CAQ Survey: Individual Investor Confidence Rises to 73%


Individual investors’ confidence in U.S. capital markets increased slightly from 2008, with 73% of investors indicating they have at least some confidence compared with 70% last year, according to a telephone survey of 1,000 investors conducted by the Center for Audit Quality and The Glover Park Group released Wednesday. This follows a sharp decrease from 84% of investors indicating at least some confidence in 2007.


“This survey is the proverbial man on the street. It shows remarkable stabilization of confidence and a surprising resiliency of investors,” CAQ Executive Director Cindy Fornelli said during a press conference. “The three years in which we have surveyed investors coincide with unprecedented economic turmoil. Yet investor confidence in the U.S. capital markets, public companies and audited financial statements remains fundamentally strong.”


The CAQ is affiliated with the AICPA.


The top three reasons investors said they had confidence are information on economic data investors have seen, read or heard (40%), confidence/trust in the U.S. government and President Barack Obama (31%) and a belief that the market is strong (12%).


Among the 26% who had very little or no confidence in U.S. capital markets, the top reasons they cited were the recession in general (23%), too much government spending/interference (15%), weak government oversight of the capital markets (14%) and volatility in the U.S. stock market (14%).


Globally, confidence in capital markets outside the United States slid to 57%, down from 62% in 2008 and 65% in 2007. The survey did not drill down into the reason for the lower confidence globally, but Fornelli said people tend to look within their own country more than abroad during tough economic times.


To adapt to the economic environment, 61% of investors said they changed their investment behavior in the last six months. Investing less was the most frequently reported change at 22%, followed by diversifying investments (8%), leaving current investments alone (7%) and taking a more conservative approach (6%).


When making investment decisions, financial performance measures led the list of types of information investors rated as having the highest importance, at 62%, followed by disclosures about off-balance-sheet entities (47%), compensation and incentives for senior executives (42%) and management’s commentary on risks facing the business (39%). Fornelli said these measures mirror those looked at by global institutional investors, though they place less emphasis on executive compensation than individual investors do. She did not provide exact statistics. When asked who does the best job of protecting their interests, the largest percentage of investors pointed to themselves (25%), followed by government regulations and oversight (13%) and public company auditors (13%). Fornelli said this is consistent with other surveys the CAQ has seen and is illustrative of investors’ changing behaviors, which show they feel they have the most control over their investments.


No clear preference emerged as to which regulatory structure investors believed would best protect them—a council of agencies charged with monitoring systematic risk throughout the financial sector or a single regulatory body—with 23% selecting neither or saying they don’t know. Of those who did answer, 44% selected a council and 33% chose a single body.


“They’re looking for confidence that bad behavior will be punished, that there are mechanisms in place to take care of and monitor the market” even though they aren’t necessarily sure they know what they want those mechanisms to be, Fornelli said.


Investors did offer clear views on what would do the most to enhance the detection and deterrence of corporate fraud, however. Fifty-six percent selected enforcing stronger penalties, and 36% chose increasing transparency of company financial information. Training also was cited, with 18% choosing providing enhanced training for public company auditors and 16% citing better educating corporate boards and management.


Additionally, 72% of investors agreed that the financial crisis of 2008 demonstrates the need for a more globally consistent approach to standards, regulation and enforcement in such areas as accounting, auditing, ethics and supervision.


This mirrors a recent survey of global institutional investors, which indicated a more global approach was necessary, according to Fornelli.


Some survey findings do not total 100% due to rounding.


The CAQ’s third annual survey of individual investors, conducted from Aug. 27 to Sept. 3, defined an investor as a person over age 18, who is the primary or shared decision maker for handling household savings and investments of $10,000 or more, including stocks, bonds, mutual funds, IRAs and 401(k)s, among other things.


Alexandra DeFelice ( is a JofA senior editor.



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