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Economic Observer reporter Cai Yuekun Niu Yu The first seven months of 2024 are about to pass, and the sponsor representative (hereinafter referred to as "sponsor representative") Bai Yu is still waiting for an IPO (initial public offering) project he is responsible for to pass the review. Although in his opinion, the financial indicators and positioning of this already submitted project meet the IPO standards, he is still uneasy. "Now the IPO review cycle has become very long. This project may pass the review this year or next year, it's hard to say." Bai Yu said.

As a senior insurance agent who has been in the industry for 9 years, he was not so entangled before. Bai Yu's team of leading securities firms had completed 10 IPO projects in two years, and the approval rate was 100%. IPO business is very familiar to him.

Once upon a time, obtaining the qualification of an insurance agent was the goal of investment bankers in the securities industry. The moment their status changed from "general securities business practitioner" to insurance agent, they were given the right to sign project reports, a considerable signing fee, and priority opportunities for promotion and salary increase. Moreover, major securities firms often offered high "transfer fees" to "poach" insurance agents.

At present, the golden age of insurance agents has come to an end. Affected by multiple factors such as capital market fluctuations, the overall business volume of securities investment banks has continued to shrink, and insurance agents are facing the dilemma of fewer and fewer IPO projects.

Wind data shows that in the first half of 2024, there were a total of 43 IPO listings on the A-share market, a decrease of 141 from the same period in 2023 and 87 from the second half of 2023.

The cold winter of the IPO market has caused a sharp decline in investment banking business, a sharp drop in revenue, and a significant increase in business difficulty. The cost pressure brought by the huge investment banking team to securities companies has become more prominent. The industry has frequently seen actions such as strengthening assessments, reducing salaries, transferring positions, and laying off employees.

"That person may never come back, or may come back tomorrow." Shen Congwen left an open ending in Border Town. This seems to be the situation that the insurance agents in securities investment banks are facing now - should they wait or give up?

Recently, the news that an insurance agent became a village secretary has been all over the financial circle, and it has also triggered insurance agents to think about transformation. Some of these "golden collar" insurance agents are carefully operating their projects, some are posting industry observations on social platforms to attract clients, and some are posting job hunting and project resource information or experience posts to find new transformation tracks.

Seeking transformation

"Even in the best market scenario, the number of IPO projects in the entire market each year is about 500, and the number of refinancing is about 900, and each project requires two signing agents. Assuming there is no duplication of personnel, these projects will require at least 2,800 signing agents." Bai Yu said that the number of signing agents in the industry is now clearly in a state of oversupply.

At a time when the team's existing projects are almost exhausted, Bai Yu's main job is to find new projects, which is equivalent to being a salesperson to find customers. As long as there are still projects to do, Bai Yu is considered a "lucky guy" in the industry. According to his observation, some insurance agents have no projects to do at all and are beginning to be strictly required to check attendance by their brokerage firms.

"We insurance agents try not to go to the company. Being in the company means there are no projects, and if there are no projects to work on, we will go looking for projects." Bai Yu said that many securities companies now require insurance agents to punch in at the company.

During the period of oversupply of insurance agents, some agents began to seek transformation.

According to information from the Nanjing University Alumni Association, in early 2024, Gu Zifeng, a 2013 master's student in economics at Nanjing University, gave up his high-paying job in Shanghai and settled in rural Shandong as the first secretary of a village.

According to the introduction, Gu Zifeng worked inSealand Securities、Zhongtai Securities, and worked in the investment banking department of Zheshang Securities, participating in multiple IPO, refinancing and major asset restructuring projects.

In January 2024, Gu Zifeng responded to the Shandong Provincial Party Committee’s call for rural revitalization and took the initiative to sign up to work as the first secretary of the village.

Gu Zifeng's choice has attracted widespread attention in the investment industry.

Bai Yu discovered that there are three common transformation paths for insurance agents: the first is to move to the primary market to invest; the second is to work as a secretary to the board of directors of some listed companies; and the third is to work as a secretary to the board of directors or financial director of a prospective listed company. Their main responsibilities are to help the prospective listed company conduct an IPO, which is nothing more than a change of identity.

At present, the common career paths that are more suitable for insurance agents have been greatly affected.

According to Bai Yu's observation, the current investment environment is facing many challenges. Whether it is the secondary market or the primary market, the investment atmosphere is generally sluggish. The withdrawal of US dollar funds and the cooling of the IPO market have brought considerable pressure to investors' exit strategies. The market's expectations for the primary and secondary markets are generally not high, and investors and institutions are looking for new exit mechanisms. Taking the fund industry as an example, many funds made large-scale investments during 2016 and 2017. Usually, private equity funds set an exit cycle of 7 years or even longer. However, with the cooling of the IPO market, many funds are facing exit difficulties. They are actively exploring various possible exit channels. In this context, funds and investment institutions are cautious about recruiting insurance agents who plan to transform.

In non-listed companies, a key task of the secretary is to facilitate the smooth implementation of the company's initial public offering.

