A visitor to any major mainland city may be excused for mistaking the street-level outlet of a securities company for the lobby of a five-star hotel. They really look that grand from the outside.

Inside, the companies are equipped with not only computers, telephones and large-screen monitors, but also scores of private rooms for priority clients, each decked out with leather sofas, large mahogany desks and other expensive amenities.

Free newspapers and lunch boxes were also common during the bull market period.

Why must investors physically go to a securities company to do their trading?

Because, apart from the opportunity to compare notes with fellow investors, priority clients' rooms are often equipped with better and more reliable communications facilities than their own homes, via which their dealings are more prompt and presumably more secure.

Large securities retail centres can be found in every primary location in the nation's main cities. According to Securities Market Weekly, there are 140 such centres in Beijing, 200 in Shenzhen and as many as 400 in Shanghai.

But the swarming of men and women to the securities retail centres every morning as if they were faithful employees was a phenomenon of the bygone years of the 1990s.

Thanks to a sluggish trading environment which began in the middle of last year, mainland securities companies are downsizing their retail services and are even selling their retail centre properties.

Going from exponential growth to conducting normal business, according to Wang Yang, vice-president of Oriental Securities' Beijing retail centre, "is only natural." He said: "You cannot take abalone as your daily meal."

But now the regular meal can be fairly lean at times. In 2002, with commission revenues declining by an average of 30 per cent, Shenzhen's securities retail business, as a whole, will suffer a net loss.

More interestingly, if Investor A claims to be able to introduce a few other clients to a retail shop, with 10 million yuan (US$1.2) committed to regular trading, the securities company would be perfectly happy to appoint Investor A as vice-president of its retail operation.

Fledgling agents

The agent system, which is quite new in the mainland, is on course to replace the old-style retail shops.

But the new system comes at a time when all securities houses are faced with dreadful cash flow prospects and cannot afford to be as generous to their new hires as they were in the 1990s.

Therefore, the overall quality of the agents is helplessly compromised. Many of them do not have much experience, and the way in which they operate is not that different from the system used by Avon ladies.

In some cities where stock trading is struggling at bottom level, such as Qingdao, an agent's base salary could be as low as 500 yuan (US$60) per month, close to the welfare payment a jobless worker receives.

What can these junior sales staff offer men and women who have been playing with the world's most widely fluctuating market for a decade? How can they hope to recruit new clients? How can they even strike up a conversation with people from a considerably wealthier class?

Most securities companies are experimenting with the agent system in their declining retail shops, putting the agents under the direction of their retail managers. But at present, the agents bring in no more than 30 per cent of a retail shop's total transaction volume.

In their client service strategy, securities companies continue to rely on their traditional retail shops for regular business incomes,even though the business is obviously on a downward slope. The agent system is still a sideline.

Of course, no one is happy with such a poor, low value-added agent system. The Shenzhen-based China Eagle Securities Co, is trying to distinguish itself by building a whole team of "financial consultants" to work with individual investors.

According to China Eagle sources, the best consultant (the one with the highest performance) brought 30 million yuan (US$3.6 million) in funds into the company in 10 months, which does appear to be substantially more than what the average young agent can do.

(Chinadaily)