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Crypto Investing: CFP & CFA Institutes Provide Guidelines for Financial Advisors

Posted on 14. January 2023 in Allgemein

• The Certified Financial Planner Board of Standards (CFP Board) and the Chartered Financial Analyst Institute (CFA Institute) have recently issued advisories and guidelines for financial advisors regarding cryptocurrency investments.
• The CFP Board issued a “Notice to CFP Professionals Regarding Financial Advice About Cryptocurrency-Related Assets” in November 2020, which will govern how holders of the CFP certification should advise clients about cryptocurrency investments.
• The CFA Institute has also issued a “Crypto-Asset Valuation Framework” to help financial advisors better understand the valuation of crypto-assets and make sound investment decisions.

Cryptocurrency is becoming an increasingly popular asset class for investors and financial advisors alike. With the rise in the number of investors looking to diversify their portfolios into digital assets, financial advisors have a responsibility to ensure that their clients are making sound investment decisions. In order to ensure that advisors are providing the best advice to their clients, two of the most respected credentialing organizations in the financial services industry, the Certified Financial Planner Board of Standards (CFP Board) and the Chartered Financial Analyst Institute (CFA Institute), have issued advisories and guidelines to help financial advisors better understand and advise on cryptocurrency investments.

The CFP Board issued a “Notice to CFP Professionals Regarding Financial Advice About Cryptocurrency-Related Assets” in November 2020, which outlines the CFP Board’s expectations of how holders of the CFP certification should advise clients about cryptocurrency investments. The notice states that CFP professionals must be knowledgeable about the asset class and must remain current on industry developments, market conditions and strategies, as well as the associated risks. CFP professionals must also be aware of the regulatory environment and any applicable laws or regulations. In addition, the CFP Board recommends that advisors adhere to the same standards of care for cryptocurrency investments as for any other investment.

The CFA Institute has also issued a “Crypto-Asset Valuation Framework” to help financial advisors better understand the valuation of crypto-assets and make sound investment decisions. The framework outlines six methods for valuing cryptocurrencies, including market comparison, discounted cash flow analysis, technical analysis, option pricing, real options analysis, and machine learning techniques. The CFA Institute also recommends that advisors follow the same risk management and regulatory compliance guidelines as they would for any other asset class.

As the cryptocurrency market continues to grow and evolve, financial advisors must stay up to date on the latest developments in order to ensure that their clients are making sound investment decisions. The CFP Board and the CFA Institute have both taken steps to provide guidelines and advisories to help financial advisors better understand and advise their clients on cryptocurrency investments. By following the guidelines and advisories issued by these two organizations, financial advisors can ensure that their clients are making informed and responsible investment decisions.