Waddell & Reed Financial (WDR) 10-Q 4 May 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 27, 2018
Document and Entity Information
Entity Registrant Name	WADDELL & REED FINANCIAL INC
Entity Central Index Key	1,052,100
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		82,034,867
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q1

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets:
Cash and cash equivalents	$ 177,630	$ 207,829
Cash and cash equivalents - restricted	32,944	28,156
Investment securities	642,237	700,492
Receivables:
Funds and separate accounts	24,685	25,664
Customers and other	106,082	131,108
Prepaid expenses and other current assets	38,273	25,593
Total current assets	1,021,851	1,118,842
Property and equipment, net	82,488	87,667
Goodwill and identifiable intangible assets	147,069	147,069
Deferred income taxes	12,111	13,308
Other non-current assets	14,061	17,476
Total assets	1,277,580	1,384,362
Liabilities:
Accounts payable	36,790	38,998
Payable to investment companies for securities	45,397	43,422
Payable to third party brokers	24,037	25,153
Payable to customers	42,094	66,830
Short-term notes payable		94,996
Accrued compensation	43,556	47,643
Other current liabilities	47,585	44,797
Total current liabilities	239,459	361,839
Long-term debt	94,801	94,783
Accrued pension and postretirement costs	14,591	15,137
Other non-current liabilities	21,191	25,210
Total liabilities	370,042	496,969
Commitments and contingencies
Redeemable noncontrolling interests	18,570	14,509
Stockholders' equity:
Preferred stock-$1.00 par value: 5,000 shares authorized; none issued
Class A Common stock - $0.01 par value: 250,000 shares authorized; 99,701 shares issued; 82,662 shares outstanding (82,687 at December 31, 2017)	997	997
Additional paid-in capital	283,768	301,410
Retained earnings	1,118,922	1,092,394
Cost of 17,039 common shares in treasury (17,014 at December 31, 2017)	(513,241)	(522,441)
Accumulated other comprehensive (loss) income	(1,478)	524
Total stockholders' equity	888,968	872,884
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$ 1,277,580	$ 1,384,362

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2018	Dec. 31, 2017
Consolidated Balance Sheets
Preferred stock-par value (in dollars per share)	$ 1	$ 1
Preferred stock-shares authorized	5,000	5,000
Preferred stock-shares issued	0	0
Class A Common stock-par value (in dollars per share)	$ 0.01	$ 0.01
Class A Common stock-shares authorized	250,000	250,000
Class A Common stock-shares issued	99,701	99,701
Class A Common stock-shares outstanding	82,662	82,687
Common shares in treasury	17,039	17,014

Consolidated Statements of Inco

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues:
Total Revenues	$ 297,615	$ 286,564
Operating expenses:
Distribution	114,470	108,437
Compensation and benefits (including share-based compensation of $14,768 and $14,185, respectively)	68,785	67,035
General and administrative	19,538	22,195
Technology	16,644	16,977
Occupancy	6,964	7,785
Marketing and advertising	2,281	2,611
Depreciation	5,302	5,221
Subadvisory fees	3,708	2,697
Intangible asset impairment		600
Total	237,692	233,558
Operating income	59,923	53,006
Investment and other income	2,816	3,012
Interest expense	(1,802)	(2,786)
Income before provision for income taxes	60,937	53,232
Provision for income taxes	14,966	18,881
Net income	45,971	34,351
Net (loss) income attributable to redeemable noncontrolling interests	(366)	480
Net income attributable to Waddell & Reed Financial, Inc.	$ 46,337	$ 33,871
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share)	$ 0.56	$ 0.40
Weighted average shares outstanding, basic and diluted (in shares)	83,111	84,077
Investment management fees
Revenues:
Total Revenues	$ 133,692	$ 130,436
Underwriting and distribution fees
Revenues:
Total Revenues	138,041	128,831
Shareholder service fees
Revenues:
Total Revenues	$ 25,882	$ 27,297

Consolidated Statements of Inc5

Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Consolidated Statements of Income
Compensation and Benefits, share-based compensation	$ 14,768	$ 14,185

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Consolidated Statements of Comprehensive Income
Net income	$ 45,971	$ 34,351
Other comprehensive income:
Unrealized (depreciation) appreciation of available for sale investment securities during the period, net of income tax benefit of $(691) and $(1,481), respectively	(1,131)	3,599
Postretirement benefit, net of income tax benefit of $(114) and $(17) respectively	(23)	(29)
Comprehensive income	44,817	37,921
Comprehensive (loss) income attributable to redeemable noncontrolling interests	(366)	480
Comprehensive income attributable to Waddell & Reed Financial, Inc.	$ 45,183	$ 37,441

Consolidated Statements of Com7

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Consolidated Statements of Comprehensive Income
Unrealized (depreciation) appreciation of available for sale investment securities during the period, net of income tax benefit	$ (351)	$ (1,481)
Postretirement benefit, net of income tax benefit	$ (7)	$ (17)

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, 2016					$ (6,757)
Increase (Decrease) in Stockholders' Equity
Net income						$ 33,871
Balance at the end of the period at Mar. 31, 2017					(3,187)
Balance at the beginning of the period at Dec. 31, 2017	$ 997	$ 301,410	$ 1,092,394	$ (522,441)	524	872,884
Balance (in shares) at Dec. 31, 2017	99,701
Increase (Decrease) in Stockholders' Equity
Adoption of ASU guidance on January 1, 2018 | ASU 2016-01			812		(812)
Adoption of ASU guidance on January 1, 2018 | ASU 2018-02			36		(36)
Adoption of ASU guidance on January 1, 2018					(848)
Net income			46,337			46,337
Recognition of equity compensation		12,065	209			12,274
Net issuance/forfeiture of nonvested shares		(29,707)		29,707
Dividends accrued, $0.25 per share			(20,866)			(20,866)
Repurchase of common stock				(20,507)		(20,507)
Other comprehensive loss					(1,154)	(1,154)
Balance at the end of the period at Mar. 31, 2018	$ 997	$ 283,768	$ 1,118,922	$ (513,241)	$ (1,478)	888,968
Balance (in shares) at Mar. 31, 2018	99,701
Balance at the beginning of the period at Dec. 31, 2017						14,509
Increase (Decrease) in Redeemable Noncontrolling Interest
Net income						(366)
Net redemption of redeemable noncontrolling interests in sponsored funds						4,427
Balance at the end of the period at Mar. 31, 2018						$ 18,570

Consolidated Statement of Stoc9

Consolidated Statement of Stockholders’ Equity (Parenthetical) - $ / shares	Feb. 13, 2018	Mar. 31, 2018
Consolidated Statement of Stockholders’ Equity
Dividends accrued, per share (in dollars per share)	$ 0.25	$ 0.25

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net income	$ 45,971	$ 34,351
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,302	5,221
Write-down of impaired assets		600
Amortization of deferred sales commissions	996	1,436
Share-based compensation	14,768	14,185
Investments loss (gain), net	3,070	(2,975)
Net purchases of equity securities and trading debt securities	(1,386)
Deferred income taxes	1,555	4,721
Net change in equity securities and trading debt securities held by consolidated sponsored funds	(2,415)	12,434
Other	1,079	(3)
Changes in assets and liabilities:
Customer and other receivables	25,026	17,070
Payable to investment companies for securities and payable to customers	(22,761)	(6,496)
Receivables from funds and separate accounts	979	3,233
Other assets	(12,162)	(4,606)
Accounts payable and payable to third party brokers	(3,324)	(6,876)
Other liabilities	(6,433)	(8,730)
Net cash provided by operating activities	50,265	63,565
Cash flows from investing activities:
Proceeds from sales of equity and equity method securities		12,105
Proceeds from maturities of trading debt securities	56,686
Additions to property and equipment	(414)	(1,885)
Net cash provided by investing activities	56,272	10,220
Cash flows from financing activities:
Dividends paid	(20,890)	(38,771)
Repurchase of common stock	(20,507)	(7,976)
Repayment of short-term debt, net	(94,978)
Net subscriptions, (redemptions, distributions and deconsolidations) of redeemable noncontrolling interests in sponsored funds	4,427	(2,617)
Other		44
Net cash used in financing activities	(131,948)	(49,320)
Net (decrease) increase in cash and cash equivalents	(25,411)	24,465
Cash, cash equivalents, and restricted cash at beginning of period	235,985	586,239
Cash, cash equivalents, and restricted cash at end of period	$ 210,574	$ 610,704

