For advisors, the past year has been a crucible for leadership qualities, forcing them to figure out how to nurture their businesses and concentrate on growth. A recent TD Ameritrade Institutional survey found that 50% of advisors had more clients than they did six months earlier, and 80% said that client numbers were up or remained steady during the same period.

"Clearly, RIAs are focused on growth," says George Tamer, a director at TD Ameritrade Institutional. "It's important for the sole practitioner to put on the CEO hat and develop the high-level business objectives to support that growth. As a business owner, you do not want to see expenses increasing at the same rate as revenues as you take on new clients."

The movement toward consolidation is less obvious, but it is still significant. This year, 36 RIA merger and acquisition deals, whose value totaled $54 billion, had been completed by June 30, according to data from Schwab Advisor Services. (Annualized, that would give the industry 72 deals worth $108 billion by year-end, which lags the all-time high in 2008, when 88 deals were struck.)

The pace of consolidation should pick up now that financing is returning to the market. "Consolidation in the RIA industry will continue, due primarily to the demographics of the RIA principals, the inflow of private equity into the space and the proliferation of holding companies," says Dave DeVoe, managing director of strategic development for Schwab Advisor Services.

AGENTS OF CHANGE

To profit from this new growth environment, advisors may need to redefine themselves as executives as well as professionals. Advisors have to see themselves as strong, decisive agents of change, says Philip Palaveev, president of Elmsford, N.Y.-based Fusion Advisor Network. That need applies to the industry as a whole, too, he says, as it contends with low investor confidence, operational challenges and increased regulatory scrutiny.

Change was an imperative for Richard Brown, chairman and CEO of Minneapolis-based JNBA Financial Advisors, who dropped into the CEO role in 1997 by necessity and ended up changing the company radically. JNBA was a family practice, founded in 1983 by Richard Brown's mother, Judith Brown. In 1997, Judith handed her practice over to Richard, so she could care for his seriously ill father and sister. "It was my turn to take responsibility and help the family out," Richard says.

"My mom said, 'What am I going to do with this business?'" Richard recalled. He left his position with Minneapolis-based Jacobs Management to take over JNBA. He embraced the job, but the road was not easy.

What he found was scary, he says. Judith had been the driving force of the whole practice, meeting with clients every hour, every day. That routine had built the practice up to $85 million in assets under management, but there was very little infrastructure in place to sustain further growth. Worse, there was no robust layer of customer relationship management. All CRM-related information, including appointments, proceedings from client meetings and follow-up tasks, was documented on legal pads and hand-written in duplicate.

Right away, Richard knew that he did not want to be the centerpiece of the practice. "I knew I didn't want to do what she was doing," he says. He preferred to teach JNBA's staff how to meet with and cultivate clients.

Within 60 days of taking over, Richard converted the firm from being an LPL registered representative to an RIA affiliated with the discount brokerage firm TD Waterhouse, now TD Ameritrade. He started generating quarterly client statements and handling compliance issues in-house. The company's attorney, Princeton, N.J.-based Stark & Stark, comes in every year to conduct a mock compliance audit. JNBA bought error and omissioninsurance through Cambridge Alliance, of Burlington, Vt. Richard also realized that JNBA needed a uniform protocol for client updates, regardless of which team saw a client on a particular day.

Over the next 10 years, Richard addressed these issues incrementally. Through resignations and terminations, the staff turned over completely. Twice. The first changeover happened about 90 days after he took over the practice, and the second happened after he implementedstrategies gleaned from TD Ameritrade's Roadmap program. Now, the practice oversees $330 million in client assets and employs 17 people, the largest it has ever been. Although Richard prefers to expand JNBA Financial Advisors through core operations, it is in the position to buy another firm. Richard is also considering expanding by taking on investment management business from family offices.

SETTING A NEW DIRECTION

No matter how small, every organization needs someone who makes the critical decisions that determine the entire future and success of the firm, Palaveev says. "That person needs to have a direction for where the firm is going and translate that decision into action," he says.