Waddell & Reed Financial (WDR) 10-Q 27 Oct 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 20, 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	Sep. 30, 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		83,371,059
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q3

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets:
Cash and cash equivalents	$ 225,922	$ 555,102
Cash and cash equivalents - restricted	35,551	31,137
Investment securities	697,138	328,750
Receivables:
Funds and separate accounts	22,510	27,181
Customers and other	114,723	128,095
Prepaid expenses and other current assets	22,943	21,574
Total current assets	1,118,787	1,091,839
Property and equipment, net	91,708	102,449
Goodwill and identifiable intangible assets	147,069	148,569
Deferred income taxes	20,457	31,430
Other non-current assets	20,834	31,985
Total assets	1,398,855	1,406,272
Liabilities:
Accounts payable	31,391	28,023
Payable to investment companies for securities	50,320	53,691
Payable to third party brokers	24,857	31,735
Payable to customers	60,118	82,918
Short-term notes payable	94,971
Accrued compensation	49,680	41,672
Other current liabilities	58,867	58,939
Total current liabilities	370,204	296,978
Long-term debt	94,765	189,605
Accrued pension and postretirement costs	8,874	38,379
Other non-current liabilities	24,071	26,655
Total liabilities	497,914	551,617
Commitments and contingencies
Redeemable noncontrolling interests	30,636	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; 83,373 shares outstanding (83,118 at December 31, 2016)	997	997
Additional paid-in capital	296,116	291,908
Retained earnings	1,112,374	1,135,694
Cost of 16,328 common shares in treasury (16,583 at December 31, 2016)	(509,870)	(531,268)
Accumulated other comprehensive loss	(29,312)	(53,329)
Total stockholders' equity	870,305	844,002
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$ 1,398,855	$ 1,406,272

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 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	83,373	83,118
Common shares in treasury	16,328	16,583

Consolidated Statements of Inco

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues:
Investment management fees	$ 134,149	$ 138,745	$ 395,463	$ 424,403
Underwriting and distribution fees	128,892	135,778	386,499	428,748
Shareholder service fees	26,406	28,563	80,706	92,959
Total	289,447	303,086	862,668	946,110
Operating expenses:
Underwriting and distribution	149,400	152,999	450,843	508,080
Compensation and related costs (including share-based compensation of $14,180, $12,425, $42,419 and $38,573, respectively)	48,340	40,214	144,970	151,495
General and administrative	27,832	23,280	81,709	61,708
Subadvisory fees	3,566	2,566	9,457	6,984
Depreciation	5,230	4,541	15,626	13,163
Intangible asset impairment		5,700	1,500	5,700
Total	234,368	229,300	704,105	747,130
Operating income	55,079	73,786	158,563	198,980
Investment and other income (loss)	7,236	7,878	11,386	(1,653)
Interest expense	(2,796)	(2,792)	(8,370)	(8,336)
Income before provision for income taxes	59,519	78,872	161,579	188,991
Provision for income taxes	20,296	24,067	64,857	63,146
Net income	39,223	54,805	96,722	125,845
Net income attributable to redeemable noncontrolling interests	1,272	978	2,408	1,355
Net income attributable to Waddell & Reed Financial, Inc.	$ 37,951	$ 53,827	$ 94,314	$ 124,490
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share)	$ 0.45	$ 0.65	$ 1.13	$ 1.51
Weighted average shares outstanding, basic and diluted (in shares)	83,476	82,834	83,719	82,629

Consolidated Statements of Inc5

Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Consolidated Statements of Income
Compensation and related costs, share-based compensation	$ 14,180	$ 12,425	$ 42,419	$ 38,573

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Consolidated Statements of Comprehensive Income
Net income	$ 39,223	$ 54,805	$ 96,722	$ 125,845
Other comprehensive income:
Unrealized appreciation (depreciation) of available for sale investment securities during the period, net of income tax expense (benefit) of $364, $1, $(1,310), and $2, respectively	2,070	(344)	6,904	1,616
Pension and postretirement benefit, net of income tax expense (benefit) of $9,186, $(167), $10,080, and $1,018, respectively	15,601	(167)	17,113	1,870
Comprehensive income	56,894	54,294	120,739	129,331
Comprehensive income attributable to redeemable noncontrolling interests	1,272	978	2,408	1,355
Comprehensive income attributable to Waddell & Reed Financial, Inc.	$ 55,622	$ 53,316	$ 118,331	$ 127,976

Consolidated Statements of Com7

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Consolidated Statements of Comprehensive Income
Unrealized appreciation of available for sale investment securities during the period, income tax expense (benefit)	$ 364	$ 1	$ (1,310)	$ 2
Pension and postretirement benefits, income tax expense	$ 9,186	$ (167)	$ 10,080	$ 1,018

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						$ 124,490
Other comprehensive income					3,486
Balance at the end of the period at Sep. 30, 2016					(58,019)
Balance at the beginning of the period at Jun. 30, 2016					(57,508)
Increase (Decrease) in Stockholders' Equity
Net income						53,827
Other comprehensive income					(511)
Balance at the end of the period at Sep. 30, 2016					(58,019)
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			94,314			94,314
Recognition of equity compensation		37,737	374			38,111
Net issuance/forfeiture of nonvested shares		(37,033)		37,033
Dividends accrued, $1.38 per share			(115,808)			(115,808)
Repurchase of common stock				(15,635)		(15,635)
Other comprehensive income					24,017	24,017
Balance at the end of the period at Sep. 30, 2017	$ 997	296,116	1,112,374	(509,870)	(29,312)	870,305
Balance (in shares) at Sep. 30, 2017	99,701
Balance at the beginning of the period at Dec. 31, 2016						10,653
Increase (Decrease) in Redeemable Noncontrolling Interest
Net income						2,408
Net redemption and deconsolidation of redeemable noncontrolling interests in sponsored funds						17,575
Balance at the end of the period at Sep. 30, 2017						30,636
Balance at the beginning of the period at Jun. 30, 2017					(46,983)
Increase (Decrease) in Stockholders' Equity
Net income						37,951
Other comprehensive income					17,671
Balance at the end of the period at Sep. 30, 2017	$ 997	$ 296,116	$ 1,112,374	$ (509,870)	$ (29,312)	870,305
Balance (in shares) at Sep. 30, 2017	99,701
Balance at the end of the period at Sep. 30, 2017						$ 30,636

Consolidated Statement of Stoc9

Consolidated Statement of Stockholders’ Equity (Parenthetical) - $ / shares	Jul. 26, 2017	Sep. 30, 2017
Consolidated Statement of Stockholders’ Equity
Dividends accrued, per share (in dollars per share)	$ 0.46	$ 1.38

