Even as many caution the use of cryptocurrencies in 401ks, the Certified Financial Planner Board of Standards, Inc. (CFP Board) has released a new guide about cryptocurrency-related assets to help CFP professionals uphold its Code and Standards process.
The guide, named the Notice to CFP Professionals Regarding Financial Advice About Cryptocurrency-Related Assets, was developed in response to questions concerning financial advice on cryptocurrencies and other crypto-related assets, specifically when tied to the CFP’s Code and Standards practice.
“CFP professionals continually seek a better understanding of what they should consider when providing financial advice to a client. As part of their CFP certification, they make a commitment to CFP Board to act as a fiduciary when providing financial advice,” said CFP Board CEO Kevin R. Keller, CAE, in a statement. “Developed with our Standards Resource Commission, this guide on cryptocurrency-related assets is a much-needed addition to our compliance resource library, which is designed to benefit and protect the public by educating CFP professionals on how to put their clients’ best interests first.”
The Notice covers topics such as satisfying the duty of competence, the fiduciary duty, the duty to provide information to a client, the duty to comply with the law, and duties when selecting, recommending and using technology. It also addresses considerations that arise under the Financial Planning Practice Standards and discusses how they apply to cryptocurrency-related assets.
The Board also highlighted specific risks associated with crypto-related assets, such as its speculative and volatile nature, difficulty to analyze, unique custodial risks, valuation issues, potential unregistered status, and its subjection to additional regulation.
In its Notice, the Board recommends CFP professionals follow regulatory guidance when providing financial advice about crypto-related assets, noting that the Department of Labor (DOL) and the Financial Industrial Regulatory Authority (FINRA) have voiced concern about potential risks when investing in crypto-related assets. In March, the DOL’s Employee Benefits Security Administration (EBSA), published compliance assistance that cautioned 401k plan fiduciaries against incorporating crypto-related investments in the retirement plans.
The Board states in its notice that while CFPs are neither prohibited or encouraged from providing crypto-related advice, those who discuss crypto with clients should be knowledgeable of the asset and the related risks.
The updated guide comes as industry leaders, including politicians, warn financial advisors and employers to tread lightly on crypto investments, especially considering crypto’s extreme volatility in 2022. In June, crypto faced a period of market cooling (otherwise known as a “crypto winter”) after Bitcoin and other cryptocurrencies suffered shocking low market levels that resulted in multiple layoffs at crypto-related organizations. Later in November, the meltdown of FTX, a formerly large and popular crypto exchange platform, found itself at the center of controversy, criminal investigations, and bankruptcy due to allegations of misused funds.
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- FTX Meltdown Doesn’t Alter Crypto 401k Prediction: Ric Edelman
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