Description of Business and Sig

Description of Business and Significant Accounting Policies	3 Months Ended
	Mar. 31, 2018
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”). On February 26, 2018, we completed the merger of Advisor Funds into Ivy Funds with substantially similar objectives and strategies (collectively, Ivy Funds, Ivy VIP, InvestEd, IVH, and Ivy NextShares are referred to as the “Funds”). As of March 31, 2018, we had $80.2 billion in assets under management. We derive our revenues from providing investment management and advisory services, investment product underwriting and distribution, and shareholder services administration to the Funds, the IGI Funds, and institutional and separately managed accounts. Investment management and/or advisory 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 programs and related advisory services, asset‑based service and distribution fees promulgated under the 1940 Act (“Rule 12b-1”), distribution fees on certain variable products, and commissions derived from sales of investment and insurance products. The products sold have various commission structures and the revenues received from those sales vary based on the type and dollar amount sold. Shareholder service fee revenue includes transfer agency fees, custodian fees from retirement plan accounts, portfolio accounting and administration fees, and is earned based on assets under management or number of client accounts. Our major expenses are for commissions, employee compensation, field services, dealer services, information technology, occupancy and marketing and advertising. 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, 2017 (the “2017 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 2017 Form 10-K with the exception of the adoption of Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts from Customers, ” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” ASU 2016-08, “Statement of Cash Flows: Restricted Cash,” ASU 2017-07, “Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” and ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” with all ASUs effective January 1, 2018. Refer to Note 2 – New Accounting Guidance for the impact these ASU’s had on our consolidated financial statements. Additionally, we changed the presentation of certain line items in the consolidated statements of income that are intended to improve the transparency of the Company’s financial statements through clearer alignment of operating expenses with financial statement captions. Specifically, the Company revised its accounting policy related to the reporting of indirect underwriting and distribution expenses in the former underwriting and distribution caption and certain expenses historically reported as general and administrative. Expenses previously recorded as Underwriting and distribution expenses were retrospectively reclassified into (a) the following existing operating expense captions: Compensation and benefits and General and administrative, and (b) the following newly created operating expense captions: Distribution, Technology, Occupancy, and Marketing and advertising. Certain expenses historically reported as general and administrative were retrospectively reclassified into the following newly created operating expense captions: Technology, Occupancy, and Marketing and advertising. The Company considers the change in policy to be preferable and does not consider the change to be material to its consolidated financial statements. These changes were applied retrospectively to all periods presented and do not affect net income attributable to the Company. The effects of the retrospective change in accounting and adoption of ASU 2017-07 on our consolidated statements of income for the periods presented were as follows: Three months ended March 31, 2017 Previously Expense ASU Adjusted Income Statement Information: (amounts in thousands, except for share and margin data) Total Operating Revenues $ 286,564 — — 286,564 Operating Expenses Distribution 149,863 (41,426) — 108,437 Compensation and benefits 48,570 17,582 883 67,035 General and administrative 25,724 (3,529) — 22,195 Technology — 16,977 — 16,977 Occupancy — 7,785 — 7,785 Marketing and advertising — 2,611 — 2,611 Depreciation 5,221 — — 5,221 Subadvisory fees 2,697 — — 2,697 Intangible asset impairment — — 600 Total Operating Expenses $ 232,675 — 883 233,558 Operating Income 53,889 — (883) 53,006 Investment and other income (loss) 2,129 — 883 3,012 Interest expense (2,786) — — (2,786) Income before provision for income taxes 53,232 — — 53,232 Provision for income taxes 18,881 — — 18,881 Net income $ 34,351 — — 34,351 Net income attributable to redeemable noncontrolling interests — — 480 Net income attributable to Waddell & Reed Financial, Inc. $ 33,871 — — 33,871 Net income per share attributable to Waddell & Reed Financial, Inc. common shareholders, basic and diluted $ — — Weighted average shares outstanding, basic and diluted 84,077 84,077 Operating margin In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only a normal and recurring nature) necessary to present fairly our financial position at March 31, 2018 and the results of operations and cash flows for the three months ended March 31, 2018 and 2017 in conformity with accounting principles generally accepted in the United States.

New Accounting Guidance

New Accounting Guidance	3 Months Ended
	Mar. 31, 2018
New Accounting Guidance
New Accounting Guidance	2. Accounting Guidance Adopted During the First Quarter of 2018 On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers.” This ASU 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. The Company applied the five-step method detailed in this ASU to all revenue streams and elected the cumulative effect approach. The implementation of this ASU did not have a material impact on the measurement or recognition of revenue from prior periods. See Note 3 – Revenue Recognition, for additional accounting policy information and the additional disclosures required by this ASU. On January 1, 2018, the Company adopted ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU provided updated guidance on the recognition, measurement, presentation and disclosure of certain financial assets and financial liabilities. After January 1, 2018, the guidance requires substantially all equity investments in non-consolidated entities to be measured at fair value with changes recognized in earnings, except for those accounted for using the equity method of accounting. As such, the guidance eliminated the available for sale investment category for equity securities, which required unrealized holding gains to be recognized in accumulated other comprehensive income. Upon adoption, we reclassified net unrealized holding gains, net of taxes, related to our available for sale investment portfolio from accumulated other comprehensive income to retained earnings. See consolidated statement of stockholders’ equity and redeemable noncontrolling interests for the financial statement reclassification impact of adopting this ASU. On January 1, 2018, the Company adopted ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This ASU eliminated 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. The adoption of this ASU did not impact our consolidated financial statements and related disclosures. On January 1, 2018, the Company adopted 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 required that a statement of cash flows include the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Cash and cash equivalents – restricted is included as a component of cash and cash equivalents on the Company’s consolidated statements of cash flows for all periods presented. On January 1, 2018, the Company adopted ASU 2017-07, “Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU changed the income statement presentation of our noncontributory retirement plan that covers substantially all employees and certain vested employees of our former parent company (the “Pension Plan”) 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.). In addition, only the service cost component is eligible for capitalization as part of an asset. The adoption of this ASU had no effect on our net income because it only impacts the classification of certain information on the consolidated statements of income. An amendment to freeze our noncontributory retirement plan that covers substantially all employees and certain vested employees of our former parent company was approved effective September 30, 2017; therefore, after September 30, 2017, we no longer incur service costs. The service cost component of net periodic benefit cost is recognized in compensation and related costs through September 30, 2017. The other components of net periodic cost were reclassified to investment and other income (loss) on a retrospective basis. On January 1, 2018, the Company adopted ASU 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting.” This ASU provided 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.” The adoption of this ASU did not impact our consolidated financial statements and related disclosures. On January 1, 2018, the Company early adopted ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU allows entities to reclassify stranded tax effects attributable to the Tax Reform Act from accumulated other comprehensive income (“AOCI”) to retained earnings. Tax effects that are stranded in other comprehensive income for reasons unrelated to the Tax Reform Act, such as other changes in tax law, will be reclassified in future periods in accordance with the Company’s policy. Under the policy, the Company releases stranded income tax effects on available for sale securities on a security-by-security basis as securities are sold, matured, or extinguished. For the post retirement plan, the Company will release stranded income tax effects when the entire plan is liquidated or terminated. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures. See consolidated statement of stockholders’ equity and redeemable noncontrolling interests for the financial statement reclassification impact of adopting this ASU. On January 1, 2018, the Company adopted ASU 2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” This ASU updates the income tax accounting in U.S. GAAP to reflect SEC interpretive guidance released on December 22, 2017 when the Tax Reform Act became law. Staff Accountant Bulletin No. 118 states the SEC permits companies to use “reasonable estimates” and “provisional amounts” for some of their line items for taxes for their fourth quarter and year-end 2017 financial statements and regulatory filings. The Company has applied this guidance to its consolidated financial statements and related disclosures. There were no adjustments made to provisional amounts in the first quarter of 2018. Accounting Guidance Not Yet Adopted 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 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption permitted and certain practical expedients are available. Although the Company is still evaluating the estimated impact the adoption of this ASU will have on its 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.