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net income	$ 96,722	$ 125,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,626	13,163
Write-down of impaired assets	1,500	5,700
Amortization of deferred sales commissions	3,799	21,842
Share-based compensation	38,111	38,573
Investments gain, net	(9,157)	(13,834)
Net purchases of trading securities	(36,643)	(24,353)
Net change in trading securities held by consolidated sponsored funds	(123,865)	(57,444)
Other	4,473	3,131
Changes in assets and liabilities:
Cash and cash equivalents - restricted	(4,414)	44,816
Customer and other receivables	13,372	67,338
Payable to investment companies for securities and payable to customers	(26,171)	(131,120)
Receivables from funds and separate accounts	4,671	8,729
Other assets	5,050	(2,826)
Accounts payable and payable to third party brokers	(3,510)	(21,738)
Other liabilities	3,856	(11,763)
Net cash (used in) provided by operating activities	(16,580)	66,059
Cash flows from investing activities:
Purchases of available for sale and equity method securities	(291,539)	(71,852)
Proceeds from sales of available for sale and equity method securities	97,917	148,373
Additions to property and equipment	(5,358)	(13,933)
Net cash of sponsored funds on consolidation		6,887
Other		(194)
Net cash (used in) provided by investing activities	(198,980)	69,281
Cash flows from financing activities:
Dividends paid	(115,691)	(114,736)
Repurchase of common stock	(15,635)	(47,984)
Net subscriptions, (redemptions, distributions and deconsolidations) of redeemable noncontrolling interests in sponsored funds	17,575	(3,695)
Other	131	2,364
Net cash used in financing activities	(113,620)	(164,051)
Net decrease in cash and cash equivalents	(329,180)	(28,711)
Cash and cash equivalents at beginning of period	555,102	558,495
Cash and cash equivalents at end of period	$ 225,922	$ 529,784

Description of Business and Sig

Description of Business and Significant Accounting Policies	9 Months Ended
	Sep. 30, 2017
Description of Business and Significant Accounting Policies
Description of Business and Significant Accounting Policies	WADDELL & REED FINANCIAL, INC. NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 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 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”). In the second quarter of 2017, we launched index funds in partnership with ProShares ® Advisors LLC (“Ivy ProShares”) (collectively, the Advisors Funds, Ivy Funds, Ivy VIP, InvestEd, IVH, Ivy NextShares and Ivy ProShares are referred to as the “Funds”). As of September 30, 2017, we had $80.9 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 primarily includes transfer agency fees, custodian fees from retirement plan accounts, and portfolio accounting and administration fees. Transfer agency fees are asset-based and/or account-based revenues. Portfolio accounting and administration fees are asset-based revenues. Custodian fees from retirement plan accounts are based on the 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 resulting from share-based compensation 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 a 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. 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 September 30, 2017 and the results of operations and cash flows for the nine months ended September 30, 2017 and 2016 in conformity with accounting principles generally accepted in the United States.

New Accounting Guidance

New Accounting Guidance	9 Months Ended
	Sep. 30, 2017
New Accounting Guidance
New Accounting Guidance	2. 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. The Company has assessed its revenue streams to identify contracts that are subject to the requirements of the new standard. The Company plans to review the identified contracts and while we have not identified material changes in the timing of revenue recognition, we continue to evaluate the quantitative impact the ASU will have on the 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 have concluded that the adoption of this ASU will have an immaterial impact 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. Upon adoption of this ASU on January 1, 2018, we will include cash and cash equivalents – restricted as a component of cash and cash equivalents on the Company’s consolidated statements of cash flows for all periods presented, and will remove the change in cash and cash equivalents-restricted as a component of net cash (used in) provided by operating activities. 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 have concluded that the adoption of this ASU will have no effect on our net income because it only impacts the classification of certain information on the consolidated statement of income. The service cost component of net periodic benefit cost was recognized in underwriting and distribution, and compensation and related costs through September 30, 2017. An amendment to freeze our noncontributory retirement plan that covers substantially all employees and certain vested employees of our former parent company (the “Pension Plan”) was approved effective September 30, 2017; therefore, after September 30, 2017 we will no longer incur service cost. The other components of net periodic cost will be reclassified to investment and other income (loss) on a retrospective basis. In May 2017, FASB issued ASU 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting.” This ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718, “Compensation – Stock Compensation Topic.” This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, 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.

