Q. What do you think people keyed in on when nominating you for the Hall of Fame?
A. I would say the pioneering work done on mortgage commitment pipeline hedging, and in the development of mortgage securitization strategies and capabilities in the early 90s. They enabled small non-bank financial mortgage lenders like FirstLine Trust Company to compete with the banks to grow profitable market share on a lower-risk ‘fully hedged’ basis…
Q. Your proudest accomplishment in the mortgage industry?
A. As a follow on, my proudest moment was the development of Canadian mortgage prepayment hedging strategies. That enabled FirstLine Trust Company to launch the NHA Mortgage Trust program, which issued AAA-rated non-prepayable bullet bonds to finance prepayable NHA insured mortgage originations. The NHA Trust became the blueprint for the development and launch of CMHC’s Canada Mortgage Bond program.
Q. Who has been your biggest mentor in the industry?
A. I have had two significant mentors in the two phases of my career. From 1984 through 1994 I was manager of an independent investment counsel and financial advisory firm. During this period, Brendan Calder, then President and CEO of Counsel Trust Company, which was also the sponsor and owner of FirstLine Trust Company and Security National Insurance, provided the operational platform, encouragement and trust for our firm to implement the new and emerging use of fixed income portfolio immunization to asset/liability management and the balance sheet optimization.
Brendan was a pioneer in understanding the power of hedging interest rate risk to reduce earnings volatility. Brendan taught the value of bringing three core strategies together: legendary customer service, a management system to create an engaged and motivated work force and the use capital markets portfolio theory in order to create a firm with sustainable shareholder value and added earnings power. Brendan Calder saw the power of engaging a small and focused advisory firm to partner with, in order to create an expertise that wasn’t available ‘in-house.’
In 1994 when Ed Clark was President and CEO of Canada Trust, he brought our advisory firm in to become the Treasury of Canada Trust. Ed Clark saw how sophisticated asset/liability management could be used to develop innovative financial products that would enable Canada Trust to compete with the banks and to develop hedging strategies for non-maturity deposits to generate sustainable earnings over time. These mortgage and deposit hedging strategies would later (after the acquisition of Canada Trust) form one of the core strengths that would enable TD Bank to build its franchise in the U.S. through an aggressive acquisition strategy. Ed Clark demonstrated confidence in me and the Treasury team by providing new and more complex balance sheet management challenges, all while enabling the Treasury team to maintain an entrepreneurial and value-added focus. Ed’s top-down commitment—to the financial paradigm of creating shareholder value by “maximizing risk adjusted returns on risk-based capital”—was incredibly powerful and motivating.
Q. What must the industry do today to have a materially greater market share in 5 years?
A. The market share battle between ‘the banks’ and non-bank financial service providers will be won incrementally over time by the entities that continue to innovate in delivering simple and easy customer sales and closing experiences, and that maintain price competitiveness through innovative funding strategies.