HR Block 2006 Annual Report Download - page 9

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MARK A. ERNST
Chairman, President and Chief Executive Officer
7
MISSION - to help our
clients achieve their
financial objectives by
serving as their tax
and financial partner.
CORPORATE VALUES
H&R Block has millions of one-to-one
relationships with its clients worldwide.
Each relationship is built on a foundation
of trust. And those relationships, as well as
our day-to-day business decisions, are
guided by our corporate values. Our values
are fundamental to the promise of the
H&R Block brand.
Client Focused - We are passionate about
helping clients. Their success is a key
measure of our success.
Integrity - We are honest and ethical in
everything we do.
Excellence - We take pride in doing our best
in everything we do. We embrace change to
learn and grow.
Respect - We treat each other with respect
and dignity, recognizing that innovation
springs from unique perspectives.
Teamwork - Everyone’s collaboration and
full participation makes us stronger and
allows us to serve clients better.
APPROACHING PROFITABILITY IN INVESTMENT SERVICES
H&R Block Financial Advisors had a very good year in fiscal 2006. The leadership team and
associates did the right things to move toward profitability, including tight discipline over
spending and an emphasis on advisor productivity. The Investment Services segment cut its
pretax loss to under $33 million – less than half of the prior year – even after a noncash
expense of $37 million for intangible amortization. Revenues grew more than 20 percent
to $288 million.
The business is strategically significant to our mission of serving as a tax and financial
partner to clients. Our U.S. tax clients represent a large and fertile source of referrals to
H&R Block Financial Advisors. Clients referred from tax professionals in recent years currently
account for nearly 90,000 funded investment accounts. This referral model has helped
attract financial advisors to the firm – nearly 200 new advisors in 2006 alone.
To create a stronger link among the H&R Block branded businesses, we launched a new
business segment at the start of fiscal 2007 – the Consumer Financial Services (CFS) Group -
which brings together H&R Block Financial Advisors, H&R Block Mortgage and H&R Block
Bank. We expect that leveraging relationships with tax clients will lead to multiple business
relationships, and that more-frequent client contact will deepen loyalty to the H&R Block
brand and increase client retention.
The opening of H&R Block Bank on May 1, 2006, extends to our clients a range of essential
consumer banking products, all competitively priced. It is yet another route to deeper
relationships, stronger loyalty and higher retention. In addition, it reduces our dependence
on third-party banks to provide selected services for our clients. H&R Block Bank also
will serve as a depository for assets of the corporation – for example, certain investment
accounts and mortgage servicing funds – generating income streams for H&R Block
shareholders.
UNDERLYING OUR SUCCESS - OUR PEOPLE
The H&R Block organization is filled with incredibly talented people – people with whom I
am proud to be associated. I want to thank all of our associates for their dedication to
serving our clients and helping to make their lives better. The work we do is important, and
the commitment I see in our associates shows they agree.
Two new Directors joined our Board during the past year. The growing complexity of
providing counsel and oversight makes the addition of Len Lauer and Jerry Choate to our
Board particularly fortunate. Len serves as Chief Operating Officer of Sprint Nextel Corp.,
and Jerry is retired Chairman and Chief Executive Officer of Allstate Corp. Their experience
and insights will be invaluable as we meet our future business challenges.
In closing, let me thank you, our shareholders. The flexibility for management to take a
long-term perspective in operating its businesses is possible only when shareholders have
the same long-term view. With your support, H&R Block has built and enjoys positions of
leadership in its businesses, and we believe that these businesses can be made stronger in
the future.