The happy smiling photos in this image do not show you the trauma a financial advisor can suffer.

It’s called the single premium trauma. Single premium refers to when you take just one investment from a customer and this can happen in the case of a unit trust, investment linked to policy (ILP) or even ETF.

When markets go down sharply, and this applies for both equities as well as high yielding fixed income then it may often take 5 to 6 years (or even more in the case of equities) for the investment to come back to it starting value. If the amount is big, the customer will obviously be worried and your annual review meetings with them will cause you a lot of stress.

This does not mean that there is something inherently wrong with single premium or a single investment. Customers may want to try out investing and a single lump sum is a natural way to start.

If you’ve attended the UTILP investment sales master class, you know that across a range of markets, the chances of losing money in a 5 to 6 year time horizon is quite high. That is why it is important to ensure that all investments are not held hostage to one level of the market. When you take a single premium, it must be at the back of your mind that you have to get this customer to invest again and hopefully again. While this does not mean that every customer has to do a monthly dollar cost averaging there has to be an element of periodicity. Maybe one or two years down the line as they have saved more they should be able to invest another amount. Investment is a marathon and not a sprint.

In this specific case, the economic slowdown in China has pulled down returns towards the latter part of the customers investment journey in Asian High Yield Bonds. The funds underperformance has also been a contributing factor. Patience may be advisable in this situation. When US interest rates come down as widely expected it might help higher yielding bonds. An element of averaging may also be helpful, but this discussion has to take place before the journey starts.