The financial advisory industry is getting younger as more firms hire recent college graduates to fill client-facing and revenue-generating roles, according to TD Ameritrade Institutional’s latest Financial Adviser Insights research report.

According to “People and Pay,” nearly one-third of firms are proactively targeting recent college graduates for revenue-generating roles, and as a result the median age of lead advisers has slipped by three years to 47 since 2015.

There is evidence that these graduates emerge licensed and credentialed, but naturally “they are less productive than experienced investment advisers with an existing client base,” at least during their early years in the firm.

Vanessa Oligino, director of business performance solutions at TD Ameritrade Institutional, suggests the big challenge for firms interested in recruiting a new generation of advisers is to “communicate the benefits they can offer, promote the growth prospects of a financial planning career and structure an organization that can help these new advisers develop and contribute to long-term growth.”

The research shows the median firm expects to have seven full-time-equivalent employees by the end of 2017, up from five just two years ago. And while advisers report the pace of client growth has slipped to 6.4%, “that growth rate is still slightly above average for the nine-year history of the study … The industry overall remains healthy with firms reporting a median of 13% growth in assets and 6.7% revenue growth.”

Still, finding qualified advisers to work with clients is increasingly challenging, as over two-thirds of firms reported.

“As a result of this scarcity, more firms are outsourcing, forming strategic partner relationships and casting a wider net for talent,” TD Ameritrade notes. “Indeed, six out of 10 firms have realized labor savings as a result of some form of outsourcing.”

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In addition to outsourcing compliance and back-office functions, many firms are using third parties to offer additional services, TD Ameritrade finds, such as tax preparation and insurance, even if they advertise these services as client offerings. The study also shows that firms are incorporating a range of benefits and non-cash compensation, such as flexible work schedules.

“Firms also offer professional development, remote work options and leaves of absence,” observes Oligino. “A key offering for younger advisers is a clear career path and the availability of mentoring.”

Other findings show, despite the high demand for talent, median lead adviser pay declined at an annual rate of 7% to reach $168,500 over the past two years. Median pay for support advisers, though, rose by an annual rate of 6.2% since 2015.

“Both trends reflect the increased hiring of younger, less-experienced advisers,” TD Ameritrade reports.

Overall, long-term organizational planning, the study shows, is “what separates the standouts from the rest of the herd.”

“Just 19% of advisers have a documented plan for the future firm they want to build, proactively thinking about hires and positions that can handle growth, before those employees are needed,” Oligino warns. “Too often, firms scramble to make hires only after expansion creates service and operational challenges. One thing that hasn’t changed in two years: an absence of formal succession plans, the need for which only grows more critical as the ranks of advisers nearing retirement swell. The share of firms with an owner three years or less away from retirement increased from 7% in 2015 to 12% in 2017.”

According to the study, only 37% of advisory firms say they have a viable transition plan in place. The rest “either don’t have a plan or have plans with serious flaws, such as the lack of deal-financing details or no named successor.”