CFP professionals who aren’t crypto competent or able to act as fiduciaries may need to limit or terminate client engagements around crypto-currency assets, the Certified Financial Planner Board of Standards Inc. (CFP Board) warned in a new guide issued today.

The guidance directs advisors who are CFP professionals “to act with caution when providing financial advice about cryptocurrency-related assets” and details the steps they need to take to uphold the requirements of the board’s Code of Ethics and Standards of Conduct in their practices.

The new guide “is designed to benefit and protect the public by educating CFP professionals on how to put their clients’ best interests first,” CFP Board CEO Kevin R. Keller said in a statement.

“As part of their CFP certification, [advisors] make a commitment to CFP Board to act as a fiduciary when providing financial advice,” Keller noted.

CFP professionals must also be competent to provide crypto advice, the guide stipulates.

An advisor who lacks competence to provide financial advice concerning crypto-related assets “must either gain competence, obtain the assistance of a professional whom the CFP professional has a reasonable basis to believe is competent, limit or terminate the client engagement or refer the client to another professional whom the CFP professional has a reasonable basis to believe is competent,” according to the guide.

However, developing competence in this area to fulfill the duty of competence is no small undertaking, given the lack of information about crypto-currency assets, the CFP Board warned.

“The information that a CFP professional needs to provide financial advice may not be available. Furthermore, the information that is available may be limited. In some circumstances, a CFP professional’s inability to obtain material information will prevent the CFP professional from providing the financial advice,” the board said in the guide.

Lack of historical performance and valuation data and risk track records on many crypto assets also make them difficult for a CFP to assess costs and risks, which CFP professionals must fully disclose to clients.

Where a CFP professional is able to provide financial advice, “notwithstanding the existence of limited information,” he or she “may need to inform the client, prior to providing the financial advice, that important facts that may affect the asset’s performance are not readily available or may change over time,” the guide says.

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.”