The investment management sector's low reported levels of compliance spending are "hard to believe", according to a quarterly survey from the CBI and PwC.
The authors of the latest Confederation of British Industry/PwC Financial Services Survey found the investment industry continues to focus on cost reduction, but spending on regulatory compliance looks "surprisingly low".
It said: "No investment manager will be unaffected by the unprecedented wave of new regulatory regimes-domestic and foreign-sweeping towards the industry over the next two years."
The survey found investment managers are making some progress with their cost reduction plans, although this means they are one of the few sub-sectors to predict reductions in headcount for the next three months.
They have also reported a sudden improvement in business sentiment and the majority expect growth to continue for the rest of the year.
A balance of +85% of investment managers feel more optimistic about their business situation and at least half of those surveyed report stronger volumes of business for the past quarter.
"Combined with the increasing volumes on business, lower operating costs mean that a strong majority of investment managers see their profitability as being on the increase," the survey said.
It also found marketing expenditure is expected by almost all respondents to expand during the coming year: "This can be tied in with growing interest in the potential for product innovation as a driver of organic growth."
The survey showed confidence has dramatically improved in the last quarter across every major sub-sector, with life insurers and investment managers "particularly bullish".
The improvement was attributed to increased business volumes, calmer financial markets and more stable economic forecasts.
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First mentioned in Cridland Report
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