How do you identify and hire future partners as part of your firm’s succession plan?

It’s a lot more complicated than placing an ad, interviewing a slew of eager candidates, and picking from the top of the list.

As we advisors start to go gray (or already are!) and think of retirement–like many of our clients–it’s become increasingly hard to find talented, new advisors to fill the ever expanding void in the industry. A survey done last year by Cerulli Associates Inc. showed that only 22% of financial advisors were under 40 (only 5% were younger than 30), and the average age of advisors was 49.6. At the same time, the total number of advisors decreased 4.3% from 334,919 in 2004 to 320,378 in 2010.

Why the shortage?

Well this isn’t your father’s financial advisory industry. Competition is fierce, margins are shrinking, and changing regulations (including legal and compliance issues post-Dodd-Frank) can be overwhelming.

The new crop of advisors also has to straddle the thin line of supporting baby boomers while adapting to the changing needs of the younger, tech-savvy generation. It’s a bit of a split-personality–balancing what has worked in the past with what’s old news by the end of the day.  

That being said, our business is booming, as reported by the Bureau of Labor Statistics. According to the report, the number of jobs for personal financial advisors has a projected increase of 32% by 2020 (or 66,400 jobs). This is significantly higher than the average growth rate of 14% for all occupations.

So what will the next generation do for the industry and more specifically, your clients? How do you find someone who ultimately wants your job?

Start with hiring

I’ve said this before: it’s critical that you find advisors who share your values (see my previous post on avoiding hiring mistakes). This goes beyond stellar credentials and experience; you need to convey very clearly to a candidate what you do, what motivates you, who your clients are, and why you do what you do every day.

If you want to be successful, you have to take your time in the hiring process–and be clear and articulate that what you’re looking for long term matches what your candidate wants.

That’s not to say you want a clone, absolutely not. New ideas should be expected, you just need to stick to your guns when it comes to core values.

Introduction and immersion

You never know for certain if a new hire is “the one,” but if you’ve done your homework in the hiring process, you can feel secure knowing that this person will fit into your team and help build your practice.

If you’ve also ensured that the rest of your team has vetted the candidate, there should be little resistance to accepting this new advisor into your team.  Everyone should be as excited as you are. 

Staying on track

Once you’ve set the tone, don’t lose momentum. Set up regularly scheduled meetings to discuss not just the firm but also the advisor’s evolving ideas, concerns and challenges. Whether or not you decide this advisor should become a part of your firm’s future, new perspectives are never wasted. 

These regular meetings should also serve as mentoring sessions, where you can share your experiences and help build leadership skills that can take an advisor beyond client management into practice management.

Getting out of the way

Yes, it’s your firm, but times are always changing.  

It’s impossible to run a business in today’s market without adapting to meet the needs of today’s client. With new advisors, your job is to equip them with the tools, knowledge, and guidance necessary to be successful managing your firm. But then you have to do something unimaginable. You have to step away.

A completely fresh perspective is not only exciting, it’s also necessary to succeed down the road. And like advisors, clients, too, are changing. In this “real-time” era of the Internet, smartphones, email, tablets, and social media, clients are now more informed and engaged. Post-2008, planning for retirement and financial planning are at the top of clients’ priorities, and it’s no longer just about financial performance. Clients today are focusing more than ever on quality of life.  Who you choose to succeed you will determine how well your firm will evolve along with your clients. 

Despite the challenges, it’s an exciting time to be in the financial advisory business. And no matter what changes in the industry, one thing will always remain the same: our shared goal of helping clients plan for their future. Now, isn’t it time you spent a little time planning yours?