The automobile industry did not voluntarily install seatbelts. Pharmaceutical companies did not voluntarily disclose side effects. And the investment industry will not voluntarily quantify the probability that its products may cause serious financial harm to ordinary Americans. Every major advance in consumer safety in the past century required legislative action. This report presents the evidence that it is time to act again.
The investment advisory industry manages the retirement savings of tens of millions of Americans. Under current regulations, these advisors are permitted to place a client's life savings into securities without performing any quantitative analysis of the probability or magnitude of loss — and to call that conduct "suitable."
No other profession that manages consequential risk on behalf of the public operates this way. A structural engineer who certifies a building without calculating its load capacity loses their license. A pharmaceutical company that sells a drug without testing for toxicity faces criminal liability. A physician who prescribes a treatment without screening for known contraindications commits malpractice.
Only in investment management is the professional permitted to recommend a product with no quantitative risk disclosure, no standardized testing for known hazards, and no requirement to inform the client of the probability that they may lose a significant portion of their savings. The consequences of this gap are not theoretical. They are measured in trillions of dollars of documented, preventable losses — losses borne disproportionately by retirees and working families who cannot replace what was lost.
Every major advance in American consumer safety was driven by legislation, not by voluntary industry reform. The pattern is consistent across a century of history:
The Securities Act and Securities Exchange Act. After the 1929 crash destroyed millions of families' savings, Congress created the SEC and established the principle that investors are entitled to truthful disclosure about the securities they purchase. Wall Street did not propose these reforms.
The National Traffic and Motor Vehicle Safety Act. After Ralph Nader documented that automobile manufacturers knew their vehicles were unsafe and chose not to act, Congress mandated seatbelts, crash standards, and safety testing. The auto industry fought the legislation. Not a single manufacturer had voluntarily installed seatbelts as standard equipment.
The Clean Air Act. Congress required industries to measure, disclose, and reduce emissions that were causing documented harm to public health — over the objection of the industries themselves.
The Sarbanes-Oxley Act. After Enron, WorldCom, and a cascade of corporate accounting frauds destroyed billions in investor savings, Congress acted to strengthen corporate disclosure requirements and auditing standards. However, Sarbanes-Oxley addressed accounting fraud. It did not address the separate and equally damaging problem documented in this report: the failure to quantify and disclose valuation risk — the risk that a stock purchased at an extreme price will produce losses even when the underlying company is healthy and growing.
The gap that remains. Despite a century of progress, there is still no requirement that investment professionals quantify the probability and magnitude of loss before committing a client's retirement savings to a security. The technology to do this work exists today. The requirement to do it does not.
This report documents eight companies — household names, widely held in retirement accounts — where extraordinary business growth produced zero or negative stock returns for periods lasting up to 25 years. In every case, the company continued to perform. In every case, the investor lost money. And in every case, the losses were caused by a single factor that can be measured in advance: the price paid was too high relative to the company's underlying financial reality.
| Company | Period | Revenue Growth | Stock Return |
|---|---|---|---|
| IBM | 1967–1993 | +2,800% | Negative real return — 25 years |
| Microsoft | 1999–2016 | +310% | −1% — 17 years |
| Amazon | 1999–2010 | +3,413% | +4% total — 11 years |
| Pfizer | 1999–2011 | +415% | −65% |
| Walmart | 1999–2017 | +214% | −1% — 18 years |
| PayPal | 2021–2026 | +39% | −87% |
These are not obscure companies. They are among the most widely recommended, most widely held securities in America — stocks that were in the retirement accounts of teachers, firefighters, nurses, and factory workers through index funds, pension plans, and 401(k)s. None of these losses were caused by fraud or business failure. All of them were caused by a measurable condition — excessive valuation — that no advisor was required to quantify or disclose.
How many lives have been saved by seatbelts? The National Highway Traffic Safety Administration estimates that seatbelts saved approximately 374,000 lives between 1975 and 2017. Before Congress acted, not a single automobile manufacturer came forward voluntarily to install them as standard equipment.
The investment industry today is in the same position the auto industry occupied in 1965. The tools to measure risk exist. The data to identify hazardous conditions exists. The technology to warn investors before losses occur is operational. What is missing is the requirement to use it.
The full evidence — including detailed case studies, sensitivity analyses, and the Microsoft three-date study demonstrating that risk is quantifiable before losses occur — is presented in the 105-page report.
Request the ReportThe losses documented above are not accidents. They are the predictable product of a system with three structural flaws — flaws that exist not because regulators lack authority, but because the investment industry's economic incentives are misaligned with its clients' safety, and no statute currently requires that misalignment to be corrected.
