As founder and CEO of The Ensemble Practice LLC, financial advisory industry veteran Philip Palaveev spends his days helping advisory firms figure out how to increase their businesses through analyzing everything from partnership structures to career paths and succession.

Palaveev believes that a critical component of any advisory firm’s enduring success is the recruiting, training and retaining of a new generation of advisors to become leaders and partners. But he wasn’t so sure that readers would accept his ideas on the subject.

Would advisory firms’ founders and leaders believe they could or even should train the next generation? Would the next generation doubt they could develop the needed skills, and would they lack enthusiasm for being in charge?

Then Palaveev met with classes at the G2 Leadership Institute development program organized by The Ensemble Practice.

“They were so talented, energetic, ambitious and accomplished that I could not wait to sit down and write. They were entrepreneurial. They wanted to be leaders. They wanted to be owners. They wanted to take risks. They wanted to grow. They may not be ready yet but it won’t be much longer until they are,’’ Palaveev writes.

Hence, his new book, G2: Building the Next Generation, a crisply written, smartly organized guide to preparing the next generation for leadership roles in advisory firms. It will be of equal value to owners and founders and to G2s, and soon, G3s.

Palaveev defines G2s as not founders, but as the second generation who joined a firm later, have at least five years experience and are lead advisors or team leaders. They are considered future owners or are already owners, and are seen as successors to the founders. They want to preserve the legacy of the founders and also improve the firm.

He writes that firms without G2s in place will either dissipate or be merged and sold into bigger entities within the next 10 years. Currently, 43 percent of advisors are older than 55, and 11 percent of advisors are under the age of 35. Palaveev writes that research says that there will be about 280,000 fewer advisors in the next 10 years, due to retirement. This is bad news for firms that want to grow.

Palaveev says that younger G2s draw younger clients, which helps ensure firm longevity. Although he encourages firms to hire G2s, Palaveev favors training and promoting professionals already within the organization.

Specific advice and guidelines aimed at G2s include a chapter on how to handle a career track, from associate to service advisor, to lead advisor and partner, with expected salary and bonuses provided. He discusses issues such as tenure, the virtues and drawbacks of a non-hierarchical firm, and making the move to partnership.

Owners and partners will find meaty information in the chapter on recruiting G2s, a task so important that Palaveev says it “should become part of an organization’s day-to-day activities and intrinsic culture.’’

He says a successful firm combines experienced hires with entry-level positions, and “is always hiring.’’
Essential steps in hiring are explained, including good advertising, screening, interviewing (always more than one of a strong candidate), job offering, opportunistic and experienced hiring.

Founders/partners and G2s can benefit equally from chapters on G2s taking over client relationships, how firms develop new business and how to become a business developer. To become a successful business developer, Palaveev says, G2s must find a good mentor, develop specialized expertise and devote enough time and discipline to excel. G2s also must accept that time will always be short for the person who insists on a balanced life; Palaveev says best to accept that there will be some major meetings or children’s plays and athletic meets that will be missed.

G2s will have to decide if they agree with the author when he says that research indicates that praise can be just as effective as money in rewarding performance, or that critical feedback is a form of respecting your colleagues.
 
Palaveev untangles the complexities of buying equity in a firm, adding new owners, rules for ownership and governance, and succession. He suggests financial advisory professionals read at least one magazine monthly for industry news and developments, and urges G2s and owners to attend conferences, seminars and business gatherings, where knowledge can be found and excellent contacts established. And he ends on a note of continuity.

“This entire conversation—this entire book—will quickly flip on you. The responsibility to grow and prepare G3 belongs to G2. A G2 professional should help (founders) recognize that it is your turn to be a coach and mentor.’’

G2: Building the Next Generation by Philip Palaveev.  John Wiley & Sons. 244 pages. $60.

Eleanor O’Sullivan is an award-winning freelance journalist who writes for Financial Advisor magazine.