Financial planners spend much oftheir time preparing members of the 78 million-strong baby boom generation to retire in the coming decade or two. But many of them overlook the fact that the majority of planners are boomers themselves and are seeking to exit the business. This will make room for the next generation of professionals, who are eager to take over the industry. But differences between these cohorts of advisors, in terms of the clients they hope to serve, are already creating tension at some firms.

Financial planners like to serve clients who are similar to themselves. In fact, 85% of planners today focus nearly all of their attention on boomers and older clients, according to a new study by Rydex AdvisorBenchmarking. More than a third of younger planners' clients, however, are below the age of 44.

When the first generation of planners started in the business, serving their peers meant selling them their first life insurance policies and IRAs. Today, it often means retirement and estate planning, among other services. But for incoming planners, peers are twenty- and thirty-somethings who are saddled with student loans and credit card debt. As much as they need to get out from under, they also need to save for retirement and other life goals.

"These young planners go out with their friends and see the mistakes they're making and want to help," says Aaron Coates, 35, partner at Relevant Financial Planning in Elkhart, Ind., and co-founder of NexGen, a community of young planners affiliated with the FPA.

A Necessary Stage

While some attribute young planners' desire to serve the middle to a generational difference, others consider it a matter of career stage. "Twenty-five-year-olds can't get million-dollar clients very easily," says Michael Kitces, director of financial planning at Pinnacle Advisory Group in Columbia, Md., and co-founder of NexGen. "Plus, they feel more comfortable giving advice to people who are more like their peers than their parents."

Unfortunately, many of the business models used by RIAs today, such as asset-based fees, make it difficult for planners to turn a significant profit serving the middle market.

"We've got to decouple that issue of fees based on AUM," says Jude Boudreaux, director of financial planning at Bellingrath Wealth Management in New Orleans and president of NexGen. "We need to move to a retainer-based program, set rates with clients and negotiate."

To Coates, one solution would be to use financial-planning triage: Separate the people who can't be helped from those who could grow wealth but need aid as soon as possible. The planner would then come in and take care of them. "We need to discern a way to find those people who need us the most, are going to do the work and are willing to pay a decent price for it, and focus on them," Coates says. "If we spend our time meeting with those who just need to pay off debt and have their hands held, then we've missed the serious cases of those in the middle who can get started with a will and term insurance."

Matt Iverson has another idea. He co-founded Boulevard R, a web platform advisors can put on their websites to reach out to less-affluent clients. "We're creating a platform that enables planners to use what we've developed to qualify prospects. Those that don't qualify can get a starter road map. Later on, they may become a client." Another model is that pioneered by Sheryl Garrett. Her planners charge for services by the hour, letting clients implement plans themselves. The Garrett Planning Network just signed up its 300th member.

Compensation models aren't the only obstacles standing in the way of these planners' goal. Amy Mullen, vice president of Money Quotient software, was surprised by the responses to articles she wrote asking why less-affluent clients, like herself, couldn't receive quality advice. "From the older generation, I got a lot of answers that this isn't possible," Mullen says. "They'd tell me that they have a family to feed. They've worked very hard to create a very successful business and they're happy where they are."

Despite pushback from elders, the next generation of planners is determined to serve its own. The first generation can and should harness that determination. "Be ready to use their energy and enthusiasm," Kitces says. "Be prepared to engage these people. That means being willing to change and going out of your comfort zone."