What effects should advisors disclose when investing in new issues on behalf of clients?

Disclosing potential effects on the performance of clients’ accounts when investing in new issues is crucial for several reasons. First, transparency is a core principle in the investment advisory profession, and understanding how new issues might impact performance allows clients to make more informed decisions about their investments.

New issues can carry unique risks and rewards that may influence a client's overall portfolio performance. For instance, a new issue might be volatile or may not perform as expected due to market conditions or company-specific factors. By addressing these potential effects, advisors help clients set realistic expectations regarding returns and risks.

Furthermore, this type of disclosure aligns with regulatory requirements that mandate advisors to provide full and fair disclosure of material information that could influence investment decisions. This enhances the trust and relationship between the advisor and the client, reinforcing the advisor’s duty to act in the best interest of the client.

While other options may seem relevant, they do not capture the essential need for transparency regarding investment performance effects. Guaranteed returns are generally not feasible in investing, limitations on opportunities are often not the focus in initial disclosures, and future performance predictions are inherently uncertain and typically not reliable.