The cost that comes with increasing staff or technology to handle regulatory pressure is a major concern to small asset management firms, according the “Boutique Business Model under Attack: Bruised by Regulation – Crippled by Cost?” commissioned by SunGard Financial Systems,, a software and IT provider.
[Read: Do Regulation and Customer Service Go Hand in Hand? to learn more.]
Besides raising assets, 51% of the respondents indicated the main barrier to start a boutique firm is the burden of due diligence and compliance. About 53% believed increasing expenses related to regulatory compliance could either make or break a boutique firm in the next 12 months.
Alternative Investment Fund Managers Directive will have the biggest impact on their business in the next 12-18 months, says 30% of respondent. While 29% believe Dodd Frank will have the biggest impact.
To combat regulatory pressure, primarily European boutique managers formed the Group of Boutique Asset Managers to share information to achieve the scale of a larger organization.
“There’s been a lot more coming together of the boutique asset managers, where the boutiques are having to combine and join forces at a minimum to share ideas,” says Edward Lopez, EVP of SunGard’s asset management business.
About 200 asset managers were surveyed for the report co-authored by TABB Group’s Adam Sussaman, partner and director of research and Valerie Bogard, research analyst.