Revenue sharing is when a fund company, platform or other third party passes part of what it earns on an investment to the firm that recommends or sells it.
The money comes out of what the fund manager or sponsor earns, so you don't see it as a separate charge. What it creates is a reason for the firm to favor the investments that pay it over ones that don't.
The SEC treats it as a core conflict. Form CRS, the short relationship summary every adviser and broker must give retail clients, has to address revenue sharing alongside proprietary products, third-party payments and principal trading. Form ADV Part 2A, Item 14, requires an adviser to describe any economic benefit it gets from someone other than a client for advising clients, and how it handles the conflict.
A firm that receives revenue sharing on what it recommends isn't paid only by its clients, so it isn't fee-only.
How to check
Read the conflicts section of the firm's Form CRS and Item 14 (Client Referrals and Other Compensation) of its Form ADV Part 2A. Then ask directly: "Does your firm receive any payments from the companies whose investments you recommend?"
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