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Soft-Dollar Brokers Underperform Other Types of Brokers, According to Study

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From a total trading cost perspective, soft-dollar brokers underperform most other types of brokers, according to a study by two university professors. Most investors are willing to pay more in commissions when they use soft-dollars because they believe they are getting additional services. However, the study reveals that if they thought higher commissions were the extent of the additional costs, they are missing a big part of the picture. On average, a soft-dollar broker costs about ten basis points more than a full-service broker. Plan Sponsor featured the report in its February 1999 issue.
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