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Investors Say Trust Most Important Trait for Finan

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Sept. 26, 2002 — Trust is the single most important characteristic that investors look for in financial advisors, according to results of a joint survey just published by S&P and BusinessWeek.

Almost half (49%) of respondents cited trust — consistent with the findings of a survey done last year — followed by knowledge (34%). Trust was also the primary reason why investors remain with their financial advisors (64%).

The survey also revealed that three-fourths (75%) of U.S. investors are concerned about their investment portfolios, even though 74% remain “confident” about the U.S. economy. Moreover, two-thirds of active investors (66%) say they are “more conservative” in their investment strategies than a year ago, up from 58% in the first survey.

With 78% of investors having less trust in analysts’ stock recommendations based on recent events, more than two-fifths (44%) of respondents say they have changed their investment strategies as a result of recent events such as restated corporate earnings and stock manipulation.

In August 2002, S&P and BusinessWeek, co-sponsored this second wave of a study to assess investment outlooks, plans and attitudes toward financial advisors, and sources of information used to make investment decisions. S&P and BusinessWeek conducted a similar survey in November 2001. Both organizations plan to continue the survey on an ongoing basis.

“Investors who have financial advisors tend to be more conservative in their approach to investing than they were a year ago,” said Kenneth Ennis, managing director, Investment Services, S&P. “We also see that since last year, investors are diversifying their choices, with increased interest in mutual funds, annuities, money market accounts and the like compared to individual stocks.”

Spotlighting an opportunity for advisors to strengthen their relationships with clients, 65% of investors said they are concerned about the objectivity of investment advisors’ recommendations.

A total of 1,764 individuals participated in this survey, of which 84% were male and 16% female; and 38% have financial advisors. Demographically, the study group of individual investors is more affluent than the general population — the median household income is $110,000, and the median age was 48.