Glossary
Financial advisor terms, defined
What the words mean, and how to check them for a specific advisor.
- Fee-only financial advisor
- A fee-only financial advisor is paid only by their clients, never by commissions, referral fees, or other payments tied to selling financial products.
- Fee-based financial advisor
- A fee-based financial advisor charges client fees and can also earn commissions on products they sell, so fee-based is not the same as fee-only.
- Commission-based advisor
- A commission-based advisor is paid by the companies whose financial products they sell, such as insurance, annuities, or mutual funds, rather than by the client directly.
- Fiduciary
- A fiduciary financial advisor is legally obligated to act in the client's best interest, putting the client's interests ahead of their own.
- Assets under management (AUM) fee
- An AUM fee is an annual charge equal to a percentage of the investments an advisor manages for you, usually billed quarterly from the account.
- Flat-fee financial planning
- Flat-fee financial planning means paying a fixed price, per project or per year, that does not depend on the size of your investments.
- Hourly financial planning
- Hourly financial planning means paying an advisor for the time they spend on your questions, with no ongoing commitment.
- Subscription financial planning
- Subscription financial planning is ongoing advice for a recurring monthly or annual fee, regardless of how much you have invested.
- Advice-only financial planning
- An advice-only financial planner gives planning advice for a fee but does not manage or hold your investments.
- Registered investment adviser (RIA)
- A registered investment adviser (RIA) is a firm registered with the SEC or a state securities regulator to give investment advice for compensation.
- Investment adviser representative (IAR)
- An investment adviser representative (IAR) is an individual registered to give investment advice on behalf of a registered investment adviser firm.
- CRD number
- A CRD number is the unique ID that the Central Registration Depository assigns to every registered financial professional and firm in the US.
- Form ADV
- Form ADV is the registration filing every investment adviser firm submits to regulators; its Part 2A brochure discloses the firm's fees, services, and conflicts of interest in plain English.
- CERTIFIED FINANCIAL PLANNER (CFP) certification
- The CFP certification is a professional credential for financial planners, granted by CFP Board in the US and FP Canada in Canada, that requires education, an exam, experience, and ongoing ethics commitments.