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Waddell & Reed's New Moves to Fortify Broker-Dealer Business

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Waddell & Reed Financial, Inc. has announced that it is undertaking a set of new initiatives to strengthen the broker-dealer business and enhance advisor experience. This is part of the company’s efforts to become more competitive within the industry.

The company’s president, Shawn Mihal stated, “While our legacy model served advisors and their clients well for decades, additional changes are needed today to enhance the way we compete in the current marketplace and position us for long-term growth.”

He added, “Advisors and clients are seeking broader product offerings for a range of differing needs, as well as simplified ways to conduct business. We’re responding by investing in solutions and products that allow advisors to more effectively work with their clients so they can best help them identify and pursue their long-term financial aspirations.”

Details of the Initiatives

  1. Enhancing the compensation grid - In order to reward advisors at every level of productivity, the company wants to provide competitive payout rates of up to 94%.
     
  2. Developing advisor technology platform - In order to integrate the leading financial services technology partners like Albridge Solutions, eMoney, Envestnet and Pershing NetX360 with the new providers that Waddell & Reed expects to announce in 2018, it wants to develop a new platform.
     
  3. Expansion of investment products - The company wants to continue expanding its advisory programs and services. Notably, in 2018, its fastest-growing advisory offering, MAP Navigator added four asset managers and more than 60 funds. In 2019, it expects to expand the program further by adding 3-5 partners and 50-75 new fund options. Moreover, the firm also wants to add a third-party strategist program, with multiple ETF investment program providers along with an open architecture mutual fund strategist program.
     
  4. Transitioning of advisors - In addition to the 36 advisors that have already been transitioned in 2018, Waddell & Reed aims to transition all advisors to personal branch offices in each community by the end of 2020, thereby moving from the remaining brick-and-mortar field offices leased by the firm. Once this will be done, the advisors will serve local clients from their personal offices, thereby, following the industry-standard independent broker-dealer model.
     
  5. Developing advisor support model - The company intends to centralize various field support activities to the home office, including the build-out of a robust practice development team. This will help in offering support for independent advisor growth, expanding the recruiting team to source and transition experienced professionals nationally, additional supervisory roles and the creation of a white glove service team for top advisors.

Notably, Waddell & Reed’s continued investment in the Broker-Dealer channel by providing additional support to its advisors through training opportunities and enhanced technology tools will help boost revenues, inflows and assets under management in the future.

Shares of the company have gained 5.7% over the past year against 17.5% decline of the industry.



Currently, Waddell & Reed carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the finance space are Citigroup Inc. (C - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) and U.S. Bancorp (USB - Free Report) . Each of these companies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past 60 days, Citigroup has witnessed an upward earnings estimate revision of 1.8% for the current year. Its shares have gained 16.8% in the past two years.

JPMorgan’s earnings estimates for 2018 have been revised 1.4% upward over the past 60 days. Shares of the company have gained 18% in the past two years.

U.S. Bancorp’s share price has increased nearly 10.3% in the past two years. For 2018, its earnings estimates have been marginally revised upward over the past 60 days.

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