Revenue Recognition

Revenue Recognition	3 Months Ended
	Mar. 31, 2018
Revenue Recognition
Revenue Recognition	3. As of January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers ” and all subsequent ASUs that modified ASC 606, “Revenue from Contracts with Customers.” The Company elected to apply the standard utilizing the cumulative effect approach. The implementation of the new standard did not have a material impact on the measurement or recognition of revenue. Investment Management and Advisory Fees We recognize investment management fees as earned over the period in which investment management services are provided. While our investment management contracts are long-term in nature, the performance obligations are generally satisfied daily or monthly based on assets under management. We calculate investment management fees from the Funds daily based upon average daily net assets under management in accordance with investment management agreements between the Funds and the Company. The majority of investment and/or advisory fees earned from institutional and separate accounts are calculated either monthly or quarterly based upon an average of net assets under management in accordance with such investment management agreements. The Company may waive certain fees for investment management services at its discretion, or in accordance with contractual expense limitations, and these waivers are reflected as a reduction to investment management fees on the consolidated statements of income. Our investment advisory business receives research products and services from broker-dealers through “soft dollar” arrangements. Consistent with the “soft dollar” safe harbor established by Section 28(e) of the Securities Exchange Act of 1934, as amended, the investment advisory business does not have any contractual obligation requiring it to pay for research products and services obtained through “soft dollar arrangements” with brokers. As a result, we present “soft dollar” arrangements on a net basis. The Company has contractual arrangements with third parties to provide subadvisory services. Investment advisory fees are recorded gross of any subadvisory payments and are included in investment management fees based on management’s determination that the Company is acting in the capacity of principal service provider with respect to its relationship with the Funds. Any corresponding fees paid to subadvisors are included in operating expenses. Underwriting, Distribution and Shareholder Service Fees Fee‑based asset allocation revenues are calculated monthly based upon average daily net assets under management. For certain types of investment products, primarily variable annuities, distribution revenues are generally calculated based upon average daily net assets under management. Fees collected from independent financial advisors associated with Waddell & Reed, Inc. for various services are recorded in underwriting and distribution fees on a gross basis, as the Company is the principal in these arrangements. Under a Rule 12b-1 service plan, the Funds may charge a maximum fee of 0.25% of the average daily net assets under management for Ivy Funds Class B, C, E and Y shares for expenses paid to broker-dealers and other sales professionals in connection with providing ongoing services to the Funds’ shareholders and/or maintaining the Funds’ shareholder accounts, with the exception of the Funds’ Class R shares, for which the maximum fee is 0.50%. The Funds’ Class B and Class C shares may charge a maximum of 0.75% of the average daily net assets under management under a Rule 12b-1 distribution plan to broker-dealers and other sales professionals for their services in connection with distributing shares of that class. The Funds’ Class A shares may charge a maximum fee of 0.25% of the average daily net assets under management under a Rule 12b-1 service and distribution plan for expenses detailed previously. The Rule 12b-1 plans are subject to annual approval by the Funds’ board of trustees, including a majority of the disinterested members, by votes cast in person at a meeting called for the purpose of voting on such approval. All Funds may terminate the service and distribution plans at any time with approval of fund trustees or portfolio shareholders (a majority of either) without penalty. Underwriting and distribution commission revenues resulting from the sale of investment products are recorded upon satisfaction of performance obligations, which occurs on the trade date. When a client purchases Class A or Class E shares (front-end load), the client pays an initial sales charge of up to 5.75% of the amount invested. The sales charge for Class A or Class E shares typically declines as the investment amount increases. In addition, investors may combine their purchases of all fund shares to qualify for a reduced sales charge. When a client invests in a fee-based asset allocation product, Class I or Y shares are purchased at net asset value, and we do not charge an initial sales charge. Underwriting and distribution revenues resulting from payments from independent financial advisors for office space, compliance oversight and affiliation fees are earned over the period in which the service is provided, which is generally monthly and is based on a fee schedule. Shareholder service fee revenue primarily includes transfer agency fees, custodian fees from retirement plan accounts, and portfolio accounting and administration fees. Transfer agency fees and portfolio accounting and administration fees are asset‑based revenues or account‑based revenues, while custodian fees from retirement plan accounts are based on the number of client accounts. Custodian fees, transfer agency fees and portfolio accounting and administration fees are earned upon completion of the service when all performance obligations have been satisfied. All revenue recognized in the consolidated statements of income is considered to be revenue from contracts with customers. The vast majority of revenue is determined based on average assets and is earned daily or monthly or is transactional and is earned on the trade date. As such, revenue from remaining performance obligations is not significant. The following table depicts the disaggregation of revenue by product and distribution channel: Three months ended Three months ended (in thousands) Investment management fees Unaffiliated and Broker-Dealer $ 127,663 123,800 Institutional 6,029 6,636 Total investment management fees $ 133,692 130,436 Underwriting and distribution fees Unaffiliated Rule 12b-1 service and distribution fees $ 20,976 24,016 Sales commissions on front-end load mutual fund and variable annuity sales 470 447 Other revenues 185 426 Total unaffiliated distribution fees $ 21,631 24,889 Broker-Dealer Fee-based asset allocation product revenues $ 65,516 56,756 Rule 12b-1 service and distribution fees 18,377 18,655 Sales commissions on front-end load mutual fund and variable annuity sales 14,427 14,326 Sales commissions on other products 8,422 7,237 Other revenues 9,668 6,968 Total broker-dealer distribution fees 116,410 103,942 Total distribution fees $ 138,041 128,831 Shareholder service fees Total shareholder service fees $ 25,882 27,297 Total revenues $ 297,615 286,564

Investment Securities

Investment Securities	3 Months Ended
	Mar. 31, 2018
Investment Securities
Investment Securities	4. Investment securities at March 31, 2018 and December 31, 2017 are as follows: March 31, December 31, 2018 2017 (in thousands) Available for sale securities: Certificates of deposit $ 7,998 12,999 Commercial paper — 34,978 Corporate bonds 178,719 197,442 U.S. Treasury bills 19,617 19,779 Total available for sale securities 206,334 265,198 Trading debt securities: Certificates of deposit 1,998 1,999 Corporate bonds 54,833 55,414 U.S. Treasury bills 4,885 4,929 Mortgage-backed securities 9 10 Consolidated sponsored funds 62,093 62,038 Total trading securities 123,818 124,390 Equity securities: Common stock 130 116 Sponsored funds (1) 137,290 137,857 Sponsored privately offered funds 728 695 Consolidated sponsored funds 79,409 77,048 Total equity securities 217,557 215,716 Equity method securities: Sponsored funds 94,528 95,188 Total securities $ 642,237 700,492 (1) Includes $124.0 million of investments at December 31, 2017, that were previously reported as available for sale securities prior to the adoption of ASU 2016-01 on January 1, 2018. Refer to Note 1 – Description of Business and Significant Accounting Policies – Basis of Presentation. Certificates of deposit, corporate bonds and U.S. Treasury bills accounted for as available for sale and held as of March 31, 2018 mature as follows: Amortized cost Fair value (in thousands) Within one year $ 58,599 58,355 After one year but within five years 150,279 147,979 $ 208,878 206,334 Certificates of deposit, corporate bonds, U.S. Treasury bills and mortgage-backed securities accounted for as trading and held as of March 31, 2018 mature as follows: Fair value (in thousands) Within one year $ 17,016 After one year but within five years 39,823 After 10 years 4,886 $ 61,725 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at March 31, 2018: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 8,000 1 (3) 7,998 Corporate bonds 180,861 19 (2,161) 178,719 U.S. Treasury bills 20,017 — (400) 19,617 $ 208,878 20 (2,564) 206,334 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 13,000 1 (2) 12,999 Commercial paper 34,836 142 — 34,978 Corporate bonds 198,404 33 (995) 197,442 U.S. Treasury bills 20,019 — (240) 19,779 $ 266,259 176 (1,237) 265,198 A summary of available for sale investment securities with fair values below carrying values at March 31, 2018 and December 31, 2017 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized March 31, 2018 Fair value losses Fair value losses Fair value losses (in thousands) Certificates of deposit $ 2,997 (3) — — 2,997 (3) Corporate bonds 173,701 (2,161) — — 173,701 (2,161) U.S. Treasury bills 19,617 (400) — — 19,617 (400) $ 196,315 (2,564) — — 196,315 (2,564) Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Certificates of deposit $ 2,998 (2) — — 2,998 (2) Corporate bonds 192,409 (995) — — 192,409 (995) U.S. Treasury bills 19,779 (240) — — 19,779 (240) $ 215,186 (1,237) — — 215,186 (1,237) 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 March 31, 2018. Sponsored Funds The Company has classified its equity investments in the Ivy Funds, Ivy Nextshares and IGI Funds as equity method investments (when the Company owns between 20% and 50% of the fund) or equity securities (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 and Ivy NextShares 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 an interest in a privately offered fund structured in the form of a limited liability company. The members of this entity have the substantive ability to remove the Company as managing member or dissolve the entity upon a simple majority vote. This entity does not meet the criteria of a VIE and is considered to be a VOE. Consolidated Sponsored Funds The following table details the balances related to consolidated sponsored funds at March 31, 2018, and at December 31, 2017, as well as the Company’s net interest in these funds: March 31, December 31, 2018 2017 (in thousands) Cash $ 4,910 8,472 Investments 141,502 139,086 Other assets 3,253 1,588 Other liabilities (1,826) (1,040) Redeemable noncontrolling interests (18,570) (14,509) Net interest in consolidated sponsored funds $ 129,269 133,597 During the three months ended March 31, 2018, we consolidated an Ivy Fund, Ivy NextShares and IGI Funds in which we provided initial seed capital at the time of the funds’ formation. When we no longer have a controlling financial interest in a sponsored fund, it is deconsolidated from our consolidated financial statements. 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 different evaluated pricing approaches depending upon the specific asset to determine a value. The carrying amounts of certificates of deposit and commercial paper are measured at amortized cost, which approximates fair value due to the short-time between purchase and expected maturity of the investments. Depending on the nature of the inputs, these investments are generally classified as Level 1 or 2 within the fair value hierarchy. U.S. Treasury bills are valued upon quoted market prices for similar assets in active markets, quoted prices for identical or similar assets that are not active and inputs other than quoted prices that are observable or corroborated by observable market data. The fair value of corporate bonds is measured using various techniques, which consider recently executed transactions 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 March 31, 2018 and December 31, 2017 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs. March 31, 2018 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 146,461 — — — 146,461 Certificates of deposit — 5,490 — — 5,490 Commercial paper — 14,802 — — 14,802 Total cash equivalents $ 146,461 20,292 — — 166,753 Available for sale securities: Certificates of deposit $ — 7,998 — — 7,998 Commercial paper — — — — — Corporate bonds — 178,719 — — 178,719 U.S. Treasury bills — 19,617 — — 19,617 Trading debt securities: Certificates of deposit — 1,998 — — 1,998 Corporate bonds — 54,833 — 54,833 U.S. Treasury bills — 4,885 — — 4,885 Mortgage-backed securities — 9 — — 9 Consolidated sponsored funds — 61,775 318 — 62,093 Equity securities: Common stock 130 — — — 130 Sponsored funds 137,290 — — — 137,290 Sponsored privately offered funds — — — 728 728 Consolidated sponsored funds 79,265 142 2 — 79,409 Equity method securities: (3) Sponsored funds 94,528 — — — 94,528 Total $ 311,213 329,976 320 728 642,237 December 31, 2017 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 145,785 — — — 145,785 Commercial paper — 11,064 — — 11,064 Total cash equivalents $ 145,785 11,064 — — 156,849 Available for sale securities: Certificates of deposit $ — 12,999 — — 12,999 Commercial paper — 34,978 — — 34,978 Corporate bonds — 197,442 — — 197,442 U.S. Treasury bills — 19,779 — — 19,779 Trading debt securities: Certificates of deposit — 1,999 — — 1,999 Corporate bonds — 55,414 — 55,414 U.S. Treasury bills — 4,929 — — 4,929 Mortgage-backed securities — 10 — — 10 Consolidated sponsored funds — 62,038 — — 62,038 Equity securities: Common stock 116 — — — 116 Sponsored funds 137,857 — — — 137,857 Sponsored privately offered funds measured at net asset value (2) — — — 695 695 Consolidated sponsored funds 77,048 — — — 77,048 Equity method securities: (3) Sponsored funds 95,188 — — — 95,188 Total $ 310,209 389,588 — 695 700,492 (1) Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1. Cash investments in commercial paper are measured at cost, which approximates fair value because of the short time between purchase of the instrument and its expected realization, and are classified as Level 2. (2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. (3) Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value. The following table summarizes the activity of investments categorized as Level 3 for the three months ended March 31, 2018: 2018 (in thousands) Level 3 assets at December 31, 2017 $ — Additions 419 Valuation change (99) Level 3 assets at March 31, 2018 $ 320

