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.