Which term describes arrangements where the adviser is instructed to direct trades to a specified brokerage?

The term that describes arrangements where an adviser is instructed to direct trades to a specified brokerage is directed brokerage. In this arrangement, the client specifies a particular broker-dealer to execute trades, often due to the belief that the specified broker provides better services, lower costs, or more favorable execution quality. This practice allows clients to have some control over who executes their trades, but it can raise compliance issues if the adviser does not consider obtaining best execution or if it affects the cost effectiveness of trading strategies.

Using directed brokerage can potentially lead to conflicts of interest, especially if the adviser receives benefits from the chosen brokerage that could influence their recommendations. The term emphasizes the client's directive aspect in choosing brokerage execution, distinguishing it clearly from related concepts like soft dollar arrangements or commission sharing, which focus on compensatory agreements or benefits in services exchanged rather than specifying a broker.