Derivative Financial Instrument

Derivative Financial Instruments	3 Months Ended
	Mar. 31, 2018
Derivative Financial Instruments
Derivative Financial Instruments	5. The Company has in place an economic hedge program that uses total return swap contracts to hedge market risk related to 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 $305.0 million and six total return swap contracts with a combined notional value of $213.9 million as of March 31, 2018 and December 31, 2017, 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 $9.7 million in cash collateral with the counterparties of the total return swap contracts as of March 31, 2018 and December 31, 2017, respectively. The cash collateral is included in customers and other receivables on the Company’s consolidated balance sheet. The Company does not record its fair value in derivative transactions against the posted collateral. The following table presents the fair value of the derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds as of March 31, 2018 and December 31, 2017 and is calculated based on Level 2 inputs: March 31, December 31, 2018 2017 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current assets (liabilities) $ 4,507 (1,093) The following is a summary of net losses recognized in income for the three months ended March 31, 2018 and March 31, 2017: Three months ended Income statement March 31, location 2018 2017 (in thousands) Total return swap contracts Investment and other (loss) $ 1,364 (11,045)

Goodwill and Identifiable Intan

Goodwill and Identifiable Intangible Assets	3 Months Ended
	Mar. 31, 2018
Goodwill and Identifiable Intangible Assets
Goodwill and Identifiable Intangible Assets	6. Goodwill represents the excess of purchase price over the tangible assets and identifiable intangible assets of an acquired business. Our goodwill is not deductible for tax purposes. Goodwill and identifiable intangible assets (all considered indefinite lived) at March 31, 2018 and December 31, 2017 are as follows: March 31, December 31, 2018 2017 (in thousands) Goodwill $ 106,970 106,970 Mutual fund management advisory contracts 38,699 38,699 Mutual fund management subadvisory contract 1,200 1,200 Other 200 200 Total identifiable intangible assets 40,099 40,099 Total $ 147,069 147,069

Indebtedness

Indebtedness	3 Months Ended
	Mar. 31, 2018
Indebtedness
Indebtedness	7. 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, 2021 is $99.8 million at March 31, 2018 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. During the first quarter of 2018, we repaid the $95.0 million Series A, senior unsecured notes that matured on January 13, 2018. On October 20, 2017, we entered into a three-year unsecured revolving credit facility with various lenders, which initially provides for borrowings of up to $100.0 million and may be expanded to $200.0 million.

Income Tax Uncertainties

Income Tax Uncertainties	3 Months Ended
	Mar. 31, 2018
Income Tax Uncertainties
Income Tax Uncertainties	8. As of March 31, 2018 and December 31, 2017, the Company had unrecognized tax benefits, including penalties and interest, of $11.1 million ($9.1 million net of federal benefit) and $10.9 million ($8.9 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. The total amount of penalties and interest, net of federal benefit, related to income tax uncertainties recognized in the statement of income for the three month period ended March 31, 2018 was $0.1 million. The total amount of accrued penalties and interest related to uncertain tax positions at March 31, 2018 of $4.2 million ($3.6 million net of federal benefit) is included in the total unrecognized tax benefits described above. As of December 31, 2017, the total amount of accrued interest and penalties related to uncertain tax positions recognized in the consolidated balance sheet was $4.0 million ($3.5 million net of federal benefit). In the ordinary course of business, many transactions occur for which the ultimate tax outcome is uncertain. In addition, respective tax authorities periodically audit our income tax returns. These audits examine our significant tax filing positions, including the timing and amounts of deductions and the allocation of income among tax jurisdictions. The Company is currently under audit in a state jurisdiction in which it operates. It is reasonably possible that the Company will settle the audit in this jurisdiction 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 this audit. Additionally, such settlement is not anticipated to have a significant impact on the results of operations. The 2014, 2015, 2016 and 2017 federal income tax returns are open tax years that remain subject to potential future audit. State income tax returns for all years after 2013 and, in certain states, income tax returns for 2013, are subject to potential future audit by tax authorities in the Company’s major state tax jurisdictions.

Pension Plan and Postretirement

Pension Plan and Postretirement Benefits Other Than Pension	3 Months Ended
	Mar. 31, 2018
Pension Plan and Postretirement Benefits Other Than Pension
Pension Plan and Postretirement Benefits Other Than Pension	9. 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 do not accrue additional benefits for future service or compensation. Participants retain benefits accumulated as of September 30, 2017 in accordance with the terms of the Pension Plan. We also sponsor an unfunded defined benefit postretirement medical plan that previously covered substantially all employees, as well as independent financial advisors associated 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 this 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 Pension Benefits Postretirement Benefits Three months ended March 31, Three months ended March 31, 2018 2017 2018 2017 (in thousands) Components of net periodic benefit cost: Service cost $ — 2,726 — — Interest cost 1,508 1,654 14 15 Expected return on plan assets (2,069) (2,559) — — Actuarial loss (gain) amortization — 1,265 (30) (45) Prior service cost (credit) amortization — 31 (1) (1) Transition obligation amortization — 1 — — Total $ (561) 3,118 (17) (31)

Stockholders' Equity

Stockholders' Equity	3 Months Ended
	Mar. 31, 2018
Stockholders' Equity
Stockholders' Equity	10. Earnings per Share The components of basic and diluted earnings per share were as follows: Three months ended March 31, 2018 2017 Net income attributable to Waddell & Reed Financial, Inc. $ 46,337 33,871 Weighted average shares outstanding, basic and diluted 83,111 84,077 Earnings per share, basic and diluted $ 0.56 0.40 Dividends On February 13, 2018, the Board of Directors approved a dividend on our Class A common stock in the amount of $0.25 per share to stockholders of record on April 10, 2018. The total dividend paid on May 1, 2018 is approximately $20.7 million and was included in other current liabilities as of March 31, 2018. Common Stock Repurchases The Board of Directors has authorized the repurchase of our Class A 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 996,309 shares and 476,882 shares repurchased in the open market or privately during the three months ended March 31, 2018 and 2017, respectively, which includes 121,309 shares and 1,882 shares, respectively, repurchased from employees who tendered shares to cover their minimum income tax withholdings with respect to vesting of stock awards during these same reporting periods. Accumulated Other Comprehensive Income (Loss) The following tables summarize accumulated other comprehensive income (loss) activity for the three months ended March 31, 2018 and March 31, 2017. Total Unrealized Postretirement accumulated gains (losses) benefits other on investment unrealized comprehensive Three months ended March 31, 2018 securities gains (losses) income (loss) (in thousands) Balance at December 31, 2017 $ 145 379 524 Amount reclassified to retained earnings for recently adopted ASUs (955) 107 (848) Other comprehensive loss before reclassification (1,131) — (1,131) Amount reclassified from accumulated other comprehensive (loss) income — (23) (23) Net current period other comprehensive (loss) income (2,086) 84 (2,002) Balance at March 31, 2018 $ (1,941) 463 (1,478) Change in valuation allowance for unrealized Total Unrealized gains Postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended March 31, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2016 $ (3,972) (3,388) 603 (6,757) Other comprehensive income before reclassification 1,423 2,324 — 3,747 Amount reclassified from accumulated other comprehensive loss (income) (92) (56) (29) (177) Net current period other comprehensive income (loss) 1,331 2,268 (29) 3,570 Balance at March 31, 2017 $ (2,641) (1,120) 574 (3,187) Reclassifications from accumulated other comprehensive income (loss) and included in net income are summarized in the tables that follow. For the three months ended March 31, 2018 Tax (expense) Statement of income Pre-tax benefit Net of tax line item or retained earnings (in thousands) Reclassifications included in net income or retained earnings for recently adopted ASUs: Sponsored funds investment gains $ 1,295 (340) 955 Retained earnings Amortization of postretirement benefits 30 (114) (84) Compensation and benefits and retained earnings Total $ 1,325 (454) 871 For the three months ended March 31, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment losses $ 148 (56) 92 Investment and other income (loss) Valuation allowance — 56 56 Provision for income taxes Amortization of postretirement benefits 46 (17) 29 Compensation and benefits Total $ 194 (17) 177

Share-Based Compensation

Share-Based Compensation	3 Months Ended
	Mar. 31, 2018
Share-Based Compensation
Share-Based Compensation	11. Share-Based Compensation In the first quarter of 2018, we granted 989,444 cash-settled restricted stock units (“RSUs”) under the Cash Settled RSU Plan (the “RSU Plan”). The aggregate value of unvested RSUs on March 31, 2018 was $38.8 million based on the closing price of our Class A common stock on that date. In the first quarter of 2018, we granted 1,032,068 shares of restricted Class A common stock with an average fair value of $22.15 per share under the Company’s 1998 Stock Incentive Plan, as amended and restated. The value of those shares at the grant date, aggregating to $22.9 million, will be amortized to expense over a four-year vesting period.

