The financial representative profession is at a crossroads. Arguably, it should be a time of strong growth for advisors, as millions of baby boomers move into a new life stage with new financial needs, insurance and investment products become more sophisticated, and as recent financial turmoil increases client needs.

However, the industry is not growing. In fact, there are fewer advisors; and those who are working tend to be older. In 2005, a study published by LIMRA International found that more than 50% of financial representatives in North America were 48 or older, and 50% of independent producers were 56 or older. Without fresh talent, the industry will not reach its full potential. Indeed, without growth, a healthy future for the industry will be in jeopardy.

The real issue is not recruiting, but retaining bright, young entrepreneurial advisors who can fill the shoes of senior professionals. We need to think outside the box and create an environment that rewards those who build a successful practice. We must take in younger advisors and work closely to bring them along.

Ironically, while many in our industry make a living advising business clients on succession planning, the industry has not done well for itself in this regard. I would suggest that making succession planning work in our industry would do more than just help the elders in our ranks. Done properly, it also can jump-start the industry growth necessary to meet the demands–and reap the rewards–of the current market.

Granted, career agency systems were not built with succession planning in mind. And they’re not structured to start implementing programs that resemble succession of wealth management operations. In large part, that’s why these programs are not already in place. But encouraging succession planning throughout offices across the country can positively address several problems the industry is facing. So I believe it’s worth looking into what needs to be done for programs to be implemented.

Succession planning requires a process by which senior advisors who intend to retire in 3 to 5 years are matched with younger, entrepreneurial advisors who are looking to learn the business while creating a succession strategy for the senior advisor. Through an introduction by their local network office, the two advisors would spend time together and with clients to see if the match is a fit. If, after a period of time, the fit is good, the younger advisor would buy the book of business.

While this process sounds elementary, our industry has structural idiosyncrasies that make succession planning often difficult to achieve. Nevertheless, the benefits it offers should make it worthwhile. Consider:

Benefits to recruiting and retaining young, entrepreneurial advisors

While it will always take time and hard work to get started in this business, knowing there is the potential to be matched to an advisor, with access to a mentor relationship and an established book of business, could provide the light at the end of the tunnel that so many of our recruits fail to see.

The benefits to the clients

While there are few incentives for senior advisors to give up their clients, it’s the clients who lose out as the advisor becomes increasingly less active. If the potential buyer works closely with the senior advisor for a number of years prior to the transition, this issue can be reduced, if not, eliminated.

The benefits to the senior advisor

With a financial deal taking place after a number of years of a successful partnership, a senior advisor will have income for retirement. The senior advisor will also have the benefit of knowing that his or her clients will be overseen by someone trusted to continue the good service they’ve come to expect.

Benefits to the local network office

With a successful transition between advisors, there is much less risk of clients becoming orphans or leaving the firm. It takes far more time and money to bring in new clients, so preserving the current base is a good investment. In addition, a successful transition in which young advisors stay with the firm is more cost-effective than continually recruiting new advisors.

Hurdles to surmount

It would seem simple to start pairing young advisors with more experienced ones, but there are a few challenges to overcome to make it work.

First, the industry’s compensation structure does not make it easy to package a book of business for sale. Senior advisors have come to think of renewals and trails as steady income to fund their retirement. While it is not easy to overhaul a system that has worked for years, with the need to bring new people in, we should look at how to help those who’ve done so much for the industry exit with what they need.

Second, we have not provided incentives that help senior advisors relinquish control. Given the current compensation structure, there is little reason for a senior advisor to give up the income stream, and pass along the book of business. This unfortunately may not be the best situation for the client. The young advisor is also denied a potentially valuable training opportunity.

Third, there is not a set concept for valuation of an insurance practice. Much of a wealth management practice, by contrast, can be defined and thus valued by its assets. In a business that is made up of both insurance and investment business, it is not as black and white. But it’s not impossible.

Fourth, distribution companies have largely not provided services or financing to help advisors through an exit planning transition. While distribution companies can continue sinking money into recruiting, it is more cost-effective to encourage and enable succession to take place within a firm.

The fixes to these issues are complex and require much thought and some restructuring of the way we provide compensation. Given the state of our industry, those companies that figure this out should thrive–because they will grow. The financial representatives coming through a program like this will still have to work through the courses. But they will also have the benefit of something equally, if not more, valuable: hands-on training by someone who cares about the future of his or her clients and practice.

And though the profession is relationship-driven, and many advisors are in it because they like helping clients, both companies and senior advisors must remember it is a business. If steps are not taken to find ways to bring young people in and help them succeed, not only will we be missing out on a great market opportunity. The industry will also be in danger.

Peter Gordon is president of John Hancock Financial Network, Boston, Mass. He can be reached at pgordon@jhancock.com