Does anyone have a good handle on what soft-dollars are?
I have some questions that maybe someone can answer via a thumbs-up/down system?
- Soft dollars can only be used to pay for tools that aid the investment decision making process? 2. Soft dollars can be used for contributions to charity at the direction of the client? I would love to get a better handle on what soft-dollars are. Any readings you can point me in the direction of doing I would be very appreciative.
Sincerely - someone who always manages to fail ethics.
Brokerage fees paid by clients.
and why am I donating a brokerage fee I own to some charity?
Reading 2, Standard IIIA, Soft Commission Policies. The client owns the brokerage fees. When you use the client brokerage, the brokerage commission is the client’s asset. Now to answer your questions, I believe 1) is thumbs-up. While directed brokerage is not a violation (i.e. client asks you to purchase goods/services with soft dollar commissions), you are on the hook for making sure that the use of the soft-dollar commissions through “best price” and “best execution” and be assured that the use will benefit the account beneficiaries. 2) is thumbs-down. This is an example of directed brokerage that does not add value to the account beneficiaries. This is all summed up very nicely in that paragraph I referenced in Reading 2, Standard IIIA, Soft Commission Policies.