Contingencies

Contingencies	3 Months Ended
	Mar. 31, 2018
Contingencies
Contingencies	12. 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. Shareholder Derivative Litigation As previously disclosed, in an action filed on April 18, 2016 in the District Court of Johnson County, Kansas, Hieu Phan v. Ivy Investment Management Company, et al. (Case No. I6CV02338 Div. 4), plaintiff filed a putative derivative action on behalf of the nominal defendant, a mutual fund trust affiliated with the Company, alleging breach of fiduciary duty and breach of contract claims relating to an investment held in the affiliated mutual fund by the Company's registered investment adviser subsidiary. On behalf of the nominal defendant trust, plaintiff filed claims against the Company’s registered investment adviser subsidiary and current and retired trustees of the trust seeking monetary damages and demanding a jury trial. On May 2, 2017, the nominal defendant trust filed a motion to stay the litigation pending the investigation and recommendation of a special litigation committee formed by the nominal defendant trust. On June 13, 2017, the court granted a 60-day stay until August 12, 2017, after which formal discovery commenced. While 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 trust, on January 8, 2018 the parties to the litigation reached a settlement in principle. On February 22, 2018, the parties filed a joint motion for preliminary approval of the settlement and other associated pleadings with the court. The settlement contemplates the payment of $19.9 million, recoverable to the Company through insurance, to the affiliated mutual fund for the benefit of its shareholders. On April 16, 2018, the court entered an order granting preliminary approval of the settlement and set the final settlement hearing for July 30, 2018. The settlement remains subject to final approval by the court. The Company has recorded a liability and offsetting receivable from insurance, which are reflected in the Company's 2018 and 2017 consolidated balance sheets. 401(k) Plan Class Action Litigation 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, and on February 22, 2018, the court denied the motion to dismiss. On March 8, 2018, the defendants filed their answer and defenses to plaintiff’s amended complaint, and on April 23, 2018, the court entered an initial scheduling order. In the opinion of management, the ultimate resolution and outcome of this matter is uncertain. Given the preliminary nature of the proceedings and the Company’s dispute over the merits of the claims, the Company is unable to estimate a range of reasonably possible loss, if any, that such matter may represent. While the ultimate resolution of this matter is uncertain, an adverse determination against the Company could have a material adverse impact on our business, financial condition and results of operations.

Description of Business and S23

Description of Business and Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2018
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, 2017 (the “2017 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 2017 Form 10-K with the exception of the adoption of Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts from Customers, ” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” ASU 2016-08, “Statement of Cash Flows: Restricted Cash,” ASU 2017-07, “Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” and ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” with all ASUs effective January 1, 2018. Refer to Note 2 – New Accounting Guidance for the impact these ASU’s had on our consolidated financial statements. Additionally, we changed the presentation of certain line items in the consolidated statements of income that are intended to improve the transparency of the Company’s financial statements through clearer alignment of operating expenses with financial statement captions. Specifically, the Company revised its accounting policy related to the reporting of indirect underwriting and distribution expenses in the former underwriting and distribution caption and certain expenses historically reported as general and administrative. Expenses previously recorded as Underwriting and distribution expenses were retrospectively reclassified into (a) the following existing operating expense captions: Compensation and benefits and General and administrative, and (b) the following newly created operating expense captions: Distribution, Technology, Occupancy, and Marketing and advertising. Certain expenses historically reported as general and administrative were retrospectively reclassified into the following newly created operating expense captions: Technology, Occupancy, and Marketing and advertising. The Company considers the change in policy to be preferable and does not consider the change to be material to its consolidated financial statements. These changes were applied retrospectively to all periods presented and do not affect net income attributable to the Company. The effects of the retrospective change in accounting and adoption of ASU 2017-07 on our consolidated statements of income for the periods presented were as follows: Three months ended March 31, 2017 Previously Expense ASU Adjusted Income Statement Information: (amounts in thousands, except for share and margin data) Total Operating Revenues $ 286,564 — — 286,564 Operating Expenses Distribution 149,863 (41,426) — 108,437 Compensation and benefits 48,570 17,582 883 67,035 General and administrative 25,724 (3,529) — 22,195 Technology — 16,977 — 16,977 Occupancy — 7,785 — 7,785 Marketing and advertising — 2,611 — 2,611 Depreciation 5,221 — — 5,221 Subadvisory fees 2,697 — — 2,697 Intangible asset impairment — — 600 Total Operating Expenses $ 232,675 — 883 233,558 Operating Income 53,889 — (883) 53,006 Investment and other income (loss) 2,129 — 883 3,012 Interest expense (2,786) — — (2,786) Income before provision for income taxes 53,232 — — 53,232 Provision for income taxes 18,881 — — 18,881 Net income $ 34,351 — — 34,351 Net income attributable to redeemable noncontrolling interests — — 480 Net income attributable to Waddell & Reed Financial, Inc. $ 33,871 — — 33,871 Net income per share attributable to Waddell & Reed Financial, Inc. common shareholders, basic and diluted $ — — Weighted average shares outstanding, basic and diluted 84,077 84,077 Operating margin In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only a normal and recurring nature) necessary to present fairly our financial position at March 31, 2018 and the results of operations and cash flows for the three months ended March 31, 2018 and 2017 in conformity with accounting principles generally accepted in the United States.

Description of Business and S24

Description of Business and Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2018
Description of Business and Significant Accounting Policies
Schedule of effects of the change in accounting on the consolidated statements of income and consolidated balance sheets	Three months ended March 31, 2017 Previously Expense ASU Adjusted Income Statement Information: (amounts in thousands, except for share and margin data) Total Operating Revenues $ 286,564 — — 286,564 Operating Expenses Distribution 149,863 (41,426) — 108,437 Compensation and benefits 48,570 17,582 883 67,035 General and administrative 25,724 (3,529) — 22,195 Technology — 16,977 — 16,977 Occupancy — 7,785 — 7,785 Marketing and advertising — 2,611 — 2,611 Depreciation 5,221 — — 5,221 Subadvisory fees 2,697 — — 2,697 Intangible asset impairment — — 600 Total Operating Expenses $ 232,675 — 883 233,558 Operating Income 53,889 — (883) 53,006 Investment and other income (loss) 2,129 — 883 3,012 Interest expense (2,786) — — (2,786) Income before provision for income taxes 53,232 — — 53,232 Provision for income taxes 18,881 — — 18,881 Net income $ 34,351 — — 34,351 Net income attributable to redeemable noncontrolling interests — — 480 Net income attributable to Waddell & Reed Financial, Inc. $ 33,871 — — 33,871 Net income per share attributable to Waddell & Reed Financial, Inc. common shareholders, basic and diluted $ — — Weighted average shares outstanding, basic and diluted 84,077 84,077 Operating margin

Revenue Recognition (Tables)

Revenue Recognition (Tables)	3 Months Ended
	Mar. 31, 2018
Revenue Recognition
Summary of Disaggregation of revenue	Three months ended Three months ended (in thousands) Investment management fees Unaffiliated and Broker-Dealer $ 127,663 123,800 Institutional 6,029 6,636 Total investment management fees $ 133,692 130,436 Underwriting and distribution fees Unaffiliated Rule 12b-1 service and distribution fees $ 20,976 24,016 Sales commissions on front-end load mutual fund and variable annuity sales 470 447 Other revenues 185 426 Total unaffiliated distribution fees $ 21,631 24,889 Broker-Dealer Fee-based asset allocation product revenues $ 65,516 56,756 Rule 12b-1 service and distribution fees 18,377 18,655 Sales commissions on front-end load mutual fund and variable annuity sales 14,427 14,326 Sales commissions on other products 8,422 7,237 Other revenues 9,668 6,968 Total broker-dealer distribution fees 116,410 103,942 Total distribution fees $ 138,041 128,831 Shareholder service fees Total shareholder service fees $ 25,882 27,297 Total revenues $ 297,615 286,564

Investment Securities (Tables)