An investment advisor can place a retiree's entire savings into a stock trading at historically extreme valuations — without calculating the probability of loss, without comparing that probability to the guaranteed return of a Treasury bond, and without disclosing any of this to the client. No other profession that manages consequential risk on behalf of the public operates without a quantitative safety standard.
The standard advisory fee is a percentage of assets under management. An advisor who moves a client into safe Treasury securities to avoid a foreseeable equity loss directly reduces their own income. The SEC acknowledges this conflict in its own published guidance — but there is no requirement to resolve it. The advisor who stays fully invested in equities, regardless of risk, earns more than the advisor who protects the client. The incentive structure rewards risk-taking and penalizes prudence.
The research that most advisors rely on to make buy and sell decisions is produced by brokerage firms whose primary revenue comes from investment banking — underwriting deals, managing stock offerings, and advising the same companies their analysts cover. The economic incentive is to recommend buying, not selling. A "sell" recommendation on a current or prospective banking client jeopardizes a revenue stream worth millions. The result is a system where the warning signal that advisors need most — the signal to reduce risk — is the one signal the system is designed never to deliver.
This report does not propose that Congress guarantee investment returns or eliminate market risk. Markets involve risk. What can be eliminated is the concealment of measurable risk — the practice of committing a family's retirement savings to a security without disclosing the documented probability that those savings may suffer significant loss.
Before investing client funds in any security, fiduciaries should be required to document the probability and expected magnitude of loss based on historical valuation patterns — and to disclose those findings to the client. The methodology exists. The data is public. What is missing is the mandate.
For clients whose primary need is income and capital preservation — particularly retirees — every equity recommendation should be compared to the guaranteed return of Treasury securities. The advisor should be required to document why stock market risk is superior to a guaranteed return for that specific client.
Analyst target prices currently carry no standardized disclosure of the likelihood that the target will be reached or the probability of significant loss. A standardized disclosure panel — analogous to a nutrition label — would give investors the context they need to evaluate what they are being told.
The fee structure that penalizes advisors for protecting their clients is a structural conflict that cannot be resolved by disclosure alone. Congress can direct the SEC to establish guiding principles for compensation models that reward long-term stewardship rather than short-term asset gathering.
The full regulatory framework — including specific recommendations for the SEC, FINRA, and state regulators — is detailed in Part IX of the report.
Request the ReportIn the years before the 2008 financial crisis, Wall Street created bundles of individual mortgage loans and sold them as "diversified" and "safe." Rating agencies blessed them with AAA ratings. Pension funds bought them without examining the loans inside. When the housing market corrected, the "diversification" proved worthless because the underlying assets were correlated by a single factor: excessive valuation. The result was approximately $8 trillion in destroyed wealth.
The structural parallel to today's index funds is direct. An S&P 500 index fund applies no screen for balance sheet solvency, operational sustainability, or valuation discipline. Fiduciaries purchase it without evaluating the suitability of the individual companies inside — relying on "diversification" as a substitute for analysis, just as pension managers relied on "diversification" to justify holding bundled subprime mortgages they had never examined.
Index fund holders held Enron until its bankruptcy, and Lehman Brothers, Bear Stearns, and Washington Mutual until virtually the moment of their collapse — not because any fiduciary had analyzed these companies and found them sound, but because the index methodology required their inclusion.
After 2008, Congress acted through the Dodd-Frank Act to address the mortgage bundling problem. The equivalent problem in equity markets — the bundling of individually risky assets into index products marketed as inherently safe — has not yet been addressed.
A person with $500,000 in retirement savings cannot afford a 50% drawdown. When that person is told that broad market exposure is "safe" because it is diversified — without being informed of the probability and magnitude of loss at current valuation levels — the result is not an informed investment decision. It is a decision made with material information missing.
Over the past century, with rare exceptions, Congress has moved the country toward stronger consumer safeguards and fairer disclosures. The premise has been consistent: ordinary Americans deserve protections they cannot realistically build for themselves. That principle applies here. The typical retirement saver does not have the time, training, data access, or analytical tools to evaluate whether a major stock — or the index fund that holds it — is priced at a level where loss is statistically more likely than gain.
The technology to measure investment risk exists today. The data science is operational. What is missing is the legislative will to require its use — the same will that Congress exercised when it mandated seatbelts, required pharmaceutical testing, and created the SEC itself.
We are committed to making ourselves available to Members of Congress, committee staff, and state legislators to explain these methods, present the evidence, and support the development of practical, implementable standards.
"How do we reassure investors that the markets will be fair? By compelling those who want to use the public's money to tell the truth, the whole truth, and nothing but the truth about the enterprise; and by going after them mercilessly when they don't." — SEC Chairman Arthur Levitt, 1996
Quantifying the Standard of Care — a 105-page evidentiary document presenting the case for requiring investment professionals to measure and disclose the probability and magnitude of loss before committing client savings.