HR Block 2006 Annual Report Download - page 79

professionals. Accounting firms are also subject to state and federal We and the Attest Firms have jointly developed and implemented
regulations governing accountants, auditors and financial planners. policies, procedures and controls designed to ensure the Attest Firms’
Various legislative and regulatory proposals have been made relating to independence and integrity as an audit firm in compliance with
auditor independence and accounting oversight, among others. Some of applicable SEC regulations and professional responsibilities. These
these proposals, if adopted, could have an impact on our operations. We policies, procedures and controls are designed to monitor and prevent
believe current state and federal regulations and known legislative and violations of applicable independence rules and include, among other
regulatory proposals do not and will not have a material adverse effect things, (1) informing our officers, directors and other members of senior
on our operations, but we cannot predict what the effect of future management concerning auditor independence matters, (2) procedures
legislation, regulations and proposals may be. for monitoring securities ownership, (3) communicating with SEC audit
Auditor independence rules of the Securities and Exchange clients regarding the SEC’s interpretation and application of relevant
Commission (SEC) and the Public Company Accounting Oversight independence rules and guidelines, and (4) requiring RSM employees to
Board (PCAOB) apply to the Attest Firms as public accounting firms. In comply with the Attest Firms’ independence and relationship policies
applying its auditor independence rules, the SEC views us and the (including the Attest Firms’ independence compliance questionnaire
Attest Firms as a single entity and requires that the SEC independence procedures). We believe these policies, procedures and controls are
rules for the Attest Firms apply to RSM McGladrey and that we be adequate, although there can be no assurances they will result in
independent of any SEC audit client of the Attest Firms. The SEC compliance with applicable independence rules and requirements. Any
regards any financial interest or prohibited business relationship we noncompliance could cause the Attest Firms to lose the ability to
have with a client of the Attest Firms as a financial interest or perform audits for firms subject to regulation by the SEC.
prohibited business relationship between the Attest Firms and the client See discussion in ‘‘Risk Factors’’ for additional information.
for purposes of applying its auditor independence rules.
INVESTMENT SERVICES
GENERAL –Our Investment Services segment provides advice-based return preparation process. Clients opened approximately 67,000
brokerage services and investment planning through HRBFA to our Express IRAs during tax season 2006, approximately 106,500 in 2005
clients in the U.S. Services offered to our customers include traditional and approximately 145,400 in 2004.
brokerage services, as well as annuities, insurance, fee-based accounts, We act as a dealer in fixed income securities including corporate and
online account access, equity research and focus lists, model portfolios, municipal bonds, various U.S. Government and U.S. Government
asset allocation strategies, and other investment tools and information. Agency securities and certificates of deposit.
Segment revenues constituted 5.9% of our consolidated revenues for CUSTOMER ACTIVITY –Customer trades in fiscal year 2006 totaled
fiscal year 2006, and 5.4% of our consolidated revenues for fiscal years approximately 1.0 million, compared to approximately 0.9 million in
2005 and 2004. 2005 and approximately 1.0 million in 2004. Average revenue per trade
HRBFA is a registered broker-dealer with the SEC and is a member of was $119.11 in fiscal year 2006, compared to $123.33 in 2005 and $119.36
the New York Stock Exchange (NYSE), other national securities in 2004. We had 418,162 traditional brokerage accounts at April 30, 2006,
exchanges, Securities Investor Protection Corporation (SIPC), and the compared to 431,749 at 2005 and 463,736 at 2004. Assets under
National Association of Securities Dealers, Inc. (NASD). HRBFA is also administration totaled $31.8 billion, $27.8 billion and $26.7 billion at
a registered investment advisor. April 30, 2006, 2005 and 2004, respectively.
The integration of investment advice with our tax client base allows FINANCIAL ADVISORS –Key to our future success are retaining and
us to leverage an already established relationship. In the past three recruiting productive financial advisors. One of our key initiatives in
years, new service offerings have allowed us to shift our focus from a fiscal year 2006 was to build revenues by attracting and retaining
transaction-based client relationship to a more advice-based focus. productive advisors.
FINANCIAL SERVICES OFFERINGS –We offer a full range of financial During fiscal years 2006, 2005 and 2004, we added 193, 258 and 255
services, including investment planning, college savings products, advisors, respectively. These additions were offset by attrition of 257,
flexible brokerage accounts with cash management features, 233 and 230 advisors, respectively. Our overall retention rate for fiscal
professionally managed accounts and a comprehensive line of year 2006 was approximately 75%, essentially flat with the prior year.
insurance annuity products. The retention rate for our higher-producing advisors was approximately
As previously discussed in ‘‘Tax Services,’’ we offer our tax clients the
opportunity to open an Express IRA through HRBFA as a part of the tax
H&R BLOCK 2006 Form 10K
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