Soft dollars are research, data, or other services paid for with client trading commissions instead of a hard-dollar invoice. Revenue sharing, 12b-1 fees, platform “marketing support,” and shelf-space payments can also sit outside the advisory AUM line you see on a statement. None of those structures is automatically illegal. Opacity is the problem: if you cannot map who gets paid and in what dollars, you cannot judge the conflict.
Martino Capital is a Colorado RIA focused on high-net-worth clients. We manage portfolios directly in-house — no TAMPs — under a single transparent AUM fee, with no product kickbacks. Insurance/annuity commissions only when that structure benefits the client, is clearer or cheaper than multi-year AUM for the same fit, and is disclosed — no double-dip. Co-founders Tom Martino (CEO / consumer advocate) and Pat Jolliffe (COO / Compliance) treat compensation clarity as a fiduciary question. Start with how to spot hidden commissions and conflicts and fee-only vs fee-based vs AUM.
What are soft dollars in plain English?
In the classic sense, soft dollars mean an adviser (or the broker it uses) pays for research, terminals, or other services with client commission dollars rather than writing a separate check from the firm’s own pocket. The research may be useful. The client still funds it through trading costs that may not appear as an “advisory fee.”
What soft dollars are not:
- They are not the same thing as the advisory AUM percentage on your invoice.
- They are not automatically “free research.” Someone pays — usually through commissions or spreads.
- They are not identical to every custodian “platform benefit” (reporting tools, research access, operational systems) that institutional custodians offer advisers who custody there.
That last distinction matters when you read Form ADV. Many firms disclose soft-dollar or custodial-benefit arrangements under brokerage practices. The question for you is whether the disclosure is specific, whether benefits tilt trading or product choice, and whether you can still get a total-cost picture in dollars. Reading help: how to read Form ADV Part 2A. Martino brochure and CRD: Part 2A and IAPD / CRD 329648.
What is revenue sharing — and how does it differ from soft dollars?
Revenue sharing (and related “shelf space” or marketing-support payments) usually means a fund company, insurance carrier, or platform pays a firm or intermediary for access, preferred placement, or distribution support. Soft dollars are typically tied to trading commissions. Revenue sharing is often tied to product flows or platform economics.
Both can steer portfolios toward higher-cost or preferred products without appearing on the advisory fee line. Both belong in the same client checklist:
- Does the firm or its affiliates receive payments from product providers?
- Does that payment change which funds, models, or insurance products get recommended?
- Can they show total client cost in dollars with and without the preferred product?
For layered outsourcing that can hide similar economics, see what is a TAMP and why we manage portfolios in-house.
What are 12b-1 fees, and who receives them?
12b-1 fees are annual mutual-fund distribution / marketing charges paid from fund assets — which means they come indirectly from shareholders. Load and no-load funds may carry them. They can compensate brokers or other intermediaries for selling or servicing the fund.
Important client framing:
- 12b-1 fees are not your adviser’s AUM fee, but they still reduce net return.
- A firm can use funds that have 12b-1 fees without receiving those fees itself.
- The clean question is: “Do you (or your firm / affiliates) receive 12b-1 or similar distribution compensation from funds in my accounts?”
Martino Capital’s Form ADV Part 2A states that the firm does not receive compensation from 12b-1 fees. Fund expense ratios and other third-party fund costs can still exist in any portfolio that uses funds or ETFs — those are separate from whether the adviser pockets 12b-1. Ask any firm for that distinction in writing, then verify it in ADV.
What other “invisible” costs show up in advisory relationships?
Beyond soft dollars, revenue sharing, and 12b-1, HNW households often miss:
| Cost / incentive | Where it hides | Question to ask |
|---|---|---|
| Custodian / ticket / wire fees | Brokerage statements | What do I pay the custodian in dollars per year? |
| Fund / ETF expense ratios | Prospectus / fact sheet | What is the weighted expense ratio of my book? |
| TAMP / model-manager layers | Platform invoices | Who runs day-to-day investing, and what do they charge? |
| Insurance / annuity commissions | Product illustration | What do you earn if I buy — and if I don’t? |
| Markups, spreads, alternative-product fees | Offering docs | Show total cost vs a transparent alternative. |
| Referral / solicitor payments | ADV / engagement letter | Does anyone get paid for introducing us either way? |
A single transparent AUM fee answers only one row of that table. It does not erase custodian or fund costs. It should, however, make the advisory layer easy to map — which is why stacked TAMP and kickback structures matter. Patterns and questions: how to spot hidden commissions and conflicts and questions to ask any advisor.
How does Martino Capital approach these costs?
Approved public posture — education, not a promise that every industry cost vanishes:
- Single transparent AUM fee for the advisory relationship; no product kickbacks; no layered third-party manager fees on top of ours.
- Direct in-house portfolio management — we do not hand the book to a TAMP (why we manage in-house, what is a TAMP).
