Two-thirds of agencies did not hire a new producer in 2012-2014, according to the 2014 Future One Agency Universe Study. And of the 34% that did, 22% hired just one.

As baby boomers start to fade out of the independent agency channel nationwide, agencies need to take a closer look at whether their hiring strategies are sustainable.

“If you think about the No. 1 problem for the future of the independent agent channel, it’s the talent pipeline and recruiting the best and the brightest into the industry,” says Warren Wright, executive vice president of LifeCourse Associates. “It’s not today’s problem, but it’s tomorrow’s problem.”

Wright references the “silver tsunami” that’s about to hit the industry, citing figures that estimate nearly 400,000 boomers plan to retire in the next two years. It’s an inescapable truth that agencies will need to start replacing their workforce.

But “hiring a couple of new producers is not a perpetuation plan,” says Jim Caragher, managing partner at career consulting firm CIB Group Services LLC. A bundle of new producers with the right strategy, a strong investment and an early start can help agencies make the inevitable transition a smooth one.

Independent agency INSURICA has recognized the problem it its own organization—and is addressing it head on. Michael Ross, president & CEO, says his 26-branch location agency has hired 10-15 new producers every year—nearly 85% millennials—since implementing a new strategic recruiting, hiring and assimilation plan about five years ago.

The “global plan is that as we do our succession planning and identify leaders and producers that will be retiring,” Ross says. That way, “we will get out in front of that and present opportunity and bring in new producers to make a seamless transition in taking that over and therefore being able to perpetuate those relationships.”

Five years later, Ross says his agency is just now realizing what could have happened without proper preparation. Currently, a few recently hired millennial employees are already preparing to take on management and leadership opportunities.

For agencies striving for independence or internal perpetuation paths, “you have absolutely no choice—you have to hire young people,” says Kevin Stipe, president at Reagan Consulting. For firms that say that they want to remain independent and perpetuate but don’t go out and hire that next generation—they’re kidding themselves. It can’t happen.”

Because many agencies’ organizational structure is top-heavy, focusing on millennial hires is the path to a successful future. “That’s not to say that the older generation isn’t important or shouldn’t be honored or appreciated, because they should be,” Stipe says. “But they aren’t the ones to take an agency through continual independence. You have to have the next generation step up and do that.”

“Hiring new producers and hiring them in the millennial generation is a big part of a plan in internally perpetuating an agency,” Caragher agrees. “In order to make an internal perpetuation work, you need to continually invest in talent and be able to buy out the ones who are retiring.”

Planning to buy or sell? An external transaction is no different. Caragher explains that even agencies fairly late in the perpetuation game—with principals in the 50-60 age range and a deficiency of 20-40 year-olds—can benefit from hiring and growing successful, validated producers in younger generations.

“At the very least, it helps stabilize the agency and make it more valuable for an external perpetuation,” Caragher says. “That’s what buyers want to see: Agencies that have growth capacity and have producers who are not all 60 years old.”

Independent agency M3 Insurance, with locations throughout Wisconsin, is already on the right track. Tim Cleary, director of sales in property and casualty, says the agency takes a diligent approach to effective perpetuation: Focusing on revenue per relationship enables leadership to evaluate book of business growth and capacity potential to migrate accounts as senior producers start to transition out.

“Whether it’s perpetuation of the ownership of the agency or books of business or technical expertise or even stories of successes and failures—unlocking all of that information gives our people a sense of team and a sense of protecting what’s ours,” Cleary says. “That can be a motivating factor for a lot of people.”

Morgan Smith is IA assistant editor.