Compensation Analysis

Your net compensation is an amalgamation of dozens of factors beyond commission and 12b-1 fees. Incentives; perks; monetary support programs; subsidized fees, benefits and overhead; bonuses and equity compensation all factor heavily into your overall opportunity to build wealth. Conversely, at many firms the advisor pays a host of expenses that need to be taken into consideration as well. Below is an analysis of Waddell & Reed's compensation package that will help take the guess-work out of your bottom line.

Gross Dealer Concession (GDC) $250,000   $500,000   $750,000   $1,000,000  
Production GDC (GDC less 12b1 revenue) $175,000   $350,000   $525,000   $700,000  
Commissions and Service Fees $148,250 59% $362,900 73% $594,900 79% $823,600 82%
President's Council Bonus² $0   $0   $10,000   $10,000  
Equity Comp $0   $5,000   $10,000   $15,000  
Total Cash/Equity Compensation $148,250 59% $367,900 74% $614,900 82% $848,600 85%
PLUS:
Licensing Fee3		 $500   $500   $500   $500  
OS J/Compliance Fees4 $12,500   $20,000   $30,000   $30,000  
Health Insurance Subsidy5 $6,100   $6,100   $6,100   $6,100  
Convention Meetings / Trips6 $3,000   $12,500   $13,500   $23,000  
Advertising (Co Op) - W&R Match7 $1,500   $1,500   $1,500   $1,500  
Division Office Value8 $12,000   $12,000   $12,000   $12,000  
Total expenses covered by W&R $35,600   $52,600   $63,600   $73,100  
Total Compensation $183,850 74% $420,500 84% $678,500 90% $921,700 92%
LESS:
Transaction Fees9		 $12,500   $25,000   $37,500   $50,000  
E & O coverage10 $840   $840   $840   $840  
Technology Fees10 $1,800   $1,800   $1,800   $1,800  
Advertising (Co Op) - Advisor Match7 $1,500   $1,500   $1,500   $1,500  
Health Insurance5 $4,100   $4,100   $4,100   $4,100  
Total expenses not covered by W&R $20,740   $33,240   $45,740   $58,240  
Net Compensation to Advisor $163,110 65% $387,260 77% $632,760 84% $863,460 86%

1. Assumes the following product mix: fee-based - 10%, mutual funds - 50%, trails - 30%, insurance - 4%, general securities - 3%, MAP - 3%.
2. Top 12 advisors earn President's Council Bonus. In 2007, the 12th ranked advisor had 750,000 in GDC.
3. Advisors initial licensing fees paid for in their resident state (and 1 non-resident state if advisor lives within 100 miles) based upon production GDC.
4. Independent Firms may charge an OSJ / Compliance Fee that generally range from 3% to 10% of GDC. This analysis uses an estimated 5% at $250,000, 4% at $500,000 and $750,000, and 3% at $1,000,000.
5. A portion of your health insurance is subsidized based upon production GDC. Amounts shown include advisor, spouse, and children.
6. Chairman's Cabinet Platinum trip (Value 9,500), Crest trip (Value 9,500), Circle of Champions meeting (Value w/ guest 3,500, Value w/o guest 2,000). The value of the trips is added to the advisors gross income as taxable income. Only the guest portion of the meetings are included as taxable income.
7. Advisor reimbursed for advertising up to 50% of covered program expenses. Example shown is $3,000 with $1,500 reimbursed by W&R.
8. For those advisors working out of a division or district, office space expense is valued at $12,000 and is covered by W&R. If an advisor works out of an independent office, they may qualify for office support up to $24,000/year.
9. W&R Transactions Fees: Fully Chargeable $7/trade; Systematic $2/trade. Analysis estimates fees based on 5% of GDC, which is only an estimate.
10. W&R E&O Insurance: $70.00 per month: W&R Technology Fee: $150.00 per month

As you are weighing the benefits of Waddell & Reed among other firms, it is important to remember that Waddell & Reed offers a highly competitive compensation package with a high level of built-in, firmwide support for your business. We believe that this is a unique model for the industry and one that wirehouses or independent firms cannot offer.