Investment Securities (Tables)	3 Months Ended
	Mar. 31, 2018
Investment Securities
Schedule of investment securities	March 31, December 31, 2018 2017 (in thousands) Available for sale securities: Certificates of deposit $ 7,998 12,999 Commercial paper — 34,978 Corporate bonds 178,719 197,442 U.S. Treasury bills 19,617 19,779 Total available for sale securities 206,334 265,198 Trading debt securities: Certificates of deposit 1,998 1,999 Corporate bonds 54,833 55,414 U.S. Treasury bills 4,885 4,929 Mortgage-backed securities 9 10 Consolidated sponsored funds 62,093 62,038 Total trading securities 123,818 124,390 Equity securities: Common stock 130 116 Sponsored funds (1) 137,290 137,857 Sponsored privately offered funds 728 695 Consolidated sponsored funds 79,409 77,048 Total equity securities 217,557 215,716 Equity method securities: Sponsored funds 94,528 95,188 Total securities $ 642,237 700,492 (1) Includes $124.0 million of investments at December 31, 2017, that were previously reported as available for sale securities prior to the adoption of ASU 2016-01 on January 1, 2018. Refer to Note 1 – Description of Business and Significant Accounting Policies – Basis of Presentation.
Summary of maturities of securities held	Certificates of deposit, corporate bonds and U.S. Treasury bills accounted for as available for sale and held as of March 31, 2018 mature as follows: Amortized cost Fair value (in thousands) Within one year $ 58,599 58,355 After one year but within five years 150,279 147,979 $ 208,878 206,334 Certificates of deposit, corporate bonds, U.S. Treasury bills and mortgage-backed securities accounted for as trading and held as of March 31, 2018 mature as follows: Fair value (in thousands) Within one year $ 17,016 After one year but within five years 39,823 After 10 years 4,886 $ 61,725
Summary of the gains (losses) related to securities	The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at March 31, 2018: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 8,000 1 (3) 7,998 Corporate bonds 180,861 19 (2,161) 178,719 U.S. Treasury bills 20,017 — (400) 19,617 $ 208,878 20 (2,564) 206,334 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 13,000 1 (2) 12,999 Commercial paper 34,836 142 — 34,978 Corporate bonds 198,404 33 (995) 197,442 U.S. Treasury bills 20,019 — (240) 19,779 $ 266,259 176 (1,237) 265,198
Summary of available for sale sponsored funds with fair values below carrying values	Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized March 31, 2018 Fair value losses Fair value losses Fair value losses (in thousands) Certificates of deposit $ 2,997 (3) — — 2,997 (3) Corporate bonds 173,701 (2,161) — — 173,701 (2,161) U.S. Treasury bills 19,617 (400) — — 19,617 (400) $ 196,315 (2,564) — — 196,315 (2,564) Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Certificates of deposit $ 2,998 (2) — — 2,998 (2) Corporate bonds 192,409 (995) — — 192,409 (995) U.S. Treasury bills 19,779 (240) — — 19,779 (240) $ 215,186 (1,237) — — 215,186 (1,237)
Summary of balances related to consolidated sponsored funds as well the company’s net interest in these funds	March 31, December 31, 2018 2017 (in thousands) Cash $ 4,910 8,472 Investments 141,502 139,086 Other assets 3,253 1,588 Other liabilities (1,826) (1,040) Redeemable noncontrolling interests (18,570) (14,509) Net interest in consolidated sponsored funds $ 129,269 133,597
Schedule of fair value of investment securities	March 31, 2018 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 146,461 — — — 146,461 Certificates of deposit — 5,490 — — 5,490 Commercial paper — 14,802 — — 14,802 Total cash equivalents $ 146,461 20,292 — — 166,753 Available for sale securities: Certificates of deposit $ — 7,998 — — 7,998 Commercial paper — — — — — Corporate bonds — 178,719 — — 178,719 U.S. Treasury bills — 19,617 — — 19,617 Trading debt securities: Certificates of deposit — 1,998 — — 1,998 Corporate bonds — 54,833 — 54,833 U.S. Treasury bills — 4,885 — — 4,885 Mortgage-backed securities — 9 — — 9 Consolidated sponsored funds — 61,775 318 — 62,093 Equity securities: Common stock 130 — — — 130 Sponsored funds 137,290 — — — 137,290 Sponsored privately offered funds — — — 728 728 Consolidated sponsored funds 79,265 142 2 — 79,409 Equity method securities: (3) Sponsored funds 94,528 — — — 94,528 Total $ 311,213 329,976 320 728 642,237 December 31, 2017 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 145,785 — — — 145,785 Commercial paper — 11,064 — — 11,064 Total cash equivalents $ 145,785 11,064 — — 156,849 Available for sale securities: Certificates of deposit $ — 12,999 — — 12,999 Commercial paper — 34,978 — — 34,978 Corporate bonds — 197,442 — — 197,442 U.S. Treasury bills — 19,779 — — 19,779 Trading debt securities: Certificates of deposit — 1,999 — — 1,999 Corporate bonds — 55,414 — 55,414 U.S. Treasury bills — 4,929 — — 4,929 Mortgage-backed securities — 10 — — 10 Consolidated sponsored funds — 62,038 — — 62,038 Equity securities: Common stock 116 — — — 116 Sponsored funds 137,857 — — — 137,857 Sponsored privately offered funds measured at net asset value (2) — — — 695 695 Consolidated sponsored funds 77,048 — — — 77,048 Equity method securities: (3) Sponsored funds 95,188 — — — 95,188 Total $ 310,209 389,588 — 695 700,492 (1) Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1. Cash investments in commercial paper are measured at cost, which approximates fair value because of the short time between purchase of the instrument and its expected realization, and are classified as Level 2. (2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. (3) Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value.
Schedule of activity of investments categorized as Level 3	2018 (in thousands) Level 3 assets at December 31, 2017 $ — Additions 419 Valuation change (99) Level 3 assets at March 31, 2018 $ 320

Derivative Financial Instrume27

Derivative Financial Instruments (Tables)	3 Months Ended
	Mar. 31, 2018
Derivative Financial Instruments
Schedule of fair value of derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds	March 31, December 31, 2018 2017 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current assets (liabilities) $ 4,507 (1,093)
Schedule of net losses recognized in income of derivative financial instrument	Three months ended Income statement March 31, location 2018 2017 (in thousands) Total return swap contracts Investment and other (loss) $ 1,364 (11,045)

Goodwill and Identifiable Int28

Goodwill and Identifiable Intangible Assets (Tables)	3 Months Ended
	Mar. 31, 2018
Goodwill and Identifiable Intangible Assets
Schedule of goodwill and identifiable intangible assets	March 31, December 31, 2018 2017 (in thousands) Goodwill $ 106,970 106,970 Mutual fund management advisory contracts 38,699 38,699 Mutual fund management subadvisory contract 1,200 1,200 Other 200 200 Total identifiable intangible assets 40,099 40,099 Total $ 147,069 147,069

Pension Plan and Postretireme29

Pension Plan and Postretirement Benefits Other Than Pension (Tables)	3 Months Ended
	Mar. 31, 2018
Pension Plan and Postretirement Benefits Other Than Pension
Schedule of components of net periodic pension and other postretirement costs	Other Pension Benefits Postretirement Benefits Three months ended March 31, Three months ended March 31, 2018 2017 2018 2017 (in thousands) Components of net periodic benefit cost: Service cost $ — 2,726 — — Interest cost 1,508 1,654 14 15 Expected return on plan assets (2,069) (2,559) — — Actuarial loss (gain) amortization — 1,265 (30) (45) Prior service cost (credit) amortization — 31 (1) (1) Transition obligation amortization — 1 — — Total $ (561) 3,118 (17) (31)

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	3 Months Ended
	Mar. 31, 2018
Stockholders' Equity
Components of basic and diluted earnings per share	Three months ended March 31, 2018 2017 Net income attributable to Waddell & Reed Financial, Inc. $ 46,337 33,871 Weighted average shares outstanding, basic and diluted 83,111 84,077 Earnings per share, basic and diluted $ 0.56 0.40
Summary of other comprehensive income (loss) activity	Total Unrealized Postretirement accumulated gains (losses) benefits other on investment unrealized comprehensive Three months ended March 31, 2018 securities gains (losses) income (loss) (in thousands) Balance at December 31, 2017 $ 145 379 524 Amount reclassified to retained earnings for recently adopted ASUs (955) 107 (848) Other comprehensive loss before reclassification (1,131) — (1,131) Amount reclassified from accumulated other comprehensive (loss) income — (23) (23) Net current period other comprehensive (loss) income (2,086) 84 (2,002) Balance at March 31, 2018 $ (1,941) 463 (1,478) Change in valuation allowance for unrealized Total Unrealized gains Postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended March 31, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2016 $ (3,972) (3,388) 603 (6,757) Other comprehensive income before reclassification 1,423 2,324 — 3,747 Amount reclassified from accumulated other comprehensive loss (income) (92) (56) (29) (177) Net current period other comprehensive income (loss) 1,331 2,268 (29) 3,570 Balance at March 31, 2017 $ (2,641) (1,120) 574 (3,187)
Summary of reclassifications from accumulated other comprehensive income (loss) and included in net income	For the three months ended March 31, 2018 Tax (expense) Statement of income Pre-tax benefit Net of tax line item or retained earnings (in thousands) Reclassifications included in net income or retained earnings for recently adopted ASUs: Sponsored funds investment gains $ 1,295 (340) 955 Retained earnings Amortization of postretirement benefits 30 (114) (84) Compensation and benefits and retained earnings Total $ 1,325 (454) 871 For the three months ended March 31, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment losses $ 148 (56) 92 Investment and other income (loss) Valuation allowance — 56 56 Provision for income taxes Amortization of postretirement benefits 46 (17) 29 Compensation and benefits Total $ 194 (17) 177

Description of Business and S31

Description of Business and Significant Accounting Policies (Details) $ in Billions	Mar. 31, 2018USD ($)
Description of Business and Significant Accounting Policies
Assets under management	$ 80.2

