ 475
Sponsored funds
Derivative Financial Instruments
Investment ownership interest (as a percent)	97.00%
Sponsored funds | Total return swap contracts
Derivative Financial Instruments
Investment ownership interest (as a percent)	83.00%

Goodwill and Identifiable Int34

Goodwill and Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Goodwill and identifiable intangible assets
Goodwill	$ 106,970	$ 106,970
Other	200	200
Total identifiable intangible assets	40,999	41,599
Total goodwill and identifiable intangible assets	147,969	148,569
Mutual fund management advisory contracts
Goodwill and identifiable intangible assets
Mutual fund contracts	38,699	38,699
Mutual fund management subadvisory contracts
Goodwill and identifiable intangible assets
Mutual fund contracts	$ 2,100	$ 2,700

Indebtedness (Details)

Indebtedness (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Indebtedness
Long-term debt	$ 94,729	$ 189,605
Senior 5.0% unsecured notes due, 2018 ("Series A Notes")
Indebtedness
Fair value of outstanding indebtedness	97,000
Long-term debt	94,900
Senior 5.75% unsecured notes due, 2021 ("Series B Notes")
Indebtedness
Fair value of outstanding indebtedness	103,000
Long-term debt	$ 94,700

Income Tax Uncertainties (Detai

Income Tax Uncertainties (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Income Tax Uncertainties
Unrecognized tax benefits, including penalties and interest that if recognized would impact effective tax rate	$ 11.8	$ 11.5
Unrecognized tax benefits, including penalties and interest, net of federal tax benefit that if recognized would affect effective tax rate	8.6	8.4
Accrued interest and penalties related to uncertain tax positions	3.9	3.8
Accrued interest and penalties related to uncertain tax positions, net of federal benefit	3.2	$ 3.1
Total expense of interest and penalties, net of federal benefit related to uncertain tax positions	$ 0.1

Pension Plan and Postretireme37

Pension Plan and Postretirement Benefits Other Than Pension (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
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	$ 10,000
Components of net periodic benefit cost:
Service cost	2,726	$ 2,993
Interest cost	1,654	2,439
Expected return on plan assets	(2,559)	(3,536)
Actuarial (gain) loss amortization	1,265	1,638
Prior service cost amortization	31	94
Transition obligation amortization	1	1
Total	3,118	3,629
Pension Benefits | Compensation and Related Costs
Components of net periodic benefit cost:
Total	$ 1,900
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
Interest cost	$ 15	92
Actuarial (gain) loss amortization	(45)	(39)
Prior service cost amortization	(1)	1
Total	(31)	$ 239
Other Postretirement Benefits | Underwriting and Distribution Expense
Components of net periodic benefit cost:
Total	$ 1,200

Stockholders' Equity - Earnings

Stockholders' Equity - Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands	Feb. 14, 2017	Mar. 31, 2017	Mar. 31, 2016
Components of basic and diluted earnings per share
Net income		$ 33,056	$ 36,968
Weighted average shares outstanding - basic and diluted		84,077,000	82,104,000
Earnings per share:
Earnings per share, basic and diluted (in dollars per share)		$ 0.39	$ 0.45
Dividends
Dividends accrued, per share (in dollars per share)	$ 0.46	$ 0.46
Dividends to be paid		$ 38,500
Common stock repurchases
Shares repurchased in the open market or privately		476,882	1,125,671
Shares repurchased from employees to cover minimum income tax withholdings		1,882	3,671

Stockholders' Equity - Other co

Stockholders' Equity - Other comprehensive income (loss) activity (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	$ 844,002
Net current period other comprehensive income (loss)	4,385
Balance at the end of the period	848,884
Accumulated Other Comprehensive Income(Loss)
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(53,329)	$ (61,505)
Other comprehensive income (loss) before reclassification	3,747	(5)
Amount reclassified from accumulated other comprehensive income (loss)	638	1,158
Net current period other comprehensive income (loss)	4,385	1,153
Balance at the end of the period	(48,944)	(60,352)
Unrealized (gains) losses on investment securities
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(3,972)	(3,729)
Other comprehensive income (loss) before reclassification	1,423	(4)
Amount reclassified from accumulated other comprehensive income (loss)	(92)	51
Net current period other comprehensive income (loss)	1,331	47
Balance at the end of the period	(2,641)	(3,682)
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	(3,388)	(3,240)
Other comprehensive income (loss) before reclassification	2,324	(1)
Amount reclassified from accumulated other comprehensive income (loss)	(56)	30
Net current period other comprehensive income (loss)	2,268	29
Balance at the end of the period	(1,120)	(3,211)
Pension and postretirement benefits
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(45,969)	(54,536)
Amount reclassified from accumulated other comprehensive income (loss)	786	1,077
Net current period other comprehensive income (loss)	786	1,077
Balance at the end of the period	$ (45,183)	$ (53,459)

Stockholders' Equity - Reclassi

Stockholders' Equity - Reclassifications from accumulated other comprehensive income (loss) and included in net income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	$ (1,103)	$ (1,777)
Tax (expense) benefit	465	619
Net of tax	(638)	(1,158)
Realized gain (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	148	(81)
Tax (expense) benefit	(56)	30
Net of tax	92	(51)
Change in valuation allowance for unrealized gains (losses) on investment securities
Reclassifications included in net income:
Net of tax	56	(30)
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	56	(30)
Net of tax	56	(30)
Pension and postretirement benefits
Reclassifications included in net income:
Net of tax	(786)	(1,077)
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	(1,251)	(1,696)
Tax (expense) benefit	465	619
Net of tax	$ (786)	$ (1,077)

Share-Based Compensation (Detai

Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Class A Common stock-par value (in dollars per share)	$ 0.01	$ 0.01
Restricted Stock Units (RSUs) | RSU Plan
Percentage increments vested on anniversaries of the grant date	25.00%
Vesting period	4 years
Class A Common stock-par value (in dollars per share)	$ 0.01
Granted (in shares)	1,131,538
Aggregate value of nonvested shares	$ 18.8
Restricted Stock | 1998 Stock Incentive Plan ("SI Plan")
Vesting period	4 years
Granted (in shares)	1,179,443
Granted (in dollars per share)	$ 19.29
Aggregate value of nonvested shares	$ 22.8

Contingencies (Details)

Contingencies (Details)	Apr. 18, 2016item
Contingencies
Number of affiliated mutual fund trustees involved in litigation	2
Number of subsidiaries	2