- 12b-1: Part 2A discloses that we do not receive compensation from those fund distribution fees.
- Insurance / annuity commissions: only under a Client-benefit rule — when a transparent commission is clearer or cheaper than wrapping the same fit under multi-year AUM — with plain disclosure, no double-dip, and no hidden kickbacks (fee-only vs fee-based vs AUM).
- Brokerage / custodial practices: Form ADV Item 11 describes brokerage, best execution, and research / platform benefits available through custodians we use. Read the current brochure rather than relying on hallway summaries: Part 2A and IAPD / CRD 329648.
- S.W.E.L.L. is our proprietary AI research tool inside a human fiduciary process — not a judgment substitute and not a claim that “the AI manages your money.” More: SWELL AI; deeper guide: how S.W.E.L.L. AI fits a fiduciary research process.
Tom’s consumer-advocate background and Pat’s compliance ownership push toward language clients can verify. Fiduciary duty in practice is what you can check — ADV, fee map, who trades — not adjectives on a homepage.
What should you ask any advisor about invisible costs?
Use this filter (expand in questions to ask any advisor):
- Do you use soft-dollar arrangements? What research or services are paid with client commissions, and how is that disclosed in ADV?
- Do you or your firm receive revenue sharing, shelf-space, or marketing-support payments from product providers?
- Do you receive 12b-1 or similar distribution fees from funds in client accounts?
- Show advisory + platform + fund + custodian costs in dollars at my asset level — not only percentages.
- Who places trades and rebalances in my accounts — your firm, a TAMP, or another adviser?
- If insurance or annuity products enter the plan, what do you earn under commission vs AUM — and do you ever collect both on the same product?
If hallway answers and Form ADV diverge, believe the paperwork — then ask why the pitch differed. How to read Form ADV Part 2A.
When are these structures legitimate — and when are they red flags?
Education only — not a recommendation for your situation.
Legitimate design usually looks like: specific ADV disclosure, a fee map in dollars, research or platform benefits that can be explained without embarrassment, and willingness to compare lower-cost alternatives. Red flags look like: “don’t worry about that,” inability to name who receives 12b-1 or revenue share, soft-dollar or platform benefits that clearly steer product choice without saying so, or “we manage your money” while a TAMP and fund stack do the economic work.
Martino Capital’s comparison point is explicit: in-house management, single transparent AUM fee, no product kickbacks, no receipt of 12b-1 compensation per Part 2A, and commissions only under the Client-benefit / disclose / no double-dip rule. That is the stack we invite you to verify — not a claim that markets have zero third-party costs.
FAQ
Are soft dollars illegal?
No. Soft-dollar and related research arrangements can be lawful when they fit applicable rules and are properly disclosed. The client issue is clarity and conflict: who pays, who benefits, and whether trading or product choice is tilted.
Does every custodian research tool count as soft dollars?
Not necessarily. Classic soft dollars are research/services paid via commissions. Custodians also offer institutional platform benefits (systems, reporting, research access) that firms disclose under brokerage practices. Ask which bucket applies and read the firm’s current ADV language rather than assuming synonyms.
Does Martino Capital receive 12b-1 fees?
No. Our Form ADV Part 2A states we do not receive compensation from 12b-1 fees. Funds you hold may still have internal expenses — those are fund costs, not Martino distribution compensation.
Do you take product kickbacks or revenue-sharing payments?
Our public fee posture is a single transparent AUM fee with no product kickbacks. Insurance/annuity commissions, when used at all, follow the Client-benefit comparison, disclosure, and no-double-dip rule. Verify current disclosures on Part 2A and IAPD / CRD 329648.
How do TAMPs relate to invisible costs?
A TAMP can add platform and model-manager layers on top of advisory AUM while the hallway story still says “we manage your portfolio.” That is a different invisible-cost family than soft dollars, but the client remedy is the same: name the parties and map dollars. See what is a TAMP and why we manage portfolios in-house.
Does S.W.E.L.L. create a soft-dollar arrangement?
No. S.W.E.L.L. is an internal research tool inside our human process — not a substitute for fiduciary judgment and not a commission-funded third-party research soft-dollar deal.
How do I talk through a fee-layer map with someone?
Phone-first: call 303.771.4357 or use the contact page. Email: tom@martinocapital.com. No online schedulers. Bring your current ADV, statements, and the questions above if you are comparing firms.
Disclaimer: This article is general education, not personalized investment, tax, or legal advice, and not a substitute for reading a firm’s current Form ADV or consulting your own counsel. It does not create an attorney-client or adviser-client relationship. Advisory services are offered only where Martino Capital is appropriately registered or exempt. Past performance does not guarantee future results. For current disclosures, see our Form ADV on IAPD.
Page reviewed September 2026 for clarity. This is educational information, not personalized investment advice.