Description of Business and S32

Description of Business and Significant Accounting Policies - Change in Financial Statements (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement Information:
Total Operating Revenues	$ 297,615	$ 286,564
Operating Expenses
Distribution	114,470	108,437
Compensation and benefits	68,785	67,035
General and administrative	19,538	22,195
Technology	16,644	16,977
Occupancy	6,964	7,785
Marketing and advertising	2,281	2,611
Depreciation	5,302	5,221
Subadvisory fees	3,708	2,697
Intangible asset impairment		600
Total	237,692	233,558
Operating Income	59,923	53,006
Investment and other income (loss)	2,816	3,012
Interest expense	(1,802)	(2,786)
Income before provision for income taxes	60,937	53,232
Provision for income taxes	14,966	18,881
Net income	45,971	34,351
Net income attributable to redeemable noncontrolling interests	(366)	480
Net income attributable to Waddell & Reed Financial, Inc.	$ 46,337	$ 33,871
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share)	$ 0.56	$ 0.40
Weighted average shares outstanding - basic and diluted	83,111	84,077
Operating margin		18.50%
ASU 2017-07
Operating Expenses
Compensation and benefits		$ 883
Total		883
Operating Income		(883)
Investment and other income (loss)		883
Previously Reported
Income Statement Information:
Total Operating Revenues		286,564
Operating Expenses
Distribution		149,863
Compensation and benefits		48,570
General and administrative		25,724
Depreciation		5,221
Subadvisory fees		2,697
Intangible asset impairment		600
Total		232,675
Operating Income		53,889
Investment and other income (loss)		2,129
Interest expense		(2,786)
Income before provision for income taxes		53,232
Provision for income taxes		18,881
Net income		34,351
Net income attributable to redeemable noncontrolling interests		480
Net income attributable to Waddell & Reed Financial, Inc.		$ 33,871
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share)		$ 0.40
Weighted average shares outstanding - basic and diluted		84,077
Operating margin		18.80%
Expense Reclassification
Operating Expenses
Distribution		$ (41,426)
Compensation and benefits		17,582
General and administrative		(3,529)
Technology		16,977
Occupancy		7,785
Marketing and advertising		$ 2,611

Revenue Recognition - Disaggreg

Revenue Recognition - Disaggregation of revenue (Details)	3 Months Ended
	Mar. 31, 2018
Ivy Funds Class Y
Revenue Recognition
Maximum service plan fee (as a percent)	0.25%
Ivy Funds Class A
Revenue Recognition
Maximum distribution plan fee (as a percent)	0.25%
Ivy Funds Class B
Revenue Recognition
Maximum service plan fee (as a percent)	0.25%
Maximum distribution plan fee (as a percent)	0.75%
Ivy Funds Class C
Revenue Recognition
Maximum service plan fee (as a percent)	0.25%
Maximum distribution plan fee (as a percent)	0.75%
Ivy Funds Class E
Revenue Recognition
Maximum service plan fee (as a percent)	0.25%
Ivy Funds Class R
Revenue Recognition
Maximum service plan fee (as a percent)	0.50%
Maximum | Ivy Funds Class E
Revenue Recognition
Sales charge (as a percent)	5.75%

Revenue Recognition - Disaggr34

Revenue Recognition - Disaggregation of revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue Recognition
Total Operating Revenues	$ 297,615	$ 286,564
Investment management fees
Revenue Recognition
Total Operating Revenues	133,692	130,436
Investment management fees - Unaffiliated and Broker-Dealer
Revenue Recognition
Total Operating Revenues	127,663	123,800
Investment management fees - Institutional
Revenue Recognition
Total Operating Revenues	6,029	6,636
Underwriting and distribution fees
Revenue Recognition
Total Operating Revenues	138,041	128,831
Unaffiliated
Revenue Recognition
Total Operating Revenues	21,631	24,889
Unaffiliated Rule 12b-1 service and distribution fees
Revenue Recognition
Total Operating Revenues	20,976	24,016
Unaffiliated sales commissions on front-end load mutual fund and variable annuity sales
Revenue Recognition
Total Operating Revenues	470	447
Unaffiliated other revenues
Revenue Recognition
Total Operating Revenues	185	426
Broker-dealer
Revenue Recognition
Total Operating Revenues	116,410	103,942
Broker-dealer fee based asset allocation product revenue
Revenue Recognition
Total Operating Revenues	65,516	56,756
Broker-dealer Rule 12b-1 service and distribution fees
Revenue Recognition
Total Operating Revenues	18,377	18,655
Broker-dealer sales commissions on front-end load mutual fund and variable annuity sales
Revenue Recognition
Total Operating Revenues	14,427	14,326
Broker-dealer sales commissions on other products
Revenue Recognition
Total Operating Revenues	8,422	7,237
Broker-dealer other revenues
Revenue Recognition
Total Operating Revenues	9,668	6,968
Shareholder service fees
Revenue Recognition
Total Operating Revenues	$ 25,882	$ 27,297

Investment Securities - Investm

Investment Securities - Investment securities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available for sale securities:
Available for sale securities	$ 206,334	$ 265,198
Available for sale securities		265,198
Trading debt securities
Trading debt securities	123,818	124,390
Equity securities:
Equity securities	217,557	215,716
Equity method securities
Total investment securities	642,237	700,492
Available for sale securities	206,334	265,198
Certificates of deposit
Available for sale securities:
Available for sale securities	7,998	12,999
Trading debt securities
Trading debt securities	1,998	1,999
Equity method securities
Available for sale securities	7,998	12,999
Commercial paper
Available for sale securities:
Available for sale securities		34,978
Equity method securities
Available for sale securities		34,978
Corporate bonds
Available for sale securities:
Available for sale securities	178,719	197,442
Trading debt securities
Trading debt securities	54,833	55,414
Equity method securities
Available for sale securities	178,719	197,442
U.S. treasury bills
Available for sale securities:
Available for sale securities	19,617	19,779
Trading debt securities
Trading debt securities	4,885	4,929
Equity method securities
Available for sale securities	19,617	19,779
Mortgage-backed securities
Trading debt securities
Trading debt securities	9	10
Common stock
Equity securities:
Equity securities	130	116
Consolidated Sponsored Funds
Trading debt securities
Trading debt securities	62,093	62,038
Equity securities:
Equity securities	79,409	77,048
Sponsored funds
Equity securities:
Equity securities	137,290	137,857
Equity method securities
Equity method securities	94,528	95,188
Sponsored privately offered funds
Equity securities:
Equity securities	$ 728	$ 695

Investment Securities - Maturit

Investment Securities - Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Amortized Cost
Within one year	$ 58,599
After one year but within five years	150,279
Amortized Cost	208,878	$ 266,259
Fair value
Within one year	58,355
After one year but within five years	147,979
Total fair value	206,334	$ 265,198
Fair value
Within one year	17,016
After one year but within five years	39,823
After 10 years	4,886
Total fair value	$ 61,725

Investment Securities - Inves37

Investment Securities - Investment securities and summary of the gains (losses) related to securities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available for sale securities:
Amortized Cost	$ 208,878	$ 266,259
Unrealized gains	20	176
Unrealized losses	(2,564)	(1,237)
Fair value	206,334	265,198
Certificates of deposit
Available for sale securities:
Amortized Cost	8,000	13,000
Unrealized gains	1	1
Unrealized losses	(3)	(2)
Fair value	7,998	12,999
Commercial paper
Available for sale securities:
Amortized Cost		34,836
Unrealized gains		142
Fair value		34,978
Corporate bonds
Available for sale securities:
Amortized Cost	180,861	198,404
Unrealized gains	19	33
Unrealized losses	(2,161)	(995)
Fair value	178,719	197,442
U.S. treasury bills
Available for sale securities:
Amortized Cost	20,017	20,019
Unrealized losses	(400)	(240)
Fair value	$ 19,617	$ 19,779

Investment Securities - Availab

Investment Securities - Available for sale sponsored funds with fair values below carrying values (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair value
Less than 12 months	$ 196,315	$ 215,186
Total temporarily impaired securities	196,315	215,186
Unrealized losses
Less than 12 months	(2,564)	(1,237)
Total Unrealized losses on temporarily impaired securities	(2,564)	(1,237)
Certificates of deposit
Fair value
Less than 12 months	2,997	2,998
Total temporarily impaired securities	2,997	2,998
Unrealized losses
Less than 12 months	(3)	(2)
Total Unrealized losses on temporarily impaired securities	(3)	(2)
Corporate bonds
Fair value
Less than 12 months	173,701	192,409
Total temporarily impaired securities	173,701	192,409
Unrealized losses
Less than 12 months	(2,161)	(995)
Total Unrealized losses on temporarily impaired securities	(2,161)	(995)
U.S. treasury bills
Fair value
Less than 12 months	19,617	19,779
Total temporarily impaired securities	19,617	19,779
Unrealized losses
Less than 12 months	(400)	(240)
Total Unrealized losses on temporarily impaired securities	$ (400)	$ (240)

Investment Securities - Consoli

Investment Securities - Consolidated Sponsored and Sponsored Privately Offered Funds (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Investment Securities
Cash	$ 177,630	$ 207,829
Redeemable noncontrolling interests	(18,570)	(14,509)
Consolidated Sponsored Funds
Investment Securities
Cash	4,910	8,472
Investments	141,502	139,086
Other assets	3,253	1,588
Other liabilities	(1,826)	(1,040)
Redeemable noncontrolling interests	(18,570)	(14,509)
Net interest in consolidated sponsored funds	$ 129,269	$ 133,597

