What is the purpose of a "risk disclosure" document?

The purpose of a "risk disclosure" document is to inform clients of the risks associated with specific investment products. This document serves as an essential tool for transparency, ensuring that clients fully understand the potential dangers and uncertainties related to their investments before proceeding. It is crucial for investors to be aware of both the rewards and the pitfalls of their investment choices, allowing them to make informed decisions based on their risk tolerance and financial goals.

While summarizing investment returns might provide essential information on the performance of products, it does not address the inherent risks connected with those investments. Informing clients of investment opportunities may enhance their knowledge about potential options but does not delve into the critical aspect of risk. Providing tax advice is also outside the scope of a risk disclosure document, as it focuses solely on the risks tied to the financial products themselves rather than on tax implications. By ensuring clients grasp the risks involved, the document plays a vital role in promoting responsible investing and protecting investors from potential losses.