Soft Dollars
A means of paying brokerage firms for their services through commission revenue, as opposed to through normal payments (hard-dollar fees).
Investopedia Commentary
For example, a mutual fund may offer to pay for research from a brokerage firm by executing trades at the brokerage.
Let's say that Cory's Large-Cap Value Fund wants to buy some research from XYZ brokerage firm. Cory's may agree to spend at least $10,000 in commissions at the firm in return for research from the brokerage. This would represent a soft dollar payment.
Alternatively, if Cory's wanted to simply buy the research and not agree to any kind of soft dollar fee, he might have to pay the brokerage $7,000 in "hard dollars" (cash) for the transaction.
Related Links
Mutual Fund Basics Tutorial
Introduction To Fee-Based Brokerage Accounts
See also: Broker, Commission, Hard Dollars, Mutual Fund, Quid Pro Quo, Value Fund
soft dollars
complimentary
subscriptions to market letters or an at-home quote system. Payment is disguised in the form of large commissions paid to the brokerage firm. Compare hard dollars.