The CFP Board’s Latest Report on Crypto Sets High Standards for Advisors

Decisions to recommend bitcoin should depend on an advisor's crypto competency and a client’s personal/financial circumstances, the CFP Board’s notice rightly says.

AccessTimeIconDec 22, 2022 at 1:49 p.m. UTC
Updated Dec 22, 2022 at 3:20 p.m. UTC

The Certified Financial Planner (CFP) Board dropped its “Notice to CFP Professionals Regarding Financial Advice about Cryptocurrency-related Assets” on Dec. 5.

The board's notice is a 14-page report that outlines a series of risks associated with cryptocurrency investment. It lays out some standards that financial advisors can adhere to in their decision to provide, or not provide, advice on cryptocurrency investment.

By the CFP Board’s definition, this advice includes “communications that, based on their content, context and presentation, would reasonably be viewed as a recommendation to take or refrain from taking a particular course of action.”

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In short, the report elucidates the CFP Board’s “Code and Standards,” which neither prohibits advisors from giving advice on crypto nor inhibits them from not giving any advice on it. It emphasizes that financial advisors must adhere to Fiduciary Duty when giving advice on crypto by fully taking into account the goals, risk tolerances and personal/financial circumstances of the client. And it underscores the standards of competency necessary in giving crypto-related advice.

On giving versus not giving advice

The report does spell out, “The CFP Board’s Code and Standards does not require a CFP professional to offer Financial Advice to a Client on every Financial Asset that is available in the marketplace. A CFP professional does not violate the Code and Standards when the CFP professional does not provide Financial Advice about cryptocurrency-related assets.”

However, the CFP Board’s precaution on advice giving should be interpreted to mean that crypto-uneducated financial advisors should not only avoid giving advice in support of cryptocurrency, but also giving advice in opposition to it.

Financial advisors uneducated about crypto can no longer legitimately argue that cryptocurrencies are “Ponzi,” “beanie babies” or “tulips,” as all of those characterizations are not founded in facts or research. The statements might work over a beer with friends but not in financial planning with clients. In such settings, misrepresenting bitcoin is a form of advice – and there are far too many advisors currently in this camp.

On responsibilities to clients

The notice mentions, “A CFP professional must satisfy the Fiduciary Duty, which provides that a CFP professional must act as a fiduciary, and therefore, act in the client's best interests, at all times when providing Financial Advice to a Client.”

This means that if you as a financial advisor feel it is irresponsible and not logical for your client to invest in crypto, then you should advise against it.

That said, I have not seen a single advisor make a specific and compelling case against an allocation to bitcoin. Whereas mathematics favors adding bitcoin, FUD (fear, uncertainty and doubt) most often gets in the way.

Bitcoin is not going to disappear because the FTX crypto exchange was allegedly a criminal enterprise. Bitcoin will remain around for generations to come because bitcoin is money, helps small business owners and helps solves ESG concerns.

Not only that, information on how to more intelligently gain exposure to a variety of crypto assets is now available. The Digital Asset Classification Standard (DACS), created by CoinDesk Indices, provides reliable, comprehensive and standardized industry definitions and classifications for digital assets.

On competency

It is wholly and entirely up to each advisor to refrain from providing advice.

But the report explains that “A CFP Professional Must Comply with the Duty of Competence When Providing Financial Advice About Cryptocurrency-Related Assets.”

I don’t have an opinion on every esoteric investment strategy – and you don’t need to either. But it’s important that, as advisors, we be honest with clients when there is an area of investment that we are not fully educated on.

Most advisors’ commentary on crypto should be, “I haven’t done the work to provide any analysis on it.” In my opinion, this applies to 90%+ of all advisors.

That said, cryptocurrency has gone mainstream, so there is less and less room for excuses on why you haven’t spent time researching this growing asset class. CNBC even has bitcoin listed on its ticker tape – so clients of all ages are seeing it and hearing about it and they’re going to be asking you questions about it.

I recommend that in 2023 you commit yourself to becoming more educated about cryptocurrency as a financial advisor. Fortunately, there are some great resources to do that.

For podcasts, check out "Bitcoin Fundamentals" and "Bitcoin Audible."

And finally, this blog post here is great: "Gradually, Then Suddenly."

Expand your network

As an advisor, know there are peers out there that can and will help you learn. There will be and are advisors focused on gathering knowledge and helping clients navigate bitcoin.

I’ve been fortunate to connect with other advisors and recently helped start the Bitcoin Financial Advisors Network. But be prepared. People at such events might ask hard questions and encourage you to dig deeper into preconceived notions.

It’s time we as a financial industry hold ourselves to a higher standard when talking about bitcoin with clients, given that as a CFP you are allowed to discuss and recommend it.

The key is getting educated because you are not protecting clients from bitcoin by not learning about it. Taking personal responsibility to educate yourself cannot be overstated in crypto. As they say, “Don’t Trust, Verify.”


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Isaiah Douglass

Isaiah Douglass, CFP®, CEPA, is a partner at Vincere Wealth Management. He is a contributing writer for CoinDesk’s Crypto for Advisors newsletter.