Should you pay for a crypto consultation?

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An eponymous cryptocurrency consultant has been convicted of embezzling millions of dollars from customers in a cryptocurrency scam earlier this year in California.

The scam in which the consultant admitted to embezzling client funds that the government says is worth more than $ 20 million today shows how bad actors can take advantage of new entrants in an emerging and murky market.

But in an industry without standards for offering advice or training to investors, who should newcomers turn to for advice? Private cryptocurrency consultants are not required to hold any traditional accreditation as a Certified Financial Planner (CFP). With personal finance experts and even government officials continually highlighting security risks and the potential for cryptocurrency fraud, conventional financial advice offers a solid fallback.

I have never recommended or advised anyone to seek an independent cryptocurrency consultant, says Daniel Johnson, CFP at ReFocus Financial Planning. It appears to be a looming disaster.

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When to pay for investment advice

Before you decide to put money anywhere, be sure to educate yourself as much as possible first, and remember that you are your best financial advisor.

No one will ever care about your money as much as you do, so some self-education is always a great first step that will serve you well for the rest of your life, says Jeremy Schneider, the personal finance expert behind Personal Finance Club.

If you are looking for expert advice, you should probably stick with a conventional financial advisor who is familiar with cryptocurrency. When looking for a financial advisor, make sure they have a Certified Financial Planning (CFP) certification.

CFPs must act as trustees with integrity and competence, says Theresa Morrison, CFP at Beckett Collective. In English, that translates into acting in the best interests of the client, with honesty and candor, and with the subject matter knowledge and skills to apply that knowledge, Morrison explains.

Because of this fiduciary responsibility, any CFP who can provide advice on digital assets must have in-depth knowledge and skills on the subject, according to Morrison. A consultant doesn’t have to buy into all of this, Morrison says. They may or may not be experts. They may or may not act with integrity.

One of the biggest benefits of using a CFP for advice is its ability to look at your entire financial situation and guide you accordingly. Right now, all advisers must decide whether investing in crypto is in the best interests of clients, says Dan Herron, CFP at Elemental Wealth Advisors. If we determine that this is the case, you’re going to see a lot of small allowances.

Morrison recognizes that it may be wise to seek out specialists, when the situation requires more expertise or a different experience than mine. Most of the cases for this have been beyond what the average investor would need to know.

If she needed to find such a specialist, Morrison would look for someone who has a solid reputation in specific expertise in traditional markets and who has transferred that expertise to digital assets.

But for most clients looking to dive into crypto, it’s much more education, says Morrison, than CFPs like her are qualified to provide.

The risks of investing in cryptocurrency

Private cryptocurrency consultants can be anyone, from someone on the internet with a passing knowledge of cryptocurrency to a professional in the field with years of experience in blockchain and digital assets.

Without any sort of regulation or standardization on who can call themselves a consultant, advisor, or cryptocurrency expert, hiring someone who is not a CFP to give credible expert advice is definitely a gamble. If you’re looking for crypto advice beyond what a CFP might be able to provide, or your own research has shown you, a healthy background check on someone is a good place to start.

One of the biggest concerns of crypto investors is the risk of hacking and fraud, and not without reason. Cryptocurrency crimes have increased, according to Federal Trade Commission data, and resulted in a median loss of $ 1,900 from October 2020 to March 2021.

Nicole DeCicco, owner and founder of CryptoConsultz in Portland, Oregon, has personal experience of the risks after losing Ethereum in a 2016 hack, she was an Ethereum minor. Her experience and first knowledge of cryptocurrency prompted her to start her own business. While I was working, I had a lot of friends asking me for help, which I gladly gave, DeCicco says.

How to detect (and avoid) crypto crooks

There are certainly bad players out there looking to exploit an emerging crypto market and investors who are drawn to it. DeCicco says she has clients who come to see her all the time who have been burned in the past. I hear about all kinds of scams, DeCicco says. The money they invested in education programs or investment advice and they were cheated out of their money.

DeCicco says she has seen scams on social media, where individuals or businesses request wire or crypto transfers to unknown wallets and demand outrageous returns.

There is a lot of risk in the industry, and like any other emerging market, we will continue to encounter bad players taking advantage of the opportunity through nefarious activities, DeCicco said.

Some things to watch out for:

Anonymous crypto experts who don’t want their real identities attached to their business Someone with no verifiable blockchain and crypto experience Someone requesting payment by wire transfer, gift card, or cryptocurrency People who guarantee that they will make you earn money

If something sounds too good to be true, assume it is. If in doubt, speak to a Certified Financial Planner. And sometimes, crooks aren’t the only danger you need to be concerned about when doing cryptocurrency transactions.

[READ MORE]: Cryptocurrency crime is on the rise. Here’s how to invest safely

Other ways to prevent crypto fraud

The Federal Trade Commission offers the following tips to avoid getting scammed:

Never pay by wire transfer, gift card, or cryptocurrency. There is almost no way to get this money back. Some scammers start with unsolicited offers from supposed investment managers. These scammers say they can help you grow your money if you give them the cryptocurrency you bought. But once you log into the investment account they opened, you will find that you cannot withdraw your money unless you pay a fee. Some crooks send out unsolicited job postings to help recruit cryptocurrency investors, sell cryptocurrency, mine cryptocurrency, or help convert money to bitcoin Scammers guarantee you’ll earn money. If they promise you’ll make a profit, that’s a scam. Even if there is celebrity endorsement or testimonials. (These are easily tampered with.) Scammers promise big wins with guaranteed returns. No one can guarantee a fixed return, for example, double your money. Much less in a short time. The crooks promise free money. They promise it in cash or cryptocurrency, but the promises of free money are always wrong. The crooks make big claims without details or explanations. Smart business people want to understand how their investment works and where their money is going. And good investment advisers want to share that information. Before investing, check them out. Search online for the company name and the name of the cryptocurrency, as well as words like review, scam, or complaint. See what others are saying. And learn more about other common investing scams.

When deciding to pay someone for financial advice, be sure to take a good look at them, set up an exploratory meeting before paying any money, and do your own independent research. For most people, a CFP will be your best bet if you think professional advice makes sense to you. For more informal consultants with crypto or whatever, it’s more of a buyer’s issue, beware.

Be careful, because the right answer to the wrong question will lead to the wrong path, says Morrison.

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