Personal Finance

Fall of stockbrokers gives agents new lease of life

thisguy

Mr Jackson Githigi, a stock agent with Suntra Investment Bank at his office in Nyeri town during the interview. JOSEPH KANYI

“They came with a bang and left with a bang,” says Mr Jackson Githigi, referring to stockbrokers whose rapid expansion forced most people in his trade out of business.

Mr Githigi is a stock agent and has been in the field for the past 15 years. Stock agents deal with shares through licensed stock brokerage firms that are members of the Nairobi Stock Exchange.

His passion, enthusiasm and patience have helped him weather many storms in his trade, including the onslaught by stock brokerage firms.

In 2007, Mr Githigi recalls, worried agents watched anxiously as some of the newly licensed stock brokerage firms such as Nyaga Stock Brokers and Discount Securities moved into town and set up branches.

They were implementing a rapid expansion strategy that saw them open up branches in all major towns throughout the country.

The stock brokers were taking advantage of a wave that began with the Kengen initial public offer (IPO), introducing the mass market to stock trading, followed by the subsequent Safaricom and Co-operative Bank IPOs.

As Mr Githigi recalls, the new firms engaged in massive promotional campaigns with road shows and radio shows that attracted people in a big way.

Suddenly, the public no longer needed agents such as Mr Githigi and they flocked the new stock broker offices. “Many of my customers moved and went to these firms. These were direct brokers and many people were attracted to them,” reminisces Mr Githigi who is an agent for Suntra Investments Bank, a licensed stockbroker with the NSE. Suntra stuck to the agents and did not open new branches.

He, however, still had a few of his loyal customers who despite the new brokers in town, stuck with him.

From his office in Nyeri town, Mr Githigi called up his manager at Suntra’s headquarters in Nairobi to inform him of the worrying development.

“When I told him about it, he just told me to continue offering services to the clients that remained and to be patient,” he remembers.

With the clients gone, many other stock agents had to close shop since they could not compete with the brokers. Not one to give up, Mr Githigi held on. His office rent was far below what other agents were paying, which helped him keep costs down. He also tried to expand his net and ventured into other businesses such as fish farming as he watched how things played out.

The new firms in town had opened elegant well furnished offices in strategic places with a lot of personnel to deal with the large flow of enthusiastic clients.

Experts questioned the viability of the expansion programme used by the new brokerage firms.

Soon enough word started going round about problems in some of the new firms. From the grapevine, word now moved to the media. Reports of problems in the new firms reached a crescendo when the Capital Market Authority moved to place the firms under receivership following allegations of financial improprieties.

Just as fast as the new firms had come into town, they were now closing one branch after another. Most members of the public, some of whom had taken up loans to buy shares, were left wondering what would become of their investments.

“I had warned some of my former clients,” says Mr Githigi. He adds: “Many of them lost a lot of money through these firms.”
Sure enough, the clients started flowing back to Mr Githigi’s office. This time they were seeking advice on what to do.

Ever passionate about his job, he welcomed them back and helped most of them transfer their shares to secure firms. But despite being left to pick up the pieces, the disappointment caused by the fall of the brokerage firms and the subsequent poor performance of some of the IPO shares had dampened people’s interest in shares, notes Mr Githigi.

Banks such as Equity also started to trade in shares as agents, taking up a sizeable number of clients, he adds.

But despite this, his enthusiasm has not waned as he jovially explains why clients will always come back to him.

“We offer consultancy and advice to clients unlike the banks. Many people still have confidence in us,” he says.

The biggest asset Mr Githigi notes in working as an agent has been a good name.

“You need to be known as a person of integrity so that you can be trusted by the brokerage firm and by clients,” he says.

One of the challenges he now faces is the lack of understanding by most people on how share trading functions.

“Many people have never understood share trading. Some are not patient and they want to earn from shares as soon as they buy them. They end up selling at a loss,” he says.

Others take up loans to buy shares, which he says is bad investment decision.

“Savings which are not being used are the best funds to invest in shares,” he explains.

As he looks into the future, Mr Githigi notes with confidence that there will always be a place for agents.

He also notes that for stocks to continue performing well, the economy of the country needs to grow and there must be political goodwill in order to give investors confidence.