Investment Securities

Investment Securities	9 Months Ended
	Sep. 30, 2017
Investment Securities
Investment Securities	3. Investment securities at September 30, 2017 and December 31, 2016 are as follows: September 30, December 31, 2017 2016 (in thousands) Available for sale securities: Certificates of deposit $ 13,004 — Commercial paper 29,882 — Corporate bonds 171,099 — U.S. treasury bills 19,937 — Sponsored funds 144,423 122,806 Sponsored privately offered funds — 570 Total available for sale securities 378,345 123,376 Trading securities: Certificates of deposit 2,000 — U.S. treasury bills 4,964 — Corporate bonds 48,712 — Mortgage-backed securities 11 13 Common stock 117 101 Consolidated sponsored funds 191,932 145,710 Consolidated sponsored privately offered funds 4,564 — Sponsored funds 13,456 29,541 Sponsored privately offered funds 657 — Total trading securities 266,413 175,365 Equity method securities: Sponsored funds 52,380 26,775 Sponsored privately offered funds — 3,234 Total equity method securities 52,380 30,009 Total securities $ 697,138 328,750 Certificates of deposit, commercial paper, corporate bonds and U.S. treasury bills accounted for as available for sale and held as of September 30, 2017 mature as follows: Amortized cost Fair value (in thousands) Within one year $ 75,335 75,349 After one year but within five years 158,845 158,573 $ 234,180 233,922 Certificates of deposit, commercial paper, corporate bonds and mortgage-backed securities accounted for as trading and held as of September 30, 2017 mature as follows: Fair value (in thousands) Within one year $ 10,084 After one year but within five years 40,603 After 10 years 5,000 $ 55,687 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at September 30, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 13,000 4 — 13,004 Commercial paper 29,855 27 — 29,882 Corporate bonds 171,306 34 (241) 171,099 U.S. treasury bills 20,020 — (83) 19,937 Sponsored funds 144,886 1,961 (2,424) 144,423 $ 379,067 2,026 (2,748) 378,345 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 investment securities with fair values below carrying values at September 30, 2017 and December 31, 2016 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized September 30, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Corporate bonds $ 141,950 (241) — — 141,950 (241) U.S. treasury bills 19,937 (83) — — 19,937 (83) Sponsored funds 12,663 (153) 44,593 (2,271) 57,256 (2,424) $ 174,550 (477) 44,593 (2,271) 219,143 (2,748) 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 investment securities, the time frame the investments have been in a loss position and our intent to hold the investment securities until they have recovered, we determined that a write-down was not necessary at September 30, 2017. Sponsored Funds The Company has classified its investments in the Ivy Funds, Ivy Nextshares, Ivy ProShares 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 Ivy Funds, Ivy NextShares and Ivy ProShares 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 September 30, 2017, and at December 31, 2016, as well as the Company’s net interest in these funds: September 30, December 31, 2017 2016 (in thousands) Cash $ 4,877 6,885 Investments 196,496 145,710 Other assets 6,334 763 Other liabilities (7,072) (390) Redeemable noncontrolling interests (30,636) (10,653) Net interest in consolidated sponsored funds $ 169,999 142,315 During the nine months ended September 30, 2017, we consolidated certain of the Ivy Funds, Ivy NextShares and Ivy ProShares 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 consolidated financial statements. During the first nine months of 2017, we closed three IGI Funds and deconsolidated the Ivy ProShares, as we no longer have a controlling interest in the funds. Accordingly, we deconsolidated $2.6 million from cash and cash equivalents, $28.6 million from investments and $31.2 million from redeemable noncontrolling interests. Four IGI Funds remain consolidated as of September 30, 2017. There was no impact to the consolidated statements of income as a result of the closures and deconsolidations, as the funds were carried at fair value. 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. The fair value of equity derivatives is measured based on active market broker quotes, evaluated broker quotes and evaluated prices from vendors. The following tables summarize our investment securities as of September 30, 2017 and December 31, 2016 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs. September 30, 2017 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Certificates of deposit $ — 13,004 — — 13,004 Commercial paper — 29,882 — — 29,882 Corporate bonds — 171,099 — — 171,099 U.S. treasury bills — 19,937 — — 19,937 Sponsored funds 144,423 — — — 144,423 Trading securities: Certificates of deposit — 2,000 — — 2,000 U.S. treasury bills — 4,964 — — 4,964 Corporate bonds — 48,712 — 48,712 Mortgage-backed securities — 11 — — 11 Common stock 117 — — — 117 Consolidated sponsored funds 114,707 77,225 — — 191,932 Consolidated sponsored privately offered funds measured at net asset value (1) — — — 4,564 4,564 Sponsored funds 13,456 — — — 13,456 Sponsored privately offered funds measured at net asset value (1) — — — 657 657 Equity method securities: (2) Sponsored funds 52,380 — — — 52,380 Total $ 325,083 366,834 — 5,221 697,138 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	9 Months Ended
	Sep. 30, 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. 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 seven total return swap contracts with a combined notional value of $208.5 million and three total return swap contracts with a combined notional value of $160.2 million as of September 30, 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 $9.2 million and $7.1 million in cash collateral with the counterparties of the total return swap contracts as of September 30, 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 September 30, 2017 and December 31, 2016: September 30, December 31, 2017 2016 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current liabilities $ 811 475 The following is a summary of net losses recognized in income for the three and nine months ended September 30, 2017 and September 30, 2016: Three months ended Nine months ended Income statement September 30, September 30, location 2017 2016 2017 2016 (in thousands) (in thousands) Total return swap contracts Investment and other (loss) $ (8,855) (8,837) (27,321) (30,767)

Goodwill and Identifiable Intan

Goodwill and Identifiable Intangible Assets	9 Months Ended
	Sep. 30, 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 September 30, 2017 and December 31, 2016 are as follows: September 30, 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 1,200 2,700 Other 200 200 Total identifiable intangible assets 40,099 41,599 Total $ 147,069 148,569

Indebtedness

Indebtedness	9 Months Ended
	Sep. 30, 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 $95.8 million at September 30, 2017 compared to the carrying value net of debt issuance costs of $95.0 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 $102.9 million at September 30, 2017 compared to the carrying value net of debt issuance costs of $94.8 million, which is listed under long-term debt in the consolidated balance sheet. Fair value is calculated based on Level 2 inputs. On October 20, 2017, we entered into a three-year unsecured revolving credit facility (the “New Credit Facility”) with various lenders, which initially provides for borrowings of up to $100.0 million and may be expanded to $200.0 million. The New Credit Facility replaced the prior credit facility, which was set to terminate in June 2018. The covenants in the New Credit Facility are consistent with the covenants in the prior credit facility, including the required consolidated leverage ratio and the consolidated interest coverage ratio.

Income Tax Uncertainties

Income Tax Uncertainties	9 Months Ended
	Sep. 30, 2017
Income Tax Uncertainties
Income Tax Uncertainties	7. As of January 1, 2017 and September 30, 2017, the Company had unrecognized tax benefits, including penalties and interest, of $11.5 million ($8.4 million net of federal benefit) and $11.2 million ($7.9 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 non-current 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 nine month period ended September 30, 2017 was $0.3 million. The total amount of accrued penalties and interest related to uncertain tax positions at September 30, 2017 of $4.1 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 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. During the current quarter, the Company closed an Internal Revenue Service audit of the 2014 tax year. This audit was settled with no significant adjustments. Additionally, the Company is currently under audit in various state and local jurisdictions 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.

