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At 26 years old, Caleb Brown has no intention of running his own financial planning firm (at least, not right now). But when owners in the Dallas area want to know how to find, hire and keep young talent, they call him up.

Although Brown has a great job with Strategic Financial Planning in Plano, Texas, perhaps his biggest accomplishment was founding Career Day at his local chapter of the Financial Planning Association in 2004. This event brings together job-hunting planners and potential employers. At first, the idea was radical enough that Brown had to work the phones just to get practice owners to come. "Now," he says with satisfaction, "we have a year-long waiting list just to participate."

Brown is one of financial planning's "NexGenners"--or self-declared next-generation financial planners--who have set out to remake their industry into a bona fide profession. Their goal: to refine the industry's business models to achieve a modicum of regularity in the way new planners--college graduates and career-changers alike--enter the field, earn their stripes and grow in their careers.

Caleb Brown, 26, associate planner at Strategic Financial Planning
in Plano, Texas: He started Career Day, where NexGenners meet
with potential employers. "Now," he says, "we have a year-long
waiting list just to participate."

NexGen's charter members found each other at industry events. Feeling alone in a sea of graying hair, they formally organized into a Financial Planning Association "community of practice" in 2004. The group's founding mission was to collect the wisdom of financial planning's "pioneers," as NexGenners call the industry's founders, and pass tthat institutional wisdom on to younger planners.

The group has emerged as the face of financial planning's younger generation. At 85 members, its voice is stronger than its numbers. Requirements to join are few: membership in the FPA, being under 36 years old and a commitment to honor industry veterans. But soon after NexGen started, they became embroiled in controversy. Impassioned magazine articles about financial planning's "generation gap" forced the unwitting NexGenners to become the defenders of their entire cohort. With characteristic idealism, they've taken on the job--and flourished.

Now that the average age of FPA members is 51, it's crucial for those first-generation planners who built the industry to realize that this new generation is, consciously or no, preparing itself to take up the reins. For most planning firms, this sophisticated pool of young talent represents both an immediate source of advisory labor and the future buyers of senior planners' equity in their firms.

Although NexGenners set out to learn from the first generation, their vision is a substantial departure from that of senior planners--mostly investment and insurance brokers who migrated out of sales forces and opened up one-person shops. While the first generation struggled to figure out how to earn a living based on giving financial advice, the NexGenners studied financial planning in college and expect to take their place in a clearly delineated profession.

Tara Scottino, 33, senior vice president of investments
and planning at Capital Chart Room in Arlington,
Texas: "Two years ago, people still said, if you couldn't 
'do sales,' you couldn't do planning." 

The industry is feeling the impact of these NexGen planners as they work their way into the field and rise in their own firms. Along the way, NexGenners are challenging the industry to accommodate salaried advisors as well as rainmakers. "Two years ago, people still said that if you couldn't do sales,' then you couldn't do' financial planning," says Tara Scottino, 33, senior vice president of investments and planning at the Capital Chart Room in Arlington, Texas, and president of NexGen.

Her comment points to one source of polarization in the so-called generation gap discussion. For the past two years, oldsters ranted about Generation X's sense of entitlement, while younger voices lamented the graybeards' refusal to accept that times and business models had changed.

CLOSING THE GENERATION GAP

In theory, entry-level salaried advisory positions would offer NexGenners the mentoring and training they seek from their elders. But that requires more forethought on the part of both employer and employee than most people realize. Many early attempts to hire and groom college-trained advisors went up in smoke. New hires complained that they were limited to menial administrative tasks, while senior advisors complained about the younger generation's disaffection and lack of real-world experience.

But the NexGenners are hardly the disenfranchised interns older advisors may assume them to be. Rather, the group's leaders, almost to a person, have systematically moved into management at the industry's highest-profile firms. For the growing number of first-generation planners who have taken the risk of hiring and training them, the reward of explosive growth could not be sweeter.

Other NexGenners have committed themselves to a new kind of career path, related not to sales, but to technical skills--a resource that, so far, only the largest and best organized firms can afford. They have also attracted the support of FPA leaders, including Dan Moisand and Marv Tuttle, president and chief executive officer of the FPA, and Ben Coombs, recipient of the 2005 P. Kemp Fain Jr. Award. Indeed, NexGen has its own presence on the FPA website (www.fpanet.org/nexgen).

COME TOGETHER, RIGHT NOW

And yet, there is another, perhaps more important, reason why the entire industry, young and old alike, will increasingly need to pay attention to this group's development. This nucleus of ambitious professionals is determined to make a home for themselves in the industry and help define the profession's future. Understanding them is as important as understanding your clients.

This past August, NexGen held its first official conference under the FPA's aegis. The atmosphere was one of empowerment. As Bob Veres wrote in his newsletter Inside Information: "I saw a realization begin to take shape that they--the group at this conference and the next few NexGen gatherings--will sooner or later become the leadership of the planning world."

