Hard Dollars

What are hard dollars?

Hard dollars are explicit cash payments a client makes to a brokerage or financial service provider in exchange for services. These are fixed, out-of-pocket charges that are known and recorded up front, such as transaction fees, monthly account maintenance charges, or direct payments for research and advisory services.

How hard dollars work

The client pays cash (via check, bank transfer, or invoice payment) directly to the firm for a specific service.
Fees are typically disclosed and billed separately from trading activity.
Because they are actual cash payments, hard dollars are reflected on statements and invoices and are straightforward to track and audit.

Hard dollars vs. soft dollars

Hard dollars: cash payments made directly by the client for services.
Soft dollars: indirect payments made using brokerage commission credits or other non-cash arrangements, where commission revenue generated from trades is used to pay for research or services.
Key difference: hard dollars are explicit cash outlays; soft dollars are paid through commission allocation or similar arrangements tied to trading activity.

Example

A client wants proprietary equity research from a brokerage. If the client has no trading relationship with that broker, they can pay for the research by sending a check — this is a hard dollar payment. Alternatively, if the client has commission credits with another broker, they might instruct that broker to use those commissions to pay for research instead — that would be a soft dollar arrangement.

Why it matters

Transparency: Hard dollar payments are clear and easy to document, which helps with expense tracking and regulatory reporting.
Conflicts of interest: Soft dollar arrangements can create incentives to trade more to generate commissions; hard dollars reduce that particular conflict because services are paid for directly.
Budgeting: Firms and investors can budget more predictably when costs are paid in hard dollars.
Record-keeping: Hard-dollar transactions are simpler to reconcile and audit.

Key takeaways

Hard dollars = direct cash payments for brokerage or research services.
They are distinct from soft dollars, which use commission-based or indirect payment mechanisms.
Hard dollars improve transparency and ease of accounting, while soft dollars may introduce incentive-related conflicts.