Revenue sharing: how it works and why it matters for your money

Ever wondered how businesses split profits?

That’s where revenue sharing comes in—a common yet often overlooked financial arrangement that influences everything from business partnerships to your investment portfolio.

But here’s the million-dollar question:

👉 Could your broker be making money from revenue sharing—and not telling you?

The answer could impact your investment decisions more than you think.

Let’s break it all down.

What is revenue sharing?

At its core, revenue sharing is an agreement where two or more parties split earnings based on predefined terms.

These agreements aren’t one-size-fits-all—some companies split revenue evenly, while others divide it based on contributions like capital, labor, or expertise.

And here’s the kicker: You encounter revenue-sharing models every day without even realizing it.

Common examples of revenue sharing

💼 Business partnerships: When two companies collaborate on a product, they often split profits based on their level of investment. For example, a tech company developing software with a marketing firm may agree to share revenue proportionally—70/30, 60/40, or whatever they negotiate.

🏪 Franchising: Ever noticed how McDonald's, Subway, and Dunkin' Donuts operate under the same brand but are owned by different individuals? Franchisees pay a percentage of their revenue back to the corporate brand in exchange for marketing, training, and branding support.

💰 Employee incentives: Many businesses use revenue-sharing bonus programs to motivate employees. Instead of traditional profit-sharing, these incentives allocate a portion of revenue before expenses—meaning employees get paid based on total sales, not just profit margins.

🌎 Affiliate marketing: Bloggers, YouTubers, and influencers make money when they refer customers to products. Every time you use an influencer’s discount code, they earn a percentage of the sale. This is a prime example of revenue sharing at work.

📱 Technology & licensing: Tech companies, content creators, and software developers license their work to others and receive a portion of revenue in return. Think of Apple’s App Store—every app developer shares revenue with Apple for using its platform.

In every case, revenue sharing aligns the interests of all parties involved. The better the business does, the more everyone benefits.

But here’s the twist…

Is your broker making money from revenue sharing behind your back?

Financial advisors and brokers often receive hidden compensation from fund companies—and it could influence the investment recommendations they give you.

💡 Translation? Your broker might push certain funds not because they’re the best for you—but because they’re getting paid extra behind the scenes.

So, how do you find out? Here’s what to look for:

1. Review your broker’s disclosures

Start with these key documents:

✅ Form ADV: If your broker is a registered investment advisor (RIA), they must file this form with the SEC. It outlines fees, business practices, and—most importantly—any revenue-sharing arrangements. You can find it on the SEC’s Investment Adviser Public Disclosure (IAPD) website.

✅ Form CRS (Client Relationship Summary): This document, required by the SEC, breaks down how a broker is compensated, potential conflicts of interest, and whether they receive payments from fund companies.

✅ Fee & compensation disclosure: Many brokers outline their earnings on their websites or in account-opening documents. Look for sections labeled “Compensation,” “Revenue Sharing,” or “Conflicts of Interest.”

2. Check the fund’s prospectus

Investment funds are required to disclose fee structures. You’ll find this information in:

📌 The prospectus & statement of additional information (SAI): These documents outline distribution fees (12b-1 fees), marketing support, and—yes—revenue-sharing agreements.

Pro tip: The SAI often contains the fine print brokers hope you won’t read.

3. Dig into your broker’s website

Most brokerage firms disclose their revenue-sharing arrangements somewhere on their site. Navigate to:

➡️ “Compensation”
➡️ “Conflicts of Interest”
➡️ “Disclosures”

Red flag: If your broker’s website is vague about how they get paid, they may have something to hide.

4. Scrutinize your account statements

You won’t always see “revenue sharing” spelled out, but you might notice:

🔍 Unusual fees
🔍 Higher-than-average expense ratios
🔍 Consistent recommendations for certain funds

If your broker only recommends funds from a select group of companies, they could be prioritizing their earnings over your financial success.

5. Just ask your broker

Yes, really.

Brokers and financial advisors are legally required to disclose conflicts of interest. If they’re earning revenue-sharing payments, they must tell you—but only if you ask.

📢 Ask them directly:
💬 “Do you receive any revenue-sharing payments from fund companies?”

If they dodge the question or give a vague answer, red flag! 🚩

6. Use the SEC & FINRA tools

Want to go straight to the source?

🔎 SEC’s Investment Adviser Public Disclosure (IAPD): Look up your broker’s Form ADV for a breakdown of their fees.

🔎 FINRA’s BrokerCheck tool: Check if your broker has a history of disclosures or conflicts of interest.

The bottom line

Revenue sharing isn’t inherently bad—but when it’s hidden, it’s a problem.

If your broker is earning extra compensation behind the scenes, you deserve to know how it affects their recommendations.

💡 Stay informed. Ask the tough questions.
💡 And make sure your money is working for YOU—not just your broker.