The two-day conference, a summer-campy affair at the YMCA in Estes Park, high in the Colorado Rockies, was designed to be as inexpensive as possible so everyone could attend. In that way, it was reminiscent of financial planning's early days, when the industry's first entrepreneurs gathered at bare-bones conferences to share strategies and support. "The whole point was to model the NexGen conference after the old financial planning retreats," says Scottino. "The first planners got to know each other because they shared rooms to save money."

Still, both generations need to realize that times have changed. NexGenners are grounded in a world where markets are global and regulation is pervasive. Take it from Michael Kitces, 28, director of financial planning at Pinnacle Advisors in Bethesda, Md., and a charter member of NexGen. He is a frequent contributor to this magazine and a well-respected technical expert. "I started in the business in 2000," he says. "After my seventh year on the job, the Standard & Poor's 500 Index is still more than 10% below where it was when I started. Even the oldest generation of planners has never seen this market environment. The whole buy and hold, and buy more on the dips' strategy...well, that's been turned on its head." Moreover, no-call lists, identity theft and a public that is increasingly wary about granting trust have made many previous methods of attracting clients passe.

Still, the NexGenners couldn't have hit their stride at a better time. The great hiring freeze of 2000 to 2002 has been replaced by a booming market for planners. According to FPA data, the average practice in 2002 was comprised of only one and a half people--and that "half" was usually a secretary or administrative assistant. As the market recovered and baby boomers started to retire, assets under management rose almost exponentially. Today, the average independent firm boasts a staff of 4.5 people--and, typically, at least one staff advisor in addition to the owner. Demand for young talent now far outstrips supply. According to the FPA, 45% of all planning firms expect to hire a salaried advisory professional in the next year.

FORGING A NEW CAREER PATH

Pleased as NexGenners are about the quick tripling of staffs, they remain focused on reshaping their jobs. And the growth in the business is helping them. In the past, most new planners had to choose between accepting a salaried administrative position from a sole proprietor--hoping over time they'd move into more advice-oriented roles--or bet the farm and open their own shops. Long-time proprietors, NexGenners agree, are notoriously hesitant to delegate responsibility for tasks involving hard-won client relationships.

That may finally be changing. According to NexGenners and industry observers alike, the inflow of clients and assets has left small firms in particular with more advisory work than they can handle. "Suddenly, salaried advisory jobs are springing up all over the place," says Kitces. "Every time a firm brings on another 100 clients, they need to hire a few more advisors to serve those clients." Scottino adds that her firm is looking to fill two advisory positions that won't have any sales responsibilities.

THE THREE-TIERED MODEL

In this new environment, NexGenners are teaming up with owners to populate a new, three-tiered firm structure: the rainmaker, the relationship manager and the back office. When the model is executed correctly, its advocates argue, it's a way to grow a practice into a firm by deploying young talent to support the firm's principal asset-gatherer. NexGenners have shown that a younger, salaried planner, with sound technical skills and the ability to serve clients, can absorb the minutia of managing existing clients while leaving the rainmaker plenty of time to do what he or she does well: make rain. However, the model's gurus--and especially the NexGenners--are quick to provide three caveats: You must plan well in advance, hire with precision and work hard to keep new talent around.

At the NexGen conference, Jon Guyton, 45, owner of Cornerstone Wealth Advisors in Edina, Minn., gave some words of advice to owners looking to make their first hire: "Decide what you want your job to look like after you have hired and trained your first employee." Guyton has two employees--both financial planners.

Jon Guyton, 45 (seated) of Cornerstone Wealth Advisors in Edina, Minn.,
hired planners Mike Branham, 32, and Andrea Eaton, 25. He was more
comfortable coaching advisors than managing administrators.

"I realized early on that I am not a particularly good manager of people," he says. "People performing administrative tasks would need to be managed, as opposed to coached, so I outsourced all those functions. I wanted to work with people who were going to grow into roles that involve giving advice." So when Guyton founded Cornerstone in 2004, his first hire was Mike Branham, 32, a planner with seven years of experience. At the time, the firm had 146 clients and $655,000 in revenue. Last year, after the firm took on 15 more clients, Guyton hired Andrea Eaton, 25, a CFP candidate out of Texas Tech. He was prepared to have her in front of clients as soon as possible. "Part of our process is that clients have relationships with all three of us," says Guyton. "Clients meet both of them in review meetings, so they know what they're capable of."

NexGenners also preach the value of preparing for your first, or next, hire well before the need for additional staff is pressing, and while you still have some time for training. "We saw the need to hire when we couldn't even work a new staffer 40 hours per week," says Scottino. "But once we hire, we'll attract more than enough work. You have to start looking when you're not desperate."

Of firms hoping to make hires in the next year, no segment faces a trickier task than the sole practitioners and smaller firms that are reaching capacity. As a result, says Stephanie Bogan, 33, president of consulting firm DP Group in Redlands, Calif., most firms will want someone with experience. But they're in for some bad news: So does everyone else, and the biggest firms suck up the best people at high salaries. That means small firms have to either train a young planner or stop their growth altogether.

