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What makes it confusing is that many advisors call themselves different things.
In the true sense of the definition a Fee Based advisor only takes fees and not commissions. But a hybrid definition/business model has evolved where advisors call themselves fee based, but the fee is only for the "financial plan" and not for the sale of the product. Sometimes this is referred to as "double dipping". Honestly it is often uncalled for unless it is a very high net worth client who's "financial plan" really does take hours and hours and hours of work to put together... usually it is called for in estate planning.
But unfortunately there are some advisors who double dip for very simple clients and charge a fee of some type wrap/flat/hourly/etc. and also take commissions on the products.
So now the term "Fee Only" has come to the market. But the problem with giving it a general label is that the term is not regulated by an agency... so some "Fee Only" advisors use that term to mean they charge a flat dollar amount or hourly rate. Then other use the term to mean they charge a wrap fee against the clients assets and do not take comp.
Then others still call themselves "Fee Based" but still just charge a wrap fee against the total dollar amount and do not take commission in addition to the fee.
Some use this term instead of "Fee Only" because they do recommend products that they are not able to include in the wrap fee. It might be a fixed annuity, life insurance, long term care, disability insurance, etc. ... but long story short they use that term usually because they reccomend risk mitigation products which are not able to go under the wrap fee... so it would be untruthful to call themselves "Fee Only", but when it comes to securities (market investments) they really are Fee Only.
So it is a very confusing and convoluted world out there for consumers (and for journalists who are not securities licensed but try to pitch themselves as experts in the subject).
The best way to decipher how your advisor gets paid is to ask. They should be completely upfront and truthful.
The other way is to ask about licensing. Someone who is only a series 65 is not able to be paid commissions on securities products. Someone who is a series 7 or 6 gets paid by commissions. Some states allow certain financial designations such as CFP/ChFC/CFA to be a 65 equivalent and if they do not have a 6 or 7 they are Fee Only.
Also, just because a series 65 advisor does have a 6 or 7 does not mean they always take commissions with all clients. But they are required to fully disclose how they are setting up the pay structure for that client.
So basically all of the "labels" other than the actual licensing are basically just generalized labels that are not regulated and do not always mean the same thing with all advisors.
Clear as mud for you?
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Originally a fee based advisor was a 65 only. The term evolved over time which is why the term Fee Only came about. Some associations have tried to define the terms but they have no real regulatory authority beyond the advisors who choose to be members of that association and pay dues.
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