Pension Plan and Postretirement

Pension Plan and Postretirement Benefits Other Than Pension	9 Months Ended
	Sep. 30, 2017
Pension Plan and Postretirement Benefits Other Than Pension
Pension Plan and Postretirement Benefits Other Than Pension	8. Benefits payable under the Pension Plan are based on employees’ years of service and compensation during the final 10 years of employment. On July 26, 2017, the Compensation Committee of the Company’s Board of Directors approved an amendment to freeze the Pension Plan effective September 30, 2017. After September 30, 2017, participants in the Pension Plan will not accrue additional benefits for future service or compensation. Participants will retain benefits accumulated as of September 30, 2017 in accordance with the terms of the Pension Plan. During the first nine months of 2017, we contributed $10.0 million to the Pension Plan. In accordance with applicable accounting standards, the Pension Plan’s assets and liabilities were remeasured as of July 31, 2017, the date participants were notified of the freeze. This resulted in a reduction of the accrued pension liability of approximately $30.0 million. 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 benefits after age 65 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. 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 September 30, Three months ended September 30, Nine months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 2017 2016 2017 2016 (in thousands) (in thousands) Components of net periodic benefit cost: Service cost 2,726 3,050 — 185 8,178 9,149 — 555 Interest cost 1,654 2,358 15 91 4,962 7,074 44 275 Expected return on plan assets (2,559) (3,482) — — (7,677) (10,445) — — Actuarial (gain) loss amortization 1,265 1,554 (45) (38) 3,795 4,661 (135) (115) Prior service cost (credit) amortization 31 93 (1) 1 93 280 (3) 3 Transition obligation amortization 1 1 — (8,475) 3 3 — (8,475) Total (1) $ 3,118 3,574 (31) (8,236) 9,354 10,722 (94) (7,757) (1) For the three months ended September 30, 2017, $1.1 million and $2.0 million of net periodic pension and other postretirement benefit costs were included in compensation and related costs and underwriting and distribution expense, respectively. For the nine months ended September 30, 2017, $4.8 million and $4.6 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	9 Months Ended
	Sep. 30, 2017
Stockholders' Equity
Stockholders' Equity	9. Earnings per Share The components of basic and diluted earnings per share were as follows: Three months ended Nine months ended September 30, September 30, 2017 2016 2017 2016 (in thousands, except per share amounts) Net income attributable to Waddell & Reed Financial, Inc. $ 37,951 53,827 $ 94,314 124,490 Weighted average shares outstanding, basic and diluted 83,476 82,834 83,719 82,629 Earnings per share, basic and diluted $ 0.45 0.65 $ 1.13 1.51 Dividends On July 26, 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 October 11, 2017. The total dividend to be paid on November 1, 2017 is approximately $38.4 million and was included in other current liabilities as of September 30, 2017. On October 18, 2017, the Board of Directors approved a dividend on our common stock in the amount of $0.25 per share, payable on February 1, 2018 to stockholders of record on January 11, 2018. 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 190,056 shares and 28,537 shares repurchased in the open market or privately during the three months ended September 30, 2017 and 2016, respectively, which includes 56 shares and 28,537 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 904,410 shares and 2,230,034 shares repurchased in the open market or privately during the nine months ended September 30, 2017 and 2016, respectively, which includes 239,410 shares and 333,034 shares, respectively, repurchased from employees who tendered shares to cover their minimum income tax withholdings with respect to the vesting of stock awards during each of these two reporting periods. Accumulated Other Comprehensive Loss The following tables summarize other comprehensive loss activity for the three and nine months ended September 30, 2017 and September 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 September 30, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at June 30, 2017 $ (1,986) (540) (44,457) (46,983) Other comprehensive income before reclassification 1,968 800 14,958 17,726 Amount reclassified from accumulated other comprehensive income (loss) (438) (260) 643 (55) Net current period other comprehensive income 1,530 540 15,601 17,671 Balance at September 30, 2017 $ (456) $ — (28,856) (29,312) 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 September 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at June 30, 2016 $ (2,498) (2,511) (52,499) (57,508) Other comprehensive income (loss) before reclassification 1,660 1,022 (1,222) 1,460 Amount reclassified from accumulated other comprehensive income (loss) (1,871) (1,155) 1,055 (1,971) Net current period other comprehensive loss (211) (133) (167) (511) Balance at September 30, 2016 $ (2,709) $ (2,644) (52,666) (58,019) Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Nine months ended September 30, 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 4,113 3,743 14,958 22,814 Amount reclassified from accumulated other comprehensive income (loss) (597) (355) 2,155 1,203 Net current period other comprehensive income 3,516 3,388 17,113 24,017 Balance at September 30, 2017 $ (456) $ — (28,856) (29,312) Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated (gains) losses (losses) on benefits other on investment investment unrealized comprehensive Nine months ended September 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ (3,729) (3,240) (54,536) (61,505) Other comprehensive income (loss) before reclassification 3,207 1,938 (1,222) 3,923 Amount reclassified from accumulated other comprehensive income (loss) (2,187) (1,342) 3,092 (437) Net current period other comprehensive income 1,020 596 1,870 3,486 Balance at September 30, 2016 $ (2,709) $ (2,644) (52,666) (58,019) Reclassifications from accumulated other comprehensive loss and included in net income are summarized in the tables that follow. For the three months ended September 30, 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 $ 698 (260) 438 Investment and other income (loss) Valuation allowance — 260 260 Provision for income taxes Amortization of pension and postretirement benefits (952) 309 (643) Underwriting and distribution expense and Compensation and related costs Total $ (254) 309 55 For the three months ended September 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 $ 2,980 (1,109) 1,871 Investment and other income (loss) Valuation allowance — 1,155 1,155 Provision for income taxes Amortization of pension and postretirement benefits (1,611) 556 (1,055) Underwriting and distribution expense and Compensation and related costs Total $ 1,369 602 1,971 For the nine months ended September 30, 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 $ 952 (355) 597 Investment and other income (loss) Valuation allowance — 355 355 Provision for income taxes Amortization of pension and postretirement benefits (3,359) 1,204 (2,155) Underwriting and distribution expense and Compensation and related costs Total $ (2,407) 1,204 (1,203) For the nine months ended September 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 $ 3,483 (1,296) 2,187 Investment and other income (loss) Valuation allowance — 1,342 1,342 Provision for income taxes Amortization of pension and postretirement benefits (4,833) 1,741 (3,092) Underwriting and distribution expense and Compensation and related costs Total $ (1,350) 1,787 437

Contingencies

Contingencies	9 Months Ended
	Sep. 30, 2017
Contingencies
Contingencies	10. 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 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. On June 13, 2017, the court granted a 60-day stay until August 12, 2017. Formal discovery has commenced. 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. 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. In an action filed on June 23, 2017 and amended on June 26, 2017 in the U.S. District Court for the District of Kansas, Schapker v. Waddell & Reed Financial, Inc., et al, (Case No. 17-2365 D. Kan.) , Stacy Schapker, a participant in the Company’s 401(k) and Thrift Plan, as amended and restated (the “401(k) Plan”), filed a lawsuit against the Company, the Company’s Board of Directors, the Administrative Committee of the 401(k) Plan, and unnamed Jane and John Doe Defendants 1-25. The amended complaint, which is filed on behalf of the 401(k) Plan and a proposed class of 401(k) Plan participants, purports to assert claims for breach of fiduciary duty and prohibited transactions under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) based on the 401(k) Plan’s offering of investments managed by the Company or its affiliates from June 23, 2011 to present. The amended complaint seeks, among other things, an order compelling the disgorgement of fees paid to the Company and its affiliates by the 401(k) Plan and the restoration of losses to the 401(k) Plan arising from defendants alleged ERISA violations, attorneys’ fees and other injunctive and equitable relief. The Company believes the allegations are without merit and intends to vigorously defend this matter. On October 6, 2017, the defendants filed a motion to dismiss the amended complaint. 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.

Description of Business and S21

Description of Business and Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 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 resulting from share-based compensation 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 a 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. 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 September 30, 2017 and the results of operations and cash flows for the nine months ended September 30, 2017 and 2016 in conformity with accounting principles generally accepted in the United States.