In listed companies, it is not enough to just perform the duties of a secretary to the board of directors. The secretary to the board of directors not only has to handle basic duties such as corporate governance and information disclosure, but also often needs to play a key role in strategic planning, capital operation, etc. At present, many listed companies are actively carrying out industrial investment activities as part of the company's strategic development. In this case, the secretary to the board of directors often participates in these investment activities. However, the position of secretary to the board of directors is relatively scarce, and it is not easy for an insurance agent to transform into a secretary to the board of directors.

An insurance agent from Shanghai revealed that he was laid off earlier this year and is currently leaving his job. He is actively exploring new career paths and looking for new job opportunities.

The Golden Age

In 2004, the sponsor system was officially implemented, and IPO projects must be signed by sponsors. At that time, investment bankers needed to pass the securities company to register for the sponsor qualification examination, and it was very difficult to pass the examination. In the early days, the growth rate of the number of sponsors in the industry was relatively stable.

Oriental FortuneChoice data shows that since April 12, 2017, when the statistics on changes in practitioners were collected, there were about 320,000 practitioners in the securities industry, of which only 3,304 were insurance agents. In the following period, the number of insurance agents grew slowly, and as of the end of 2019, the number of insurance agents was 3,810.

From 2020 to mid-2023, with the full promotion of the registration system and the lowering of the qualification threshold for insurance agents, the number of insurance agents in securities institutions has expanded rapidly. As of the end of June 2023, the number of insurance agents in the industry was 8,061. Since the second half of 2023, the growth rate of the number of insurance agents has slowed down.

In June 2020, in order to cooperate with the implementation of the new "Securities Law" and reforms such as the GEM registration system, and to further standardize the underwriting business activities of securities issuance and listing, the China Securities Regulatory Commission issued new underwriting regulations, canceling the prerequisite of "signing as a project co-organizer" to obtain the underwriting agent qualification. Practitioners can become underwriting agents as long as they pass the exam and pass the company registration.

Bai Yu, a "veteran" insurance agent, believes that the lowering of the threshold has resulted in many people who have passed the exam only obtaining the qualification of insurance agents, but lacking practical experience and having major defects in the actual operation of projects.

Data from the China Securities Association shows that as of July 25, 2024, there are a total of 8,821 sponsors registered with the China Securities Association. Judging from the number of sponsors in each securities company, the head aggregation effect is very obvious. The top five securities companies in terms of the number of sponsors have a total of more than 2,500 sponsors, accounting for about 30% of all sponsors. Currently, among the 8,821 sponsors, more than 4,400 are "idle sponsors", that is, the number of people who have signed project documents is temporarily zero, and this part of the number accounts for nearly 50% of the total number.

According to the data from Oriental Fortune Choice, as of July 25, 2024, there were 550 IPO application projects, of which 327 companies withdrew voluntarily, 1 was rejected, and only 222 projects were validly applied for. During the same period, there were 220 refinancing application projects, and only 884 agents were needed if there was no duplication of personnel. This means that nearly 8,000 agents are not reviewing projects.

An investment banker who joined a leading securities firm in the second half of 2021 said that at the time, securities firms were expanding their recruitment significantly, and even fresh graduates with no experience or qualifications could enter investment banks to work on projects. The following year, he prepared for and passed the insurance agent exam. But to this day, because there are no projects to sign, he and several colleagues who passed the exam at the same time have not completed the registration.

Insurance agency is not popular anymore

With a serious surplus of staff, the qualification of insurance agent seems to have lost its appeal.

Looking back, the first golden age of insurance agents was at the beginning of the 21st century. With the development of the private economy after China joined the WTO (World Trade Organization), the domestic capital market officially implemented the approval system and the sponsorship system.

At that time, due to the difficulty in obtaining the qualifications of insurance agents, insurance agents in the securities industry became a scarce resource. Because there were too many projects, many securities companies offered "transfer fees" to compete for insurance agents. At that time, insurance agents brought their own project resources to "add bricks and tiles" to the development of securities companies' investment banking business.

From 2019 to 2022, insurance agents ushered in their second golden period. With the implementation of the registration system and policy requirements to support the listing and financing of science and technology enterprises, the number of projects that insurance agents need to sign has increased sharply, and the "in short supply" insurance agent qualifications have been gradually relaxed.

CITIC SecuritiesAn insurance agent recalled that since the launch of the pilot registration system, the number of equity business line projects of securities investment banks has increased sharply, and the review process is relatively relaxed. Projects that used to take one or two years or even longer were approved very quickly at that time. In short, "projects were easy to do" at that time. For example, it only took four months for the Beijing Stock Exchange project to be accepted by the China Securities Regulatory Commission and officially issued and listed.

Data disclosed by the China Securities Regulatory Commission show that since the launch of the pilot registration system, the number and market value of A-share listed companies have grown rapidly. By the end of 2018, there were 3,584 listed companies in Shanghai and Shenzhen; by the end of 2022, the number of listed companies in Shanghai and Shenzhen reached 4,917, an increase of 1,333.

