A sophisticated investor is indeed a mere mortal but they also...

A sophisticated investor is indeed a mere mortal but they also come with a certificate stating their status as a sophisticated investor, which as you mentioned, is for legal reasons and a lesser disclosure burden on particular investments. Also the ability to enter into some investments that us common folk can't.
They don't actually have to be more financially literate than the average joe or particularly aware of risks related to their investment, they just need to have been accredited as having greater than $250k of income for 2 consecutive years, or, more than $2.5m of net assets. Any rich idiot could get it and throw their money away.