Investment Securities (Tables)

Investment Securities (Tables)	9 Months Ended
	Sep. 30, 2017
Investment Securities
Schedule of investment securities	September 30, December 31, 2017 2016 (in thousands) Available for sale securities: Certificates of deposit $ 13,004 — Commercial paper 29,882 — Corporate bonds 171,099 — U.S. treasury bills 19,937 — Sponsored funds 144,423 122,806 Sponsored privately offered funds — 570 Total available for sale securities 378,345 123,376 Trading securities: Certificates of deposit 2,000 — U.S. treasury bills 4,964 — Corporate bonds 48,712 — Mortgage-backed securities 11 13 Common stock 117 101 Consolidated sponsored funds 191,932 145,710 Consolidated sponsored privately offered funds 4,564 — Sponsored funds 13,456 29,541 Sponsored privately offered funds 657 — Total trading securities 266,413 175,365 Equity method securities: Sponsored funds 52,380 26,775 Sponsored privately offered funds — 3,234 Total equity method securities 52,380 30,009 Total securities $ 697,138 328,750
Summary of maturities of securities held	Certificates of deposit, commercial paper, corporate bonds and U.S. treasury bills accounted for as available for sale and held as of September 30, 2017 mature as follows: Amortized cost Fair value (in thousands) Within one year $ 75,335 75,349 After one year but within five years 158,845 158,573 $ 234,180 233,922 Certificates of deposit, commercial paper, corporate bonds and mortgage-backed securities accounted for as trading and held as of September 30, 2017 mature as follows: Fair value (in thousands) Within one year $ 10,084 After one year but within five years 40,603 After 10 years 5,000 $ 55,687
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 September 30, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 13,000 4 — 13,004 Commercial paper 29,855 27 — 29,882 Corporate bonds 171,306 34 (241) 171,099 U.S. treasury bills 20,020 — (83) 19,937 Sponsored funds 144,886 1,961 (2,424) 144,423 $ 379,067 2,026 (2,748) 378,345 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 September 30, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Corporate bonds $ 141,950 (241) — — 141,950 (241) U.S. treasury bills 19,937 (83) — — 19,937 (83) Sponsored funds 12,663 (153) 44,593 (2,271) 57,256 (2,424) $ 174,550 (477) 44,593 (2,271) 219,143 (2,748) 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	September 30, December 31, 2017 2016 (in thousands) Cash $ 4,877 6,885 Investments 196,496 145,710 Other assets 6,334 763 Other liabilities (7,072) (390) Redeemable noncontrolling interests (30,636) (10,653) Net interest in consolidated sponsored funds $ 169,999 142,315
Schedule of fair value of investment securities	3. Investment securities at September 30, 2017 and December 31, 2016 are as follows: September 30, December 31, 2017 2016 (in thousands) Available for sale securities: Certificates of deposit $ 13,004 — Commercial paper 29,882 — Corporate bonds 171,099 — U.S. treasury bills 19,937 — Sponsored funds 144,423 122,806 Sponsored privately offered funds — 570 Total available for sale securities 378,345 123,376 Trading securities: Certificates of deposit 2,000 — U.S. treasury bills 4,964 — Corporate bonds 48,712 — Mortgage-backed securities 11 13 Common stock 117 101 Consolidated sponsored funds 191,932 145,710 Consolidated sponsored privately offered funds 4,564 — Sponsored funds 13,456 29,541 Sponsored privately offered funds 657 — Total trading securities 266,413 175,365 Equity method securities: Sponsored funds 52,380 26,775 Sponsored privately offered funds — 3,234 Total equity method securities 52,380 30,009 Total securities $ 697,138 328,750 Certificates of deposit, commercial paper, corporate bonds and U.S. treasury bills accounted for as available for sale and held as of September 30, 2017 mature as follows: Amortized cost Fair value (in thousands) Within one year $ 75,335 75,349 After one year but within five years 158,845 158,573 $ 234,180 233,922 Certificates of deposit, commercial paper, corporate bonds and mortgage-backed securities accounted for as trading and held as of September 30, 2017 mature as follows: Fair value (in thousands) Within one year $ 10,084 After one year but within five years 40,603 After 10 years 5,000 $ 55,687 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at September 30, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 13,000 4 — 13,004 Commercial paper 29,855 27 — 29,882 Corporate bonds 171,306 34 (241) 171,099 U.S. treasury bills 20,020 — (83) 19,937 Sponsored funds 144,886 1,961 (2,424) 144,423 $ 379,067 2,026 (2,748) 378,345 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 investment securities with fair values below carrying values at September 30, 2017 and December 31, 2016 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized September 30, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Corporate bonds $ 141,950 (241) — — 141,950 (241) U.S. treasury bills 19,937 (83) — — 19,937 (83) Sponsored funds 12,663 (153) 44,593 (2,271) 57,256 (2,424) $ 174,550 (477) 44,593 (2,271) 219,143 (2,748) 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 investment securities, the time frame the investments have been in a loss position and our intent to hold the investment securities until they have recovered, we determined that a write-down was not necessary at September 30, 2017. Sponsored Funds The Company has classified its investments in the Ivy Funds, Ivy Nextshares, Ivy ProShares 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 Ivy Funds, Ivy NextShares and Ivy ProShares 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 September 30, 2017, and at December 31, 2016, as well as the Company’s net interest in these funds: September 30, December 31, 2017 2016 (in thousands) Cash $ 4,877 6,885 Investments 196,496 145,710 Other assets 6,334 763 Other liabilities (7,072) (390) Redeemable noncontrolling interests (30,636) (10,653) Net interest in consolidated sponsored funds $ 169,999 142,315 During the nine months ended September 30, 2017, we consolidated certain of the Ivy Funds, Ivy NextShares and Ivy ProShares 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 consolidated financial statements. During the first nine months of 2017, we closed three IGI Funds and deconsolidated the Ivy ProShares, as we no longer have a controlling interest in the funds. Accordingly, we deconsolidated $2.6 million from cash and cash equivalents, $28.6 million from investments and $31.2 million from redeemable noncontrolling interests. Four IGI Funds remain consolidated as of September 30, 2017. There was no impact to the consolidated statements of income as a result of the closures and deconsolidations, as the funds were carried at fair value. 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. The fair value of equity derivatives is measured based on active market broker quotes, evaluated broker quotes and evaluated prices from vendors. The following tables summarize our investment securities as of September 30, 2017 and December 31, 2016 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs. September 30, 2017 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Certificates of deposit $ — 13,004 — — 13,004 Commercial paper — 29,882 — — 29,882 Corporate bonds — 171,099 — — 171,099 U.S. treasury bills — 19,937 — — 19,937 Sponsored funds 144,423 — — — 144,423 Trading securities: Certificates of deposit — 2,000 — — 2,000 U.S. treasury bills — 4,964 — — 4,964 Corporate bonds — 48,712 — 48,712 Mortgage-backed securities — 11 — — 11 Common stock 117 — — — 117 Consolidated sponsored funds 114,707 77,225 — — 191,932 Consolidated sponsored privately offered funds measured at net asset value (1) — — — 4,564 4,564 Sponsored funds 13,456 — — — 13,456 Sponsored privately offered funds measured at net asset value (1) — — — 657 657 Equity method securities: (2) Sponsored funds 52,380 — — — 52,380 Total $ 325,083 366,834 — 5,221 697,138 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 Instrume23

Derivative Financial Instruments (Tables)	9 Months Ended
	Sep. 30, 2017
Derivative Financial Instruments
Schedule of fair value of derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds	September 30, December 31, 2017 2016 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current liabilities $ 811 475
Schedule of net losses recognized in income of derivative financial instrument	Three months ended Nine months ended Income statement September 30, September 30, location 2017 2016 2017 2016 (in thousands) (in thousands) Total return swap contracts Investment and other (loss) $ (8,855) (8,837) (27,321) (30,767)