Investment Securities - Fair va

Investment Securities - Fair value of investment securities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair value of investments
Cash equivalents	$ 166,753	$ 156,849
Available for sale securities	206,334	265,198
Trading debt securities	123,818	124,390
Equity securities	217,557	215,716
Total investment securities	642,237	700,492
Money market funds
Fair value of investments
Cash equivalents	146,461	145,785
Certificates of deposit
Fair value of investments
Cash equivalents	5,490
Available for sale securities	7,998	12,999
Trading debt securities	1,998	1,999
Commercial paper
Fair value of investments
Cash equivalents	14,802	11,064
Available for sale securities		34,978
Corporate bonds
Fair value of investments
Available for sale securities	178,719	197,442
Trading debt securities	54,833	55,414
U.S. treasury bills
Fair value of investments
Available for sale securities	19,617	19,779
Trading debt securities	4,885	4,929
Mortgage-backed securities
Fair value of investments
Trading debt securities	9	10
Common stock
Fair value of investments
Equity securities	130	116
Consolidated Sponsored Funds
Fair value of investments
Trading debt securities	62,093	62,038
Equity securities	79,409	77,048
Sponsored funds
Fair value of investments
Equity securities	137,290	137,857
Equity method securities	94,528	95,188
Sponsored privately offered funds
Fair value of investments
Equity securities	728	695
Level 1
Fair value of investments
Cash equivalents	146,461	145,785
Total investment securities	311,213	310,209
Level 1 | Money market funds
Fair value of investments
Cash equivalents	146,461	145,785
Level 1 | Common stock
Fair value of investments
Equity securities	130	116
Level 1 | Consolidated Sponsored Funds
Fair value of investments
Equity securities	79,265	77,048
Level 1 | Sponsored funds
Fair value of investments
Equity securities	137,290	137,857
Equity method securities	94,528	95,188
Level 2
Fair value of investments
Cash equivalents	20,292	11,064
Total investment securities	329,976	389,588
Level 2 | Certificates of deposit
Fair value of investments
Cash equivalents	5,490
Available for sale securities	7,998	12,999
Trading debt securities	1,998	1,999
Level 2 | Commercial paper
Fair value of investments
Cash equivalents	14,802	11,064
Available for sale securities		34,978
Level 2 | Corporate bonds
Fair value of investments
Available for sale securities	178,719	197,442
Trading debt securities	54,833	55,414
Level 2 | U.S. treasury bills
Fair value of investments
Available for sale securities	19,617	19,779
Trading debt securities	4,885	4,929
Level 2 | Mortgage-backed securities
Fair value of investments
Trading debt securities	9	10
Level 2 | Consolidated Sponsored Funds
Fair value of investments
Trading debt securities	61,775	62,038
Equity securities	142
Level 3
Fair value of investments
Total investment securities	320
Level 3 | Consolidated Sponsored Funds
Fair value of investments
Trading debt securities	318
Equity securities	2
Other Assets Not Held at Fair Value
Fair value of investments
Total investment securities	728	695
Other Assets Not Held at Fair Value | Sponsored privately offered funds
Fair value of investments
Equity securities	$ 728	$ 695

Investment Securities - Inves41

Investment Securities - Investment category (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Additions	$ 419
Valuation change	(99)
Level 3 assets at end of period	$ 320

Derivative Financial Instrume42

Derivative Financial Instruments (Details) - Not designated as a hedge - Total return swap contracts $ in Thousands	3 Months Ended
	Mar. 31, 2018USD ($)contract	Mar. 31, 2017USD ($)	Dec. 31, 2017USD ($)contract
Derivative Financial Instruments
Number of contracts | contract	7		6
Notional value	$ 305,000		$ 213,900
Cash collateral with the counterparties	9,200		9,700
Investment and other income (loss)
Derivative Financial Instruments
Net gains (losses) recognized in income	1,364	$ (11,045)
Level 2 | Other assets
Derivative Financial Instruments
Fair value - assets	$ 4,507
Fair value - liabilities			$ (1,093)

Goodwill and Identifiable Int43

Goodwill and Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Goodwill and identifiable intangible assets
Goodwill	$ 106,970	$ 106,970
Other	200	200
Total identifiable intangible assets	40,099	40,099
Total goodwill and identifiable intangible assets	147,069	147,069
Mutual fund management advisory contracts
Goodwill and identifiable intangible assets
Mutual fund contracts	38,699	38,699
Mutual fund management subadvisory contract
Goodwill and identifiable intangible assets
Mutual fund contracts	$ 1,200	$ 1,200

Indebtedness (Details)

Indebtedness (Details) - USD ($) $ in Thousands	Oct. 20, 2017	Mar. 31, 2018	Dec. 31, 2017
Indebtedness
Long-term debt		$ 94,801	$ 94,783
Repayment of short-term debt		94,978
Credit Facility
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 5.75% unsecured notes due, 2021 ("Series B Notes")
Indebtedness
Fair value of outstanding long-term indebtedness		99,800
Long-term debt		$ 94,800

Income Tax Uncertainties (Detai

Income Tax Uncertainties (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Income Tax Uncertainties
Unrecognized tax benefits, including penalties and interest that if recognized would impact effective tax rate	$ 10.9	$ 11.1
Unrecognized tax benefits, including penalties and interest, net of federal tax benefit that if recognized would affect effective tax rate	8.9	9.1
Accrued interest and penalties related to uncertain tax positions	4.2	4
Accrued interest and penalties related to uncertain tax positions, net of federal benefit	3.6	$ 3.5
Total expense of interest and penalties, net of federal benefit related to uncertain tax positions	$ 0.1

Pension Plan and Postretireme46

Pension Plan and Postretirement Benefits Other Than Pension (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
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
Components of net periodic benefit cost:
Service cost		$ 2,726
Interest cost	$ 1,508	1,654
Expected return on plan assets	(2,069)	(2,559)
Actuarial loss (gain) amortization		1,265
Prior service cost (credit) amortization		31
Transition obligation amortization		1
Total	$ (561)	3,118
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:
Interest cost	$ 14	15
Actuarial loss (gain) amortization	(30)	(45)
Prior service cost (credit) amortization	(1)	(1)
Total	$ (17)	$ (31)

Stockholders' Equity - Earnings

Stockholders' Equity - Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands	Feb. 13, 2018	Mar. 31, 2018	Mar. 31, 2017
Components of basic and diluted earnings per share
Net income attributable to Waddell & Reed Financial, Inc.		$ 46,337	$ 33,871
Weighted average shares outstanding - basic and diluted		83,111,000	84,077,000
Earnings per share:
Earnings per share, basic and diluted (in dollars per share)		$ 0.56	$ 0.40
Dividends
Dividends accrued, per share (in dollars per share)	$ 0.25	$ 0.25
Dividends to be paid		$ 20,700
Common stock repurchases
Shares repurchased in the open market or privately		996,309	476,882
Shares repurchased from employees to cover minimum income tax withholdings		121,309	1,882

Stockholders' Equity - Other co

Stockholders' Equity - Other comprehensive income (loss) activity (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	$ 872,884
Balance at the end of the period	888,968
Accumulated Other Comprehensive Income(Loss)
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	524	$ (6,757)
Amount reclassified to retained earnings for recently adopted ASUs	(848)
Other comprehensive income (loss) before reclassification	(1,131)	3,747
Amount reclassified from accumulated other comprehensive loss (income)	(23)	(177)
Net current period other comprehensive income (loss)	(2,002)	3,570
Balance at the end of the period	(1,478)	(3,187)
Unrealized (gains) losses on investment securities
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	145	(3,972)
Amount reclassified to retained earnings for recently adopted ASUs	(955)
Other comprehensive income (loss) before reclassification	(1,131)	1,423
Amount reclassified from accumulated other comprehensive loss (income)		(92)
Net current period other comprehensive income (loss)	(2,086)	1,331
Balance at the end of the period	(1,941)	(2,641)
Change in valuation allowance for unrealized gains (losses) on investment securities
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period		(3,388)
Other comprehensive income (loss) before reclassification		2,324
Amount reclassified from accumulated other comprehensive loss (income)		(56)
Net current period other comprehensive income (loss)		2,268
Balance at the end of the period		(1,120)
Postretirement benefits unrealized gains (losses)
AOCI Attributable to Parent, Net of Tax
Balance at the beginning of the period	379	603
Amount reclassified to retained earnings for recently adopted ASUs	107
Amount reclassified from accumulated other comprehensive loss (income)	(23)	(29)
Net current period other comprehensive income (loss)	84	(29)
Balance at the end of the period	$ 463	$ 574

Stockholders' Equity - Reclassi

Stockholders' Equity - Reclassifications from accumulated other comprehensive income (loss) and included in net income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	$ 1,325	$ 194
Tax (expense) benefit	(454)	(17)
Net of tax	871	177
Sponsored funds investment gains(losses) | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	1,295
Tax (expense) benefit	(340)
Net of tax	955
Sponsored funds investment gains(losses) | Investment and other income (loss) | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax		148
Tax (expense) benefit		(56)
Net of tax		92
Change in valuation allowance for unrealized gains (losses) on investment securities
Reclassifications included in net income:
Net of tax		56
Change in valuation allowance for unrealized gains (losses) on investment securities | Provision for income taxes | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Tax (expense) benefit		56
Net of tax		56
Postretirement benefits unrealized gains (losses)
Reclassifications included in net income:
Net of tax	23	29
Postretirement benefits unrealized gains (losses) | Compensation and benefits | Reclassifications from accumulated other comprehensive income (loss)
Reclassifications included in net income:
Pre-tax	30	46
Tax (expense) benefit	(114)	(17)
Net of tax	$ (84)	$ 29

Share-Based Compensation (Detai

Share-Based Compensation (Details) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2018USD ($)$ / sharesshares
Cash Settled RSU Plan | RSU Plan
Granted (in shares) | shares	989,444
Aggregate value of nonvested shares | $	$ 38.8
Restricted Stock | 1998 Stock Incentive Plan ("SI Plan")
Vesting period	4 years
Granted (in shares) | shares	1,032,068
Granted (in dollars per share) | $ / shares	$ 22.15
Aggregate value of nonvested shares | $	$ 22.9

Contingencies (Details)

Contingencies (Details) $ in Millions	Feb. 22, 2018USD ($)
Shareholder Derivative Litigation
Settlement amount	$ 19.9