Hard Dollars

What Are Hard Dollars?

Hard dollars are cash fees or payments made by an investor or customer to a brokerage firm in return for their services. Hard dollar payments are generally set sums that are realized before a customer starts dealing with a broker.

Hard dollar payments incorporate set transaction charges, month to month account maintenance charges, as well as paying for research given by the brokerage firm.

Seeing Hard Dollars

On the off chance that an investor requires research from a brokerage, they can pay for those services by means of a cash payment. This would be viewed as a hard dollar payment for services. Be that as it may, if the investor needs to pay a couple with commission dollars accessible with another brokerage firm, the customer can dispense a portion of those commission dollars towards another brokerage firm to pay for services or research. This type of payment is known as soft dollars.

Illustration of Hard Dollars

For instance, on the off chance that a client is hoping to receive research from a broker or investment bank, they will as a rule pay for the research by trading with the broker and generating commission dollars. In any case, in the event that the client doesn't have a trading relationship with the bank or broker, they can send along a check for payment. This would be viewed as hard dollars.

In the event that the client has a soft dollar arrangement with another broker, meaning they have commission funds set to the side to pay for research and different necessities, they can direct the soft dollar broker to pay one more broker for research. In the event that the client, as opposed to sending a hard check, directs the soft dollar broker to pay a firm for their research, this would be a soft dollar payment.

As such, hard dollars contrast from soft dollar payments in light of the fact that soft dollar payments are paid inside the commission revenue from making trades or deducted from the value of some other transactions. One more method for seeing it is that difficult dollar payments are physical 'real' payments in cash, while soft dollars are paid with commission dollars created with a soft dollar broker.