Goodwill and Identifiable Int24

Goodwill and Identifiable Intangible Assets (Tables)	9 Months Ended
	Sep. 30, 2017
Goodwill and Identifiable Intangible Assets
Schedule of goodwill and identifiable intangible assets	September 30, 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 1,200 2,700 Other 200 200 Total identifiable intangible assets 40,099 41,599 Total $ 147,069 148,569

Pension Plan and Postretireme25

Pension Plan and Postretirement Benefits Other Than Pension (Tables)	9 Months Ended
	Sep. 30, 2017
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 September 30, Three months ended September 30, Nine months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 2017 2016 2017 2016 (in thousands) (in thousands) Components of net periodic benefit cost: Service cost 2,726 3,050 — 185 8,178 9,149 — 555 Interest cost 1,654 2,358 15 91 4,962 7,074 44 275 Expected return on plan assets (2,559) (3,482) — — (7,677) (10,445) — — Actuarial (gain) loss amortization 1,265 1,554 (45) (38) 3,795 4,661 (135) (115) Prior service cost (credit) amortization 31 93 (1) 1 93 280 (3) 3 Transition obligation amortization 1 1 — (8,475) 3 3 — (8,475) Total (1) $ 3,118 3,574 (31) (8,236) 9,354 10,722 (94) (7,757) (1) For the three months ended September 30, 2017, $1.1 million and $2.0 million of net periodic pension and other postretirement benefit costs were included in compensation and related costs and underwriting and distribution expense, respectively. For the nine months ended September 30, 2017, $4.8 million and $4.6 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)	9 Months Ended
	Sep. 30, 2017
Stockholders' Equity
Components of basic and diluted earnings per share	Three months ended Nine months ended September 30, September 30, 2017 2016 2017 2016 (in thousands, except per share amounts) Net income attributable to Waddell & Reed Financial, Inc. $ 37,951 53,827 $ 94,314 124,490 Weighted average shares outstanding, basic and diluted 83,476 82,834 83,719 82,629 Earnings per share, basic and diluted $ 0.45 0.65 $ 1.13 1.51
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 September 30, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at June 30, 2017 $ (1,986) (540) (44,457) (46,983) Other comprehensive income before reclassification 1,968 800 14,958 17,726 Amount reclassified from accumulated other comprehensive income (loss) (438) (260) 643 (55) Net current period other comprehensive income 1,530 540 15,601 17,671 Balance at September 30, 2017 $ (456) $ — (28,856) (29,312) 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 September 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at June 30, 2016 $ (2,498) (2,511) (52,499) (57,508) Other comprehensive income (loss) before reclassification 1,660 1,022 (1,222) 1,460 Amount reclassified from accumulated other comprehensive income (loss) (1,871) (1,155) 1,055 (1,971) Net current period other comprehensive loss (211) (133) (167) (511) Balance at September 30, 2016 $ (2,709) $ (2,644) (52,666) (58,019) Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Nine months ended September 30, 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 4,113 3,743 14,958 22,814 Amount reclassified from accumulated other comprehensive income (loss) (597) (355) 2,155 1,203 Net current period other comprehensive income 3,516 3,388 17,113 24,017 Balance at September 30, 2017 $ (456) $ — (28,856) (29,312) Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated (gains) losses (losses) on benefits other on investment investment unrealized comprehensive Nine months ended September 30, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ (3,729) (3,240) (54,536) (61,505) Other comprehensive income (loss) before reclassification 3,207 1,938 (1,222) 3,923 Amount reclassified from accumulated other comprehensive income (loss) (2,187) (1,342) 3,092 (437) Net current period other comprehensive income 1,020 596 1,870 3,486 Balance at September 30, 2016 $ (2,709) $ (2,644) (52,666) (58,019)
Summary of reclassifications from accumulated other comprehensive income (loss) and included in net income	For the three months ended September 30, 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 $ 698 (260) 438 Investment and other income (loss) Valuation allowance — 260 260 Provision for income taxes Amortization of pension and postretirement benefits (952) 309 (643) Underwriting and distribution expense and Compensation and related costs Total $ (254) 309 55 For the three months ended September 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 $ 2,980 (1,109) 1,871 Investment and other income (loss) Valuation allowance — 1,155 1,155 Provision for income taxes Amortization of pension and postretirement benefits (1,611) 556 (1,055) Underwriting and distribution expense and Compensation and related costs Total $ 1,369 602 1,971 For the nine months ended September 30, 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 $ 952 (355) 597 Investment and other income (loss) Valuation allowance — 355 355 Provision for income taxes Amortization of pension and postretirement benefits (3,359) 1,204 (2,155) Underwriting and distribution expense and Compensation and related costs Total $ (2,407) 1,204 (1,203) For the nine months ended September 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 $ 3,483 (1,296) 2,187 Investment and other income (loss) Valuation allowance — 1,342 1,342 Provision for income taxes Amortization of pension and postretirement benefits (4,833) 1,741 (3,092) Underwriting and distribution expense and Compensation and related costs Total $ (1,350) 1,787 437

Description of Business and S27

Description of Business and Significant Accounting Policies (Details) - USD ($) $ in Millions	Jan. 01, 2017	Sep. 30, 2017
Assets under management		$ 80,900
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 (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Available for sale securities:
Available for sale securities	$ 378,345	$ 123,376
Trading securities:
Trading securities	266,413	175,365
Equity method securities
Equity method securities	52,380	30,009
Total investment securities	697,138	328,750
Certificates of deposit
Available for sale securities:
Available for sale securities	13,004
Trading securities:
Trading securities	2,000
Commercial paper
Available for sale securities:
Available for sale securities	29,882
Mortgage-backed securities
Trading securities:
Trading securities	11	13
Corporate bonds
Available for sale securities:
Available for sale securities	171,099
Trading securities:
Trading securities	48,712
U.S. treasury bills
Available for sale securities:
Available for sale securities	19,937
Trading securities:
Trading securities	4,964
Common Stock
Trading securities:
Trading securities	117	101
Consolidated Sponsored Funds
Trading securities:
Trading securities	191,932	145,710
Consolidated sponsored privately offered funds
Trading securities:
Trading securities	4,564
Sponsored funds
Available for sale securities:
Available for sale securities	144,423	122,806
Trading securities:
Trading securities	13,456	29,541
Equity method securities
Equity method securities	52,380	26,775
Sponsored privately offered funds
Available for sale securities:
Available for sale securities		570
Trading securities:
Trading securities	$ 657
Equity method securities
Equity method securities		$ 3,234

Investment Securities - Maturit

Investment Securities - Maturity (Details) $ in Thousands	Sep. 30, 2017USD ($)
Amortized Cost
Within one year	$ 75,335
After one year but within five years	158,845
Total amortized cost	234,180
Fair value
Within one year	75,349
After one year but within five years	158,573
Total fair value	233,922
Fair value
Within one year	10,084
After one year but within five years	40,603
After 10 years	5,000
Total fair value	$ 55,687

