Over the last decade schizophrenia researchers have turned their attention to earlier identification in the prodromal period of illness. A greater understanding of both risk and protective factors can lead to improved prevention and treatment strategies in this vulnerable population. This research, however, has far-reaching ethical implications. One year follow-up data from 50 individuals who met established criteria for a prodromal state is used to illustrate ethical issues that directly affect clinicians and future research strategies. At 1-year follow-up, the psychotic transition rate was 13%, but it increased in subsequent years with smaller sample sizes. One-half developed an affective psychosis. The converted sample was older (p > 0.05) than the nonconverted sample and more likely to have a premorbid history of substance abuse, as well as higher clinical ratings on "subsyndromal" psychotic items (delusional thinking, suspiciousness, and thought disorder). Despite a lack of conversion, the nonconverted sample remained symptomatic and had a high rate of affective and anxiety disorders with evidence of functional disability. This conversion rate is relatively low compared to similar studies at 1 year. Specific risk factors were identified, but these findings need to be replicated in a larger cohort. By examining the rate of conversion and nonconversion in this sample as an example, we hope to contribute to the discussion of implications for clinical practice and the direction of future research in the schizophrenia prodrome. Finally, our data strengthen the evidence base available to inform the discussion of ethical issues relevant to this important research area.