HR Block 2006 Annual Report Download - page 80

87%, down from 92% in 2005. Advisor productivity by recruitment class retail tax offices, and the consolidation of smaller branches. At April 30,
is as follows: 2006, we had 73 offices co-located with retail tax and mortgage offices.
(in 000s)
We believe the existence of these locations contributes to our growth
Revenue Total Production
and client satisfaction.
Per Advisor Revenues
COMPETITIVE CONDITIONS –HRBFA competes directly with a
Fiscal Year 2006 –
broad range of companies seeking to attract consumer financial assets,
Pre-2004 class $ 250 $ 137,212
including full-service brokerage firms, discount and online brokerage
2004 recruits 157 19,579
firms, mutual fund companies, investment banking firms, commercial
2005 recruits 109 19,942
and savings banks, insurance companies and others. The financial
2006 recruits 111 13,741
services industry has become more concentrated as numerous
Fiscal Year 2005 –
securities firms have been acquired by or merged into other firms. Some
Pre-2003 class $ 230 $ 121,342
2003 recruits 114 16,416
of these competitors have greater financial resources than HRBFA and
2004 recruits 98 19,941
offer additional financial services. In addition, we expect competition
2005 recruits 65 8,203
from domestic and international commercial banks and larger securities
Fiscal Year 2004 –
firms to continue to increase as a result of legislative and regulatory
Pre-2003 class $ 216 $ 135,128
initiatives in the U.S., including the passage of the Gramm-Leach-Bliley
2003 recruits 84 17,717
Act in November 1999 and the implementation of the U.S.A. Patriot Act
2004 recruits 61 7,664
in April 2002. These initiatives strive to remove or relieve certain
Financial advisors generally reach productivity levels equal to those restrictions on mergers between commercial banks and other types of
achieved at their prior firm approximately 24 to 36 months after they financial services providers and extend privacy provisions and anti-
join our company. money laundering procedures across the financial services industry.
PARTNERING WITH TAX PROFESSIONALS –The H&R Block Discount brokerage firms and online-only financial services providers
Preferred Partner Program
SM
facilitates strategic, referral-based compete vigorously with HRBFA with respect to commission charges.
partnerships between tax professionals and financial advisors. The Some full-commission brokerage firms also offer greater product
program includes the Licensed Referral Tax Professional breadth, discounted commissions and more robust online services to
(LRTP) program and a non-licensed option, which allows non-licensed selected retail brokerage customers. Additionally, some competitors in
tax professionals to gain additional rewards and recognition when both the full-commission and discount brokerage industries have
making qualified client referrals to financial advisor partners. The LRTP substantially increased their spending on advertising and direct
program helps tax professionals obtain a securities license, teaming solicitation of customers.
them with a financial advisor and providing a commission to the LRTP Competition in the online trading business has become similarly
for business referred to Investment Services. intense as recent expansion and customer acceptance of conducting
As of April 30, 2006, our Preferred Partner Program had 9,552 active financial transactions online has attracted new brokerage firms to
tax partners, of which 705 were licensed. We had 6,442 active tax the market.
partners, of which 686 were licensed at the end of fiscal year 2005. As a We compete based on expertise and integration with our tax services
result of this initiative, we added more than 17,000 new customer relationships, quality of service, breadth of services offered, prices,
accounts and assets totaling $764.3 million during fiscal year 2006. accessibility through delivery channels and technological innovation.
We expect to continue to increase the number of tax partners in the SEASONALITY OF BUSINESS –The Investment Services segment
coming year. does not, as a whole, experience significant seasonal fluctuations. The
INTEGRATED ONLINE SERVICES –We have an online investment securities business is cyclical, however, and directly affected by
center on our website at www.hrblock.com. Online users have the national and global economic and political conditions, trends in
opportunity to open accounts, obtain research, create investment plans, business and finance and changes in the conditions of the securities
buy and sell securities, and view the status of their accounts. markets in which our clients invest, as well as fluctuating interest rates.
OFFICE LOCATIONS –HRBFA is authorized to do business as a GOVERNMENT REGULATION –The securities industry is subject to
broker-dealer in all 50 states, the District of Columbia and Puerto Rico. extensive regulation, including registration of our offices and personnel,
At the end of fiscal year 2006, we operated 219 branch offices, sales methods, the acceptance and execution of customer orders, the
compared to approximately 257 offices in 2005 and 358 in 2004. The handling of customer funds and securities, trading practices, capital
reduced number of branch offices is primarily due to the evolution of structure, record keeping policies and practices, margin lending,
our tax-partnering program, in which financial advisors are located in execution and settlement of transactions, the conduct of directors,
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H&R BLOCK 2006 Form 10K