Investment Securities - Inves30

Investment Securities - Investment securities and summary of the gains (losses) related to securities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Available for sale securities:
Amortized cost	$ 379,067	$ 129,692
Unrealized gains	2,026	1,133
Unrealized losses	(2,748)	(7,449)
Fair value	378,345	123,376
Certificates of deposit
Available for sale securities:
Amortized cost	13,000
Unrealized gains	4
Fair value	13,004
Commercial paper
Available for sale securities:
Amortized cost	29,855
Unrealized gains	27
Fair value	29,882
Corporate bonds
Available for sale securities:
Amortized cost	171,306
Unrealized gains	34
Unrealized losses	(241)
Fair value	171,099
U.S. treasury bills
Available for sale securities:
Amortized cost	20,020
Unrealized losses	(83)
Fair value	19,937
Sponsored funds
Available for sale securities:
Amortized cost	144,886	129,427
Unrealized gains	1,961	828
Unrealized losses	(2,424)	(7,449)
Fair value	$ 144,423	122,806
Sponsored privately offered funds
Available for sale securities:
Amortized cost		265
Unrealized gains		305
Fair value		$ 570

Investment Securities - Availab

Investment Securities - Available for sale sponsored funds with fair values below carrying values (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Fair value
Less than 12 months	$ 174,550
12 months or longer	44,593
Total temporarily impaired securities	219,143
Unrealized losses
Less than 12 months	(477)
12 months or longer	(2,271)
Total Unrealized losses on temporarily impaired securities	(2,748)
Write-off of sponsored funds
Sponsored funds wrote-off	1,500	$ 5,700
Corporate bonds
Fair value
Less than 12 months	141,950
Total temporarily impaired securities	141,950
Unrealized losses
Less than 12 months	(241)
Total Unrealized losses on temporarily impaired securities	(241)
U.S. treasury bills
Fair value
Less than 12 months	19,937
Total temporarily impaired securities	19,937
Unrealized losses
Less than 12 months	(83)
Total Unrealized losses on temporarily impaired securities	(83)
Sponsored funds
Fair value
Less than 12 months	12,663		$ 71,051
12 months or longer	44,593		34,182
Total temporarily impaired securities	57,256		105,233
Unrealized losses
Less than 12 months	(153)		(1,834)
12 months or longer	(2,271)		(5,615)
Total Unrealized losses on temporarily impaired securities	$ (2,424)		$ (7,449)

Investment Securities - Consoli

Investment Securities - Consolidated sponsored funds (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Investment Securities
Cash	$ 225,922	$ 555,102	$ 529,784	$ 558,495
Redeemable noncontrolling interests	(30,636)	(10,653)
Consolidated Sponsored Funds
Investment Securities
Cash	4,877	6,885
Investments	196,496	145,710
Other assets	6,334	763
Other liabilities	(7,072)	(390)
Redeemable noncontrolling interests	(30,636)	(10,653)
Net interest in consolidated sponsored funds	169,999	$ 142,315
Deconsolidated cash and cash equivalents value	2,600
Deconsolidated investments value	28,600
Deconsolidated redeemable noncontrolling interest	$ 31,200

Investment Securities - Fair va

Investment Securities - Fair value of investment securities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair value of investments
Available-for-sale Securities	$ 378,345	$ 123,376
Trading Securities	266,413	175,365
Equity method securities	52,380	30,009
Total investment securities	697,138	328,750
Certificates of deposit
Fair value of investments
Available-for-sale Securities	13,004
Trading Securities	2,000
Commercial paper
Fair value of investments
Available-for-sale Securities	29,882
Corporate bonds
Fair value of investments
Available-for-sale Securities	171,099
Trading Securities	48,712
U.S. treasury bills
Fair value of investments
Available-for-sale Securities	19,937
Trading Securities	4,964
Consolidated Sponsored Funds
Fair value of investments
Trading Securities	191,932	145,710
Consolidated sponsored privately offered funds
Fair value of investments
Trading Securities	4,564
Sponsored funds
Fair value of investments
Available-for-sale Securities	144,423	122,806
Trading Securities	13,456	29,541
Equity method securities	52,380	26,775
Sponsored privately offered funds
Fair value of investments
Available-for-sale Securities		570
Trading Securities	657
Equity method securities		3,234
Mortgage-backed securities
Fair value of investments
Trading Securities	11	13
Common Stock
Fair value of investments
Trading Securities	117	101
Level 1
Fair value of investments
Total investment securities	325,083	280,070
Level 1 | Consolidated Sponsored Funds
Fair value of investments
Trading Securities	114,707	100,847
Level 1 | Sponsored funds
Fair value of investments
Available-for-sale Securities	144,423	122,806
Trading Securities	13,456	29,541
Equity method securities	52,380	26,775
Level 1 | Common Stock
Fair value of investments
Trading Securities	117	101
Level 2
Fair value of investments
Total investment securities	366,834	44,876
Level 2 | Certificates of deposit
Fair value of investments
Available-for-sale Securities	13,004
Trading Securities	2,000
Level 2 | Commercial paper
Fair value of investments
Available-for-sale Securities	29,882
Level 2 | Corporate bonds
Fair value of investments
Available-for-sale Securities	171,099
Trading Securities	48,712
Level 2 | U.S. treasury bills
Fair value of investments
Available-for-sale Securities	19,937
Trading Securities	4,964
Level 2 | Consolidated Sponsored Funds
Fair value of investments
Trading Securities	77,225	44,863
Level 2 | Mortgage-backed securities
Fair value of investments
Trading Securities	11	13
Other Assets Not Held at Fair Value
Fair value of investments
Total investment securities	5,221	3,804
Other Assets Not Held at Fair Value | Consolidated sponsored privately offered funds
Fair value of investments
Trading Securities	4,564
Other Assets Not Held at Fair Value | Sponsored privately offered funds
Fair value of investments
Available-for-sale Securities		570
Trading Securities	$ 657
Equity method securities		$ 3,234

Derivative Financial Instrume34

Derivative Financial Instruments (Details) - Not designated as a hedge - Total return swap contracts $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017USD ($)contract	Sep. 30, 2016USD ($)	Sep. 30, 2017USD ($)contract	Sep. 30, 2016USD ($)	Dec. 31, 2016USD ($)contract
Derivative Financial Instruments
Number of contracts | contract	7		7		3
Notional value	$ 208,500		$ 208,500		$ 160,200
Cash collateral with the counterparties	9,200		9,200		7,100
Investment and other income (loss)
Derivative Financial Instruments
Net gains (losses) recognized in income	(8,855)	$ (8,837)	(27,321)	$ (30,767)
Other assets
Derivative Financial Instruments
Fair value - liabilities	$ 811		$ 811		$ 475