According to Oriental Wealth Choice data, from August 1, 2019 to June 30, 2023, there were 1,279 companies that applied for and listed IPOs under the registration system in Shanghai and Shenzhen. Among them, it takes at least 8 days from the acceptance of IPO applications to approval, at least 2 days from approval to submission for registration, and at least 5 days from submission for registration to approval for registration.

Bai Yu reaped the benefits during the second golden period. The project resources he had accumulated for five years were quickly listed during this period. From 2013 to 2014, Bai Yu's team helped some companies start with the NEEQ listing project, and it was not until 2020 and 2021 that they completed the main board listing. During these two years, Bai Yu's team completed 10 projects with a 100% approval rate.

In Bai Yu's opinion, for an enterprise to pass the review, three time points need to be integrated: first, the enterprise's own life cycle reaches a mature stage, second, the audit window period, and third, the industry cycle. The current problem for insurance agents is that it is difficult to integrate these three points.

"One reason is that the review cycle is now longer. Companies are facing changes in industries and policies, and the net profits of all companies will fluctuate with cyclical changes in the industry. However, the review side requires that the net profit remain stable. Therefore, many companies can only choose to withdraw." Bai Yu said, for example, in the technology industry, the requirements for hard technology on the Science and Technology Innovation Board are getting higher and higher, but the number of domestic technology companies that meet the requirements is not that large.

Bai Yu estimates that the number of IPOs per year may remain at around 100 in the future, because there may be only so many companies that meet the current review conditions, which is 80% less than the scale of about 500 in 2021. Insurance agents may face long-term capacity clearance.

Waiting for the market to pick up

For Bai Yu, he chose to stick to his career as an insurance agent and patiently wait for the recovery of the IPO market.

In Bai Yu's view, insurance agents mainly provide three aspects of value to the capital market: first, IPO gatekeepers. The basic responsibility of insurance agents is to act as gatekeepers of the capital market, screen high-quality companies and help them complete IPOs. Second, solve practical problems. On the basis of helping companies with IPOs, the deeper value is reflected in the ability to solve practical problems in the development of enterprises, such as finance, law and management, which is similar to providing consulting services, requiring insurance agents to contribute valuable suggestions to enterprises throughout the IPO process. Third, the realization of corporate value. A higher level of value is to help enterprises realize their value in the process of business operations, such as technological innovation, and create value for society. This may involve financing, finding investment institutions, IPOs, and upstream and downstream resource docking and mergers and acquisitions. This requires insurance agents to deeply participate in the development of enterprises like partners or executives of enterprises. "Only when these three levels of value are achieved can the work of insurance agents truly have value in the modern sense. Although the market environment is changing, the core value of insurance agents still exists." Bai Yu also pointed out that the current insurance agent group is in a state of "overcapacity", which is inevitable in the development of any industry. During the industry's downturn, the process of clearing capacity may lead to layoffs and other situations, making new entrants face greater challenges. Therefore, he advises young people to be cautious about entering this industry in the short term.

From 2024 to July 24, a total of 339 A-share IPO companies chose to withdraw their applications, including 158 in Shenzhen, 127 in Shanghai, and 54 in Beijing. 334 companies took the initiative to "withdraw orders", accounting for more than 90%.

Wind data shows that in the first half of 2024, Chinese companies' A-share IPO fundraising amounted to 30.272 billion yuan, with a year-on-year decline of 76.73% in the first quarter and a year-on-year decline of 93.55% in the second quarter.

Deloitte China Capital Markets Services believes that the overall slowdown in the issuance of new shares in the A-share market should be temporary, and expects investors to choose more high-quality listing applicants and issuers, bringing more ideal investment returns and greater contributions to the economy. Considering the mainland's continued strict supervision of issuers and listing applications, as well as the positive impact of the implementation of various policy measures, Deloitte China Capital Markets Services maintains its full-year forecast for the A-share new stock market, that is, a total of 115 to 155 new stocks will be listed and raised approximately RMB 139 billion to RMB 166 billion.

Bai Yu firmly believes that no matter if you are extremely talented or need to work hard, you should focus on one industry and put all your energy into it to achieve a qualitative leap from quantitative accumulation. "I am not the kind of person who can spread my energy across industries. I prefer to work deeply in one industry. This is my long-term career plan," he said.

Regarding the forecast of the future market, Ji Wenhe, the listed business leader of Deloitte China's Capital Market Services Department, said: "In the first half of 2024, the Shanghai Stock Exchange will remain in the fifth place in the global IPO market rankings. We expect that the two major mainland stock exchanges will soon be able to soar again in the global IPO market rankings as in the past few years."

In the current industry context, Bai Yu decided to focus his short-term career on discovering and cultivating new projects. He positioned himself as a salesperson, dedicated to exploring and attracting potential customers. This is not only a strategic adjustment, but also a proactive preparation for future opportunities.

He hopes that when the market enters the next growth cycle, he will be fully prepared and have sufficient resources. Once the IPO market picks up, he will be able to act quickly and make great strides when the market recovers.

(At the request of the interviewee, Bai Yu is a pseudonym in this article)