The “me” generation has never been very good at coming to terms with what comes after it, whether the subject is hockey stars or rock musicians. A baby boomer even introduced the idea that history had reached its end, all evidence to the contrary.

The boomers — those born between 1947 and 1966 — will start hitting 65 within a few years. For many, that means winters in Florida, more time with the grandkids and all the other comforts that their golden years are likely to entail. The retail investment industry came into its own in Canada by making sure that this group would be ready for retirement. Now it must plan for retirement within its own ranks.

Research for Investment Ex-ec-utive’s annual Advisor Report Card has confirmed that the average advisor is getting older. In 2005, the average age was 44; in 2006, that figure was 45. This year, 61% of the 1,727 advisors surveyed were born before 1964 and will be retiring in the next quarter-century.

“There is no date or timeline for an exodus,” says Nick Pszeniczny, senior vice president of wealth and estate planning with Freedom 55 Financial, a division of London Life Insurance Co. , based in London, Ont. But advisors’ retirement, gradual though the effect may be, will trigger a cultural shift, as the “echo” generation — boomers’ children — replace them. The generation in between, which is smaller due to lower birth rates between 1966 and 1980 and which was shaped by the recession of the 1970s, is expected to have less of a social and economic impact.

The planning sector will be the most immediately affected by the boomers’ exodus from the workforce — 70% of advisors working at mutual fund dealers were born before the end of the boom, vs 62% of investment advisors. They will be reaching retirement between now and 2029. Insurance advisors, according to IE research, will lose only 60% of their numbers between now and 2029. Only the banks and credit unions can expect to retain more than half of their workforces after the boomers retire.

But while the financial services industry is facing the loss of 61% of its senior advisors, the full process will take almost 25 years. What the industry needs to look at is the way these advisors will be leaving their businesses and who will be replacing them.

Granted, this is one of those businesses in which professionals can easily opt to keep working. And, as advisors approach retirement age, many choose to continue to practise. But whether an advisor intends to walk away from the business or keep working, a sound succession plan will benefit all the interested parties: clients, the advisors and the product manufacturers.

Sam Albanese, insurance industry director at Seneca College and founder of Seneca’s financial services practitioner program, compares writing a succession plan to writing a will or planning one’s funeral, because it confirms what an advisor doesn’t want to admit — that they are not going to be running the show forever. And like a will, succession planning is of the utmost importance. Because, as advisors become older, the possibility that they may leave their practices on short notice — due to death, illness or a sudden desire to spend their declining years in Tuscany — also increases, and it will ultimately affect their clients negatively if they are not prepared for it.

Succession planning is usually one of the services that financial services dealers offer their in-house sales teams. If a retiring advisor can’t find a buyer for his or her book, the company will buy the book and sell it to an incoming advisor.

For an independent advisor, Albanese recommends choosing a successor, which could include taking on an apprentice who is groomed to take over the advisor’s clients. After handing over the day-to-day operation of the business, the senior advisor is free to travel or just slow down in general, knowing that someone is manning the storefront. The aging advisor, however, needs to face the reality that such a handover will entail cultural changes in the practice.

Another issue is the general lack of clear career paths for aspiring advisors. The banks take in new graduates, and some financial services and insurance companies train and maintain dedicated sales forces. But for most advisors, succession planning involves selling their book of business, not training a successor to work it.

@page_break@The cost of selecting and training a new partner can be a strong deterrent. The Seneca program has an $8,000 price-tag. Within the career sales forces, the cost is astronomical and the attrition rate is jaw-droppingly high, although less so for the major banks. Freedom 55’s four-year retention rate is industry-leading at 35% — which has to hurt, what with the cost of training a single agent hitting about $45,000 in the first year.

The industry’s dirty little secret is that most dealers fill their ranks by recruiting experienced advisors with established books of business. Or they recruit aspiring agents from in-house sales forces in companies that invest heavily in training green recruits. Outside of the banks, the number of firms training incoming advisors has imploded.

Given the looming demographic shift, the industry as a whole needs to dedicate itself to bringing in fresh blood, and the banks cannot be expected to bear the full brunt of the effort. While they are adept at teaching the hard skills an advisor needs, the Big Six banks do not teach the entrepreneurial and management skills upon which an independent or branded advisor relies.

The Seneca program, according to Albanese, teaches its students to be “entrepreneurs, not employees” by focusing on management and marketing as well as the hard skills that go with being an advi-sor. Albanese presents the program as a conduit that senior advisors can use to train their apprentices in areas that senior advisors may not be familiar with themselves. The successors will, after all, be managing a new generation of clients who may have different needs and priorities. “Technology-literate clients have product at their fingertips with the Internet,” says Albanese. “What they need is advice on increasingly complex products.”

The boomer generation’s exit from the workforce presents an opportunity for the industry to reform itself. The needed influx of new advisors coincides with a drive toward the increasing expertise of the financial advisor; the next step is developing a career path that will ensure that the new generation of advisors is competent to serve the new generation of investors. IE