Advisor Insight

What's in a name? Decoding financial advisory terms

What kind of advisor did you hire?

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Just the idea of financial planning can strike fear in the hearts of average investors. So when confronted with the seemingly complex terminology that describes the myriad types of financial advisors—from fee-only vs. fee-based to hybrid advisor and dually registered, not to mention the alphabet soup of advisor certification acronyms, such as CFP and ChFC—it's no wonder many are inclined to simply throw their hands up in despair.

CNBC takes a crack at explaining five terms for financial planners you're likely to encounter.

By CNBC's Kenneth Kiesnoski
Posted 19 June 2015

Financial advisor

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Financial planners provide financial advice or guidance to customers for compensation. They can provide an array of services, such as investment management, income-tax preparation and estate planning. However, they must carry the Series 65 license in order to conduct business with the public.

Financial advisor is a generic term, and many different types of financial professionals fall into this general category.

These financial professionals also go under these titles: wealth manager, investment advisor, financial planner and financial consultant.

Some of the members of this group include stockbrokers, insurance agents, tax preparers, registered reps and investment advisor rep. Estate planners and bankers fall under this umbrella as well.

Source: Investopedia

Fee-based financial planner

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Financial planners whose income is based on a combination of commissions on financial products they sell and fees for financial planning.

Source: Kahler Financial Group

Fee-only financial planner

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Financial planners who do not receive any commissions, kickbacks or hidden fees from any source. Instead, their earnings come from direct fees to clients.

Source: Kahler Financial Group

Hybrid advisor

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A hybrid financial advisor has passed the Series 7, or General Securities Representative Exam, has a Series 65 license to give financial-planning advice and owns his or her own registered investment advisory (RIA) firm registered with the Securities and Exchange Commission or analogous state securities regulatory authority.

Source: Financial Planning

Dually registered advisor

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A dually registered advisor wears two hats. They also have both Series 7 and Series 65 licenses, but do not own his or her own RIA. Such advisors are affiliated with a broker-dealer, and they are registered as investment advisor representatives under that broker-dealer's corporate RIA.

Source: Financial Planning