Goodwill and Identifiable Int35

Goodwill and Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Goodwill and identifiable intangible assets
Goodwill	$ 106,970	$ 106,970
Other	200	200
Total identifiable intangible assets	40,099	41,599
Total goodwill and identifiable intangible assets	147,069	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	$ 1,200	$ 2,700

Indebtedness (Details)

Indebtedness (Details) - USD ($) $ in Thousands	1 Months Ended
	Oct. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Indebtedness
Short-term notes payable		$ 94,971
Long-term debt		94,765	$ 189,605
Credit Facility | Subsequent Event
Indebtedness
Revolving credit facility term	3 years
Maximum borrowing capacity	$ 100,000
Amount that borrowing capacity can be expanded upon entity's request	$ 200,000
Senior 5.0% unsecured notes due, 2018 ("Series A Notes")
Indebtedness
Fair value of outstanding short-term indebtedness		95,800
Short-term notes payable		95,000
Senior 5.75% unsecured notes due, 2021 ("Series B Notes")
Indebtedness
Fair value of outstanding long-term indebtedness		102,900
Long-term debt		$ 94,800

Income Tax Uncertainties (Detai

Income Tax Uncertainties (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Income Tax Uncertainties
Unrecognized tax benefits, including penalties and interest that if recognized would impact effective tax rate	$ 11.2	$ 11.5
Unrecognized tax benefits, including penalties and interest, net of federal tax benefit that if recognized would affect effective tax rate	7.9	8.4
Accrued interest and penalties related to uncertain tax positions	4.1	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	$ 0.3

Pension Plan and Postretireme38

Pension Plan and Postretirement Benefits Other Than Pension (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 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
Reduction of the accrued pension liability	$ 30,000
Components of net periodic benefit cost:
Service cost	2,726	$ 3,050	8,178	$ 9,149
Interest cost	1,654	2,358	4,962	7,074
Expected return on plan assets	(2,559)	(3,482)	(7,677)	(10,445)
Actuarial (gain) loss amortization	1,265	1,554	3,795	4,661
Prior service cost (credit) amortization	31	93	93	280
Transition obligation amortization	1	1	3	3
Total	3,118	3,574	9,354	10,722
Pension Benefits | Compensation and Related Costs
Components of net periodic benefit cost:
Total	1,100		$ 4,800
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		555
Interest cost	15	91	$ 44	275
Actuarial (gain) loss amortization	(45)	(38)	(135)	(115)
Prior service cost (credit) amortization	(1)	1	(3)	3
Transition obligation amortization		(8,475)		(8,475)
Total	(31)	$ (8,236)	(94)	$ (7,757)
Other Postretirement Benefits | Underwriting and Distribution Expense
Components of net periodic benefit cost:
Total	$ 2,000		$ 4,600

Stockholders' Equity - Earnings

Stockholders' Equity - Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands	Oct. 18, 2017	Jul. 26, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Components of basic and diluted earnings per share
Net income attributable to Waddell & Reed Financial, Inc.			$ 37,951	$ 53,827	$ 94,314	$ 124,490
Weighted average shares outstanding - basic and diluted			83,476,000	82,834,000	83,719,000	82,629,000
Earnings per share:
Earnings per share, basic and diluted (in dollars per share)			$ 0.45	$ 0.65	$ 1.13	$ 1.51
Dividends
Dividends accrued, per share (in dollars per share)		$ 0.46			$ 1.38
Dividends to be paid			$ 38,400		$ 38,400
Common stock repurchases
Shares repurchased in the open market or privately			190,056	28,537	904,410	2,230,034
Shares repurchased from employees to cover minimum income tax withholdings			56	28,537	239,410	333,034
Subsequent Event
Dividends
Dividends accrued, per share (in dollars per share)	$ 0.25

Stockholders' Equity - Other co

Stockholders' Equity - Other comprehensive income (loss) activity (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period			$ 844,002
Net current period other comprehensive income (loss)			24,017
Balance at the end of the period	$ 870,305		870,305
Accumulated Other Comprehensive Income(Loss)
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(46,983)	$ (57,508)	(53,329)	$ (61,505)
Other comprehensive income (loss) before reclassification	17,726	1,460	22,814	3,923
Amount reclassified from accumulated other comprehensive income (loss)	(55)	(1,971)	1,203	(437)
Net current period other comprehensive income (loss)	17,671	(511)	24,017	3,486
Balance at the end of the period	(29,312)	(58,019)	(29,312)	(58,019)
Unrealized (gains) losses on investment securities
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(1,986)	(2,498)	(3,972)	(3,729)
Other comprehensive income (loss) before reclassification	1,968	1,660	4,113	3,207
Amount reclassified from accumulated other comprehensive income (loss)	(438)	(1,871)	(597)	(2,187)
Net current period other comprehensive income (loss)	1,530	(211)	3,516	1,020
Balance at the end of the period	(456)	(2,709)	(456)	(2,709)
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	(540)	(2,511)	(3,388)	(3,240)
Other comprehensive income (loss) before reclassification	800	1,022	3,743	1,938
Amount reclassified from accumulated other comprehensive income (loss)	(260)	(1,155)	(355)	(1,342)
Net current period other comprehensive income (loss)	540	(133)	3,388	596
Balance at the end of the period		(2,644)		(2,644)
Pension and postretirement benefits
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	(44,457)	(52,499)	(45,969)	(54,536)
Other comprehensive income (loss) before reclassification	14,958	(1,222)	14,958	(1,222)
Amount reclassified from accumulated other comprehensive income (loss)	643	1,055	2,155	3,092
Net current period other comprehensive income (loss)	15,601	(167)	17,113	1,870
Balance at the end of the period	$ (28,856)	$ (52,666)	$ (28,856)	$ (52,666)

Stockholders' Equity - Reclassi

Stockholders' Equity - Reclassifications from accumulated other comprehensive income (loss) and included in net income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	$ (254)	$ 1,369	$ (2,407)	$ (1,350)
Tax (expense) benefit	309	602	1,204	1,787
Net of tax	55	1,971	(1,203)	437
Sponsored funds investment gains | Investment and other income (loss) | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	698	2,980	952	3,483
Tax (expense) benefit	(260)	(1,109)	(355)	(1,296)
Net of tax	438	1,871	597	2,187
Change in valuation allowance for unrealized gains (losses) on investment securities
Reclassifications included in net income:
Net of tax	260	1,155	355	1,342
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	260	1,155	355	1,342
Net of tax	260	1,155	355	1,342
Pension and postretirement benefits
Reclassifications included in net income:
Net of tax	(643)	(1,055)	(2,155)	(3,092)
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	(952)	(1,611)	(3,359)	(4,833)
Tax (expense) benefit	309	556	1,204	1,741
Net of tax	$ (643)	$ (1,055)	$ (2,155)	$ (3,092)

Contingencies (Details)

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