The CFP Board Calls Out Crypto in Code of Ethics and Standards

Advisors providing advice on cryptocurrency-related assets should do so with caution, according to a new report by the CFP Board.


Illustration by RIA Intel

Following the collapse of FTX, bankruptcy filings by BlockFi, and increasing regulatory scrutiny on crypto markets, the Certified Financial Planner Board of Standards (CFP Board) released new guidelines last week specifically targeting cryptocurrency. CFP is the most popular professional designation for wealth managers, with more than 93,000 designees.

For the first time, the CFP Board said cryptocurrency and cryptocurrency-related assets fall under its definition of “financial assets,” which also include securities, insurance products, real estate, bank instruments, commodities contracts, and other financial products. The CFP Board recommended that advisors act with caution when advising on cryptocurrency, as these investments “present significant risks.”

Prior to this notice, the CFP Board remained vague on digital assets. Leo Rydzewski, the CFP Board’s general counsel, told RIA Intel last January that “the fiduciary duty is sufficiently broad to cover all types of investments, and the Code and Standards does not single out any specific type of investment.”

The CFP Board’s Code and Standards does not require CFP professionals to provide financial advice about cryptocurrency-related assets – nor does it prohibit designees from doing so. However, according to the new guidelines, a “CFP® professional’s recommendation that a Client invest in, purchase, hold, gift, or sell cryptocurrency-related assets is Financial Advice that is subject to the Fiduciary Duty set forth in CFP Board’s Code and Standards, including the Duty of Care.”

Further, per the guidelines, anyone offering financial advice about cryptocurrency-related assets must have the relevant ability to apply that knowledge with skill to the client’s circumstances. Designees must also consider the heightened risks that cryptocurrency-related assets present.

Cryptocurrency-related assets may include but are not limited to cryptocurrency ETFs or mutual funds, cryptocurrency derivatives, and other assets, such as interests in business entities focused on the provision of services related to cryptocurrency.

The report highlights government and regulator concerns about crypto. In particular, the notice calls out the United States Department of Labor (DOL) Employee Benefits Security Administration’s statement in a March 2022 Compliance Assistance Release that the DOL “has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.”

A report published in October by Fidelity Digital Assets, the investment firm’s crypto custody business, found that 73 percent of financial advisors had bought or were currently invested in crypto — up 30 percent from the previous year’s report — and that 88 percent of financial advisors expressed a preference for buying digital assets in the future.

Related Articles