Daren Blonski, co-founder and managing principle of Sonoma Wealth Advisors, Sonoma, CA, and a CFP professional himself, said he found the guidance a bit opague. "If you're going to recommend against bitcoin as an asset class, you should also understand it to say no to it. Most advisors ignore it."
Blonski said he uses "a very measured position in bitcoin in client portfolios. When you've got the market volatility we've seen, we use the opportunity to rebalance just like we would with any other asset class. We don't say 'the market solf off, we're going to get rid of bitcoin.'"
in that vein, the guide reminds CFP professionals that they must satisfy their fiduciary duty “at all times” when providing crypto advice, which includes “implementing a process for analyzing crypto assets” and evaluating assumptions and estimates used to recommend crypto assets in light of clients’ risk tolerance, goals and circumstances.
CFP professionals should “not cause the client to incur excessive cost or be exposed to excessive risk relative to comparable, reasonably available alternatives,” the board warned.
Advisors should also take care to establish how to measure the outcome and success of a client’s crypto currencies and determine whether or not the advisors will be implementing or monitoring such assets on an ongoing basis or the client will be doing it on their own.
Advisor questions and the warnings issued by regulators prompted the organization to issue the guide, the CFP Board said.
Various federal and state regulators like the Financial Industry Regulatory Authority, Inc. (Finra), U.S. Department of Labor (DOL) and consumer protection organizations “have cautioned that investments in cryptocurrency-related assets present significant risks that warrant careful evaluation,” the board said.
The board also pointed to a U.S. Department of Labor release in March which said the DOL “has serious concerns about the prudence of a fiduciary’s decision to expose 401(k) plan participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies” and cautioned fiduciaries to “exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.”