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Posted on December 4, 2017

Barron’s: Seeking Safe Dividend-Paying Stocks in a Pricey Market

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As a newly independent financial advisor 24 years ago, Pamela Corrigan had to dip into her credit cards and even sell T-shirts at a local flea market in order to make ends meet. “It was the scariest thing ever,” she says.

But Corrigan, who had left an insurance sales position to go independent, says it was worth it. Rather than pushing insurance products, she would be able to determine what clients really needed, and then match them up with the best financial products and services.

The client-centric approach has paid off for Corrigan, who along with a team of 21, serves more than 1,200 clients and manages some $400 million of assets.

Corrigan, 51, doesn’t pretend to be upbeat about the market’s buying opportunities right now. “I’m so surprised we continue to see [so many market sectors] going up so well,” she says. “It’s hard to find a place for cash that fits our parameters for buying.”

Indeed, Corrigan’s biggest challenge in rising markets like this one is to push back on clients who are pushing her and her team for more-aggressive trading. That includes reminding them that they’re invested through a disciplined process that is designed to play out over five years, not five days.

A TENNESSEE NATIVE, Corrigan earned an accounting degree in 1988 from East Tennessee State University. After a couple of corporate jobs, she decided she just didn’t like accounting. An aptitude test pointed her toward financial planning, so she joined Prudential Insurance, under the mistaken impression that she’d be doing financial planning rather than selling products.

“As I met younger clients who didn’t need this type of product, I’d help them find no-load mutual funds,” she says. “That opened my eyes to the world of [independent advice].”

She soon jumped to LPL Financial as an independent, struggling at first but gaining traction through a series of educational workshops for women. Today, she is well established, and her firm, GAAM Wealth Advisors, is an affiliate of Carson Group Partners. And she continues to offer a range of educational programs for women.

Corrigan’s clients tend to be comfortable but not superwealthy. Many have worked at Eastman Chemical’s big manufacturing site in Kingsport. Like all investors, they want assurance that they won’t outlive their retirement savings.

One way that Corrigan is protecting their money is by keeping their exposure to bonds low. Bonds make up just 14% of Corrigan’s portfolio, a far cry from the typical 60/40 balance between stocks and bonds.

Bonds, of course, have been poised on a knife’s edge for a while now: They’re fairly expensive and vulnerable to rising interest rates. The Federal Reserve is projected to raise rates by a quarter of a point in December, but countervailing forces have so far kept interest rates subdued.

To generate income without loading up on bonds, Corrigan uses dividend-paying stocks as well as covered calls, in which income is generated by selling call options on clients’ holdings. Ninety percent of her equity portfolio is composed of domestic stocks. “So many U.S. companies are heavily invested in foreign countries that you end up with a significant amount of international exposure,” she explains.

Corrigan uses options to partially insulate clients against drops in the stock market. Up to 20% of the equities in some portfolios have options written against them. “We have options, and literally we will call them an insurance policy,” she says.

To add noncorrelated assets to the portfolio, Corrigan makes private investments in small and start-up companies through Orlando, Fla.–based CNL Financial Group. Corrigan also accesses hedge fund strategies through Chicago-based Vivaldi Capital Management.

Meanwhile, GAAM Wealth Advisors has big plans: It’s looking to acquire other advisory businesses—small shops that are also aligned with Carson Group. “Our goal is to have three locations, and we want $250 million under management through deals by next year,” says Corrigan.

In her free time, Corrigan enjoys racing vintage cars with her husband, Keith, who heads business development at GAAM. The two travel around the country to compete in races. “When I’m not racing, I’m knitting,” says Corrigan, “or in the 45-foot RV pulling racing cars behind us.”

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