Federal finance minister tells Canada’s asset management industry he’s ‘always open’ to policy proposals

Finance Minister François-Philippe Champagne said on Monday that he’s open to discussing new ways to encourage investment in Canada-listed investment funds that support the economic growth of the country, but he expressed concern about product duplication as it relates to achieving those mandates.

Champagne made those comments during a fireside chat hosted by the Canadian ETF Association (CETFA) at the TMX Market Centre. The event drew senior leaders from various asset management companies in the country.

CETFA has been lobbying the federal government on several fronts, including asking officials to consider the introduction of a so-called Maple Investment TFSA that would incent Canadians to invest domestically. As envisioned by the association, the vehicle would give Canadians a higher capital allowance than in a regular TFSA if they choose to purchase Canada-listed investment funds. The federal government would also match domestic investment contributions up to a certain point, like in an RESP.

“I’m always open to reflect … and to consider,” the federal minister said in response to a question about the proposed Maple Investment TFSA. “But I would say, if I compare to the G7, we have a number of products already. And I’m always concerned … about the multiplicity of products as well.”

He acknowledged that the adoption rate of some existing savings vehicles in Canada “is not equal for all of them, so there might be an issue about marketing and how they’re presented.”

Champagne said there may be ways to tweak these existing vehicles or create new ones to encourage Canadians to save and invest in their country, “if we see that there is a rationale.”

But he noted that the federal government has been working to boost investment in the Canadian economy and Canada-listed securities.

“If we did not believe in that, we would not have created the Canada Strong Fund,” Champagne said.

Announced by Prime Minister Mark Carney in late April, the Canada Strong Fund is the country’s first national sovereign wealth fund. It will invest in major Canadian industrial projects in areas such as energy, infrastructure, mining, agriculture and technology.

The federal government has said it will consult Canadians over the coming months on specific aspects of the Canada Strong Fund, but details around the fund remain sparse.

1,000 Shopifys

Champagne said that while Canada does “great” fundamental and applied research, its businesses need to be more focused on commercialization and scale, which would encourage more domestic investment.

“We need 1,000 Shopifys in this country,” he said.

Asked about harmonizing securities regulation across the various provincial and territorial bodies in Canada — another of CETFA’s policy proposals — he said, “It’s a work in progress, but we need to do more and faster.”

Champagne noted that the federal government is discussing how to support such financial industry harmonization with the provinces.

The minister encouraged Canada’s asset management industry to come with a “one-pager” with the top three suggestions they have for the government “that would make the biggest impact.”

CETFA executive director Eli Yufest said he felt “energized” by what he heard from the minister.

“The minister and the government [have] clearly signalled that they’re open for suggestions, open for ways to make our capital markets, our ecosystem more efficient,” Yufest said in an interview.

“[T]he association will be working in the coming days and weeks to ensure that the government has what they need to make it more efficient.”

CETFA is also calling for the removal of sales tax on ETF management fees and for a review of the Canada Revenue Agency’s allocation-to-redeemers tax formula, policy reforms it has said will level the playing field between Canadian and U.S. ETF providers.

Yufest said that more than 30% of every dollar invested by Canadians in ETFs goes to U.S.-listed products.

“If that trend continues [for] 15 or 20 years, there won’t be a domestic ecosystem,” he added.