Do Advisers Have a Fiduciary Responsibility to Offer Bitcoin?

Cryptocurrency is the end product of decades of development in distributed ledger technology, tokens, and virtual currencies. Bitcoin was introduced to the public in 2009, and many began purchasing it a few years later to see what would happen. However, it has only been since about 2016 that it started to dominate financial news and conversations among certain investors.

The total market value of all cryptocurrencies was close to $2.6 trillion in March 2024, and Bitcoin-related investments are traded on mainstream exchanges. So, what do financial advisors do regarding Bitcoin and cryptocurrency now? Do they have a fiduciary duty to consider digital currencies as investable assets?

In the 2024 regulatory environment, it seems that financial advisors or the companies they work for determine how they approach fiduciary responsibilities regarding cryptocurrency—as long as they follow the codes and standards they are required to adhere to.

Reasons for Recommending

The lack of regulation hasn’t stopped investors from asking their advisers about crypto. This comes as many large institutions are also looking for ways to embrace Bitcoin. For instance, Fidelity Investments allows customers to purchase Bitcoin through their employee-sponsored 401(k), while PayPal allows customers to buy and sell this digital asset.

More Options are Available

In January 2024, the SEC approved the first Bitcoin Spot ETFs, finally granting access to instruments that give all investors exposure to Bitcoin without the need to hold it themselves. This was a significant milestone for advisors, as they were given one more option for clients asking about Bitcoin investing.

An adviser’s fiduciary duty means they cannot act negligently, make unnecessary trades, or misrepresent a transaction. Other than that, many advisers have a lot of discretion about what is and is not in the best interest of their clients. 

Clients are Purchasing Bitcoin While Waiting for Advisors

However, many may not be able to get the crypto access their clients want. A Bitwise Asset Management and ETF Trends survey from January 2024 found that only 19% of advisers were able to buy cryptocurrency for their clients.

But at the time (about a week before the Bitcoin Spot ETF approvals), 88% of advisors interested in purchasing Bitcoin for their clients were waiting to see if ETFs were approved. While they were waiting, it seemed clients took it upon themselves to invest—more than half of responding advisors admitted that some or all of their clients were investing in Bitcoin on their own—without consulting their financial advisors.

This is concerning for advisors because when clients don't consult with the person planning their finances about purchases, that advisor's fiduciary hands are tied. They cannot act in the best interest of their clients if the clients are acting on their own and not reporting it to their advisors.

In some cases, advisers are still not allowed to provide recommendations for these ETFs unless specifically asked about them, so they don't have a fiduciary duty to offer them. However, they may soon lose business to their competition if they aren't allowed to inform their clients about all of the options they have.

With that said, advisers may consider at least educating clients about cryptocurrency and the safest ways of investing in these assets. Preparing clients through education is always one of the best ways to guide clients as they navigate their way through the ever-evolving landscape of modern investing.

Guidance For CFP® Professionals

In 2022, the Certified Financial Planner Board of Standards issued guidance for CFP® professionals to follow when recommending cryptocurrency-related products to clients. The Board does not prohibit a CFP® professional from providing financial advice about cryptocurrency-related assets; however, the Board recommends proceeding with caution when discussing them. They must also adhere to the same Code of Standards as other financial products or assets. Moreover, they should be knowledgeable enough about cryptocurrencies and blockchains to provide advice concerning the particular attributes, risks, and uncertainties that cryptocurrency-related assets present.

The Bottom Line

Financial advisers are regulated by the Investment Advisers Act of 1940. They have a fiduciary responsibility to act in their clients' best interests. This means they must offer investment advice suitable for their clients based on their financial circumstances, goals, risk tolerance, and preferences.

Whether or not an adviser has a fiduciary responsibility to offer advice on Bitcoin would depend on the specific circumstances of the client and the adviser's expertise in this area. While Bitcoin and other cryptocurrencies can offer new opportunities as an alternative asset class, it also comes with unique risks and uncertainty. It is important for clients to discuss their investment goals and risk tolerance with their advisers in order to determine the best course of action.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author owns BTC and XRP.