Critics of the increase in rules governing the asset management industry have warned of rising compliance costs. Now they have some numbers to support their arguments. The cost of compliance rose an average of 54 percent from 2004 to 2005, according to a just released survey from the Investment Advisor Association and the CFA Institute.

Though the Cost of Compliance Survey did not ask respondents why their compliance costs rose so steeply, it is very likely that rules changes at the SEC and a new mandate that fund firms have chief compliance played a role in the increase.

The survey provides some evidence for that view. Next year, for example, respondents said that they expect compliance costs to rise by 8.4 percent, a figure that suggests an exceptional cause for the 60 percent increase in 2005.

The two trade groups surveyed more than 100 IAA member firms for the survey. Three-quarters of respondents said they managed between $100 million and $5 billion of assets. The typical respondent works with between two and four full-time compliance staffers.

Those staffs grow in 2005. Half (50 percent) of firms said that now have 2-4 compliance staff, compared to 37 percent who employed this number in 2004.

The firms also report that compliance is eating up more of their budget. In 2004, 68 percent of the firms responding said that they spent less than 6 percent of their overall budget on compliance. In 2005, only 55 percent of firms made the same claim.  

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