NexGenners hope smaller firms take the leap. Eric Hehman, 31, a partner and chief operating officer at Austin Asset Management Co. in Austin, Texas, and one-time young hire, reduces this to a simple dichotomy: "Your desire for growth has to be stronger than your fear of making the wrong hire," he says. "When you look at your staff, you have to see a collection of resources, not a load of expense."

THE "MINI-ME" SYNDROME

NexGenners and practitioners who have successfully hired inexperienced advisors joke about a trend affectionately called "Mini-Me" Syndrome. As owners search for new talent, the natural tendency is to try to find someone "just like you." Like Caleb Brown, Eric Hehman has consulted with numerous owners about hiring. "Guess what?" Hehman asks, sounding almost exhausted from repeating his mantra. "You can't replicate yourself. You simply have to hire an employee with a skill set that is the opposite of yours." But wait, there's more. "Get used to the idea that you'll probably get some new ideas. You might even find out that the way you've done things isn't necessarily the best," he says. When owners hire a Mini-Me, Hehman knows where the relationship ends up: "Basically, you've hired someone to do exactly what you do," he says. "Except they take longer, they don't think just like you and you're frustrated. The person you hired is frustrated, too."

Hehman also knows how an "opposite" hire can work out. Fresh from college in 1997, he doggedly pursued a position with John Henry MacDonald, a well-known planner and owner of Austin Asset Management Co. To convince MacDonald of his worth, he worked as an unpaid intern while waiting tables on the side to pay the bills.

Eric Hehman, 31, partner and chief operating officer at
Austin Asset Management Co. in Austin, Texas, knows
how well an "opposite" hire can work out.

Hehman and MacDonald proved to be perfect complements. McDonald was a rainmaker and Hehman was an operations guy. He eventually became COO of the firm, streamlining its business operations, so MacDonald could focus on long-term growth. In 1999, Hehman became a partner, and by 2000, the firm's client roll had nearly doubled from its 1997 level. Today, it has 15 employees, 300 clients and $300 million under management. With six salaried advisors, all CFPs, Hehman expects to hire more in the near future. For Austin Asset Management Co., making a careful and complementary first hire paid off in spades.

Obviously, the onus of hiring falls on the employer. And yet, successful NexGenners tell the incoming ranks not to expect the industry to help them figure out what job they want. Many new planners assume that planning firms offer formal training programs, as do banks and brokerages. "Some people think financial planning is like law or accounting, where you show up and they've got the job all figured it out. But it doesn't work that way," Hehman says. Adds Branham: "I tell people looking for a job to figure out what they want to do, and then find that position."

Hehman is quick to add that planners interviewing for their next job should ask owners to explain the firm's business plan and how incoming planners will fit into it. "If the owner envisions ambitious growth well into the future, that's a sign that he or she has really thought about where to take the firm," he says. "But if the response is, 'Well, I really don't know,' or 'I want to grow the firm at 5% a year,' there's probably no career potential there."

DEFINING AN EQUITY TRACK

Most successful relationships with NexGenners require a clear understanding of whether there's an equity track at the firm. Although planners and industry experts have been trying to standardize routes to making partner, discussion both at and away from the NexGen conference suggest that the industry has its work cut out for it.

There is a primary point of agreement, however: Have the equity conversation early and often. "What both the owners and the new planners don't do is talk about it from the beginning," laments DP Group's Bogan. In Estes Park, one young planner asked a panel of firm owners when she should finally feel comfortable asking her boss about an equity stake. "I don't think it's ever too early," Hehman told her. "If an employee is asking me what it takes to become a partner, I know that she's very serious about working here and doing a great job. I can invest in that person, knowing that the training will pay off." Besides, says Scottino, "when you walk into a law firm, you know exactly what you have to do to make partner. Why should it be any different at a planning firm?"

Mark Tibergien, a specialist in financial services practice management and a principal at accounting and consulting firm Moss Adams, observes that awarding ownership should be the product of a planner's contribution to the firm's overall direction and value. "Among the biggest mistakes advisors make is awarding equity based upon loyalty," he says. "It should be awarded as a recognition of the person's contribution to the business."

For the most successful young planners, it can be difficult to sit quietly while a potential ownership stake appreciates. Hehman and MacDonald handled the situation by having frank conversations and exploring their mutual visions for the company. "It was as much me prodding him," Hehman recalls, "as it was him saying, He's doing things that are valuable to the business.'"

But NexGenners need to be diplomatic, too. Owners have conflicted emotions about selling pieces of their firms, which they built with decades of blood, sweat and tears. "For most of these owners," Tibergien observes, "selling the firm feels somewhere between giving a daughter away for marriage...and selling a child on the open market."

What's next for NexGen? Far from seeking to ride herd on the industry, the ambitious NexGenners are simply trying to make the trip as smooth as possible for everyone. The crucial point is that, although the NexGenners are a force to be reckoned with, they have not set themselves up in opposition to the first generation. Instead, they want a mutually respectful conversation with their forebears. "This profession usually starts a conversation by having a debate," Guyton says. "But this is not a conversation we can afford not to have."

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