Perhaps not an annus horribilis, 2019 has been a tricky year for the asset management industry so far, with a number of prominent scandals raising questions about industry practices and the general conduct of investment businesses.

Regulators have predictably responded, with the latest obligations – requiring UK fund boards to appoint at least two independent non-executive directors – coming into force next week.

The rationale of the Financial Conduct Authority (FCA) is simple: to provide an independent voice in order to ensure the needs of underlying investors are fully considered and met in line with best governance practices.

The concept is a relatively straightforward one. Yet even before the regulations come into place, concerns ae already being raised: an article in the Financial Times suggests things have “got off to a slow start”, with manages accused of “cutting corners” by employing an “old boys network” to act as non-executive directors. The implication, of course, is that these revised fund governance structures will not truly be independent.

If such a situation is being allowed to happen, it is obviously not a good state of affairs. But the perception alone (which has ultimately been sufficient for the FT to write its article) is extremely unhelpful.

Other regulatory changes are also coming. October will see institutional asset owners having to conduct “value appraisals” to assess the quality of service being provided by managers, pushing investment firms to be more proactive and transparent in reporting and delivery of service. We will also see the conclusion of the Competition and Markets Authority (CMA) assessment of investment consultancy practices, which could create further waves in the industry over the division (or otherwise) between advice and investment services.

Put simply, the asset management industry is under pressure. As has been said on a number of occasions on this blog in the past: if the 10 years following the global financial crisis was characterised by scrutiny of the banking sector, it is only reasonable to conclude that at least the next five years will see the asset management industry receive similar treatment.

Yet these challenges should also bring opportunities. Yes; additional regulation is not something that investment industry participants want to see, and there are of course practicalities in meeting incoming requirements. However, they also provide a platform for investment companies to positively respond, using regulations as a basis to demonstrate their understanding of the needs of underlying clients and their ability to meet their requirements.

To do so, however, asset managers will need to be proactive and, critically, abide by the spirit of the regulations, not just the letter of the law.

So, yes, the new regulatory environment will be challenging, but there is a silver lining.