Stephen J. R. Smith, financial services entrepreneur, civic leader, philanthropist (born 2 June 1951 in Ottawa, ON). Stephen Smith is a successful entrepreneur in the financial services industry. He is co-founder, chairman, president and CEO of First National Financial LP, Canada’s largest non-bank mortgage lender, as well as chairman and co-owner of the Canada Guaranty Mortgage Insurance Company, Canada’s third largest mortgage insurance provider. He is also involved in the administration of cultural organizations such as the Royal Ontario Museum, Rideau Hall Foundation and Historica Canada — publisher of The Canadian Encyclopedia — where he has been chair of the board of directors since 2009. The business school at his alma mater, Queen’s University, was named in his honour after his record $50 million gift to the university in 2015. He is a Companion of the Canadian Business Hall of Fame (2019). A licensed pilot, he is renowned among friends and associates for his daredevil approach to his favourite sports, which include heli-skiing and long-distance cycling. As Charles Brindamour, president and chief executive officer of Intact Financial Corp. has said, “Stephen is a force of nature.”
Education and Early Career
Stephen Smith was born in Ottawa, where he attended St. Patrick’s College High School. His early interests included ham radio operating and the emerging field of computer coding.
In 1968, he attended Queen’s University, where he earned his Bachelor of Science (Honours) in electrical engineering in 1972. While studying engineering, he received special permission to take economics courses with renowned economists Richard Lipsey and David C. Smith.
Stephen Smith’s first jobs included work as a computer coder before deciding to pursue his Master of Science in Economics from the London School of Economics and Political Science (LSE) in the United Kingdom. (See also Computer Science.)
While there, Smith became fascinated by the links between business decisions and public policy. After graduating in 1973, he worked variously as a market researcher, research analyst, and then as an assistant director in corporate planning for aircraft manufacturer Hawker Siddeley Canada Inc.
In 1980, Smith was fired from Hawker Siddeley for speaking his mind. “If my boss told me to do something and I didn’t think it was right, I didn’t hide that,” he recalled in 2015. “I thought I was smarter than my bosses. I was insolent, which is probably one of the characteristics of entrepreneurs.” Smith took the opportunity to change his career direction. He began to invest in real estate, renovating and then reselling triplexes. Emboldened by the experience, he began to build houses. However, as interest rates rose to unprecedented levels — causing a dramatic slowdown in the real estate market — the venture collapsed. In 1984, Smith declared personal bankruptcy. He has described this period as the toughest in his life — although he has also said he learned valuable lessons from that experience.
First National Financial LP
In 1988, Stephen Smith formed First National Financial, along with Moray Tawse, a manager at Guaranty Trust. Their office was atop a pub in the Yonge and Eglinton area of Toronto. Legislative changes in the 1980s opened the Canadian financial sector to more non-bank competition. Tawse and Smith partnered to sell blocks of mortgages originated by Guaranty Trust to select life insurance companies. In 1987, Canada Mortgage and Housing Corporation created National Housing Act Mortgage-Backed Securities (MBS). Spotting an opportunity, Smith and Tawse approached a life insurance company with a proposal to establish a corporation to specialize in MBS. The insurance company declined that proposal but encouraged them to establish a company to originate, underwrite and sell mortgages on a whole-loan basis — and offered to be their first customer.
First National was immediately successful in this environment, with approximately $200,000 generated in its first year by 10 employees. Its success was largely due to its competitively priced mortgages and use of computer programs to stay ahead of their rivals. An innovator in the use and development of information technology in the mortgage industry, Smith and First National developed the mortgage software MERLIN, which became the industry’s leading mortgage approval and tracking software.
First National has grown to become Canada’s largest non-bank mortgage lender. Smith is a leader in the use and development of securitization (the transformation of illiquid assets into tradable financial assets) to finance mortgage asset growth, and he regularly speaks at securitization and financial services conferences. In 2017, First National surpassed $100 billion of mortgages under administration. On 31 March 2018, the company celebrated its 30th anniversary in business.
Financial Services Involvement
Stephen Smith is also the chairman and co-owner of the Canada Guaranty Mortgage Insurance Company, Canada’s third largest mortgage insurance provider, which he purchased from AIG in 2010. Smith is chairman and co-owner of Duo Bank of Canada, which he purchased from Walmart Canada in April 2019. He is also chairman and a partner in Peloton Capital Management, a mid-market private equity firm specializing in the health care, consumer and financial services sectors across North America.
Smith is also a director of E-L Financial Corporation Limited. He is the largest shareholder in Equitable Bank, Canada’s ninth largest publicly traded bank. He is a member of the Business Council of Canada, an organization of business leaders that meets to discuss public policy issues including taxation, the environment, fiscal policy and monetary policy.
He is also a member of the board of the Canada Infrastructure Bank.
Involvement with Queen’s University
An advocate for the social responsibility of business, Stephen Smith has made contributions beyond the financial services community. He has maintained a strong connection with his alma mater, Queen’s University, and created an award for electrical engineering and economics students there in 1997. The Stephen J. R. Smith Bursary rewards leadership, involvement and creativity, and as of 2015 has helped more than 250 Queen’s students. He also funded a chair in public policy in the Queen’s Economics Department in 2013.
In 2015, Smith donated $50 million — the largest donation ever made to a Canadian business school — to Queen’s University to support business education. In recognition, the university renamed its school of business the Stephen J. R. Smith School of Business. His donation enabled new scholarships, faculty research chairs and professorships, thereby helping attract talented students and faculty. As part of his endowment, Smith called for “vigilant protection for the rights for freedom of speech, academic freedom, and freedom of research.”
Passionate about civic engagement, education, Canadian history and the arts, Stephen Smith is active in several cultural organizations. He is an honorary governor of the Royal Ontario Museum, a member of the board of the Rideau Hall Foundation, and board chair for Historica Canada, the producer of the Heritage Minutes and publisher of The Canadian Encyclopedia. In 2014, Smith and his wife, Diana Blake, donated $3 million to help found the Myseum of Toronto, an interactive online museum of the city of Toronto.
Smith is a director of the C. D. Howe Institute, an independent nonprofit Canadian research institute that promotes economically sound public policies. He was previously also vice-chair of Metrolinx Inc, the provincial crown agency providing public transit in the Greater Toronto and Hamilton Area.