Creating a "next-generation" business model is arguably one of the most pressing issues facing the financial planning community, yet only now is it starting to get the attention it deserves. For mainstream advisers, hiring a member of the next generation of planners can help solve a variety of challenges: It can give you a transition plan for smaller clients, increase planning capacity to support growth and provide a succession plan down the road.

On a macro level, the profession is facing the question, really for the first time in its short history, of how to transfer its culture, knowledge and viable businesses from one generation to the next. How we handle this transition will serve as the model for future generations.

The first generation of students educated in financial planning is graduating from colleges and universities and they aren't interested in learning to be salesmen; they want to follow a professional career path much the same way that doctors and lawyers do. The result is that they often aren't willing (nor should they be expected) to work the same way senior advisers did when they were cutting their teeth. Thus, a clear set of expectations and open communication are essential to a successful relationship between a senior adviser and the next-generation planner.

WHAT GOES WRONG

In my experience working with planning firms around the country, this relationship is often rocky because senior advisers envision the path to success as opening the telephone book and finding clients. When the baby boom generation pioneered today's profession, there were no firms to turn to for planning experience or mentoring under a seasoned professional. As a result, firms often have a dysfunctional process for bringing a college-trained professional into the office and using his or her talents to the fullest. Among the mistakes or problems I've seen:

• The hire is largely ad hoc, with no defined job description, compensation model or measurable criteria for choosing the right employee.
• No employment agreements are executed for new hires, making it easy for Gen2 planners to leave--sometimes with clients--and not face any consequences.
• The plan to integrate Gen2 advisers into the company's workflow is informal, lacking any real definition or structure. The firm follows the "wing it" model of management.
• There is no training program to indoctrinate Gen2 advisers into the firm's methodology or to help deepen the new adviser's knowledge and experience.
• Gen2 planners are often left to their own devices in terms of acquiring clients--or, if they are hired to work with the firm's smaller clients, those clients aren't clearly identified. There is often no transition plan that would define the process by which Gen2 will be introduced to smaller clients or take over new clients who come to the firm.
• The compensation plan for Gen2 planners is ill-defined and therefore hard to manage, creating problems with expectations on both sides.
• There is no career ladder in place to establish how Gen2 grows within the firm and no partnership plans to define the professional and financial expectations for partnership.
• The transition of control and authority are psychologically difficult for the firm's principal.

Sound familiar? If it does, my best advice is to start addressing these issues sooner rather than later. The biggest mistake I see firms make is waiting to search for a candidate until they are in dire need of one. It's better not to be forced to fill a key role from a compromised position. To ensure the best possible outcome, I generally recommend that planning firms start looking for a qualified professional a year in advance of the need. The worst thing that happens is that you find someone "great" too soon-and I'm not sure there is such a thing as too soon to find the right person.

Over the past 10 years of advising advisers on building their practices, I've found that your chances of recruiting and managing Gen2 advisers--or any advisers for that matter--are greatly improved if you develop what I call a Career Ladder. We typically include the following fundamentals in designing a career ladder, but the way different advisers design their ladders will vary to some degree based on the specifics of their firm, situation and goals.

THE ELEMENTS OF DESIGN

Start by implementing a defined hierarchy that reflects the evolution of the new employee's position through pre-defined breakpoints. This ensures that both you and he or she understand that this is a process, not an event. The goal is to define the expectations at each level, so that both of you are clear about how and when the adviser should be promoted up the career ladder.