HR Block 2007 Annual Report Download - page 35

a registered investment adviser. We act as a dealer in fixed-income (LRTP) program and a non-licensed option, which allows non-licensed
securities including corporate and municipal bonds, various tax professionals to gain additional rewards and recognition when
U.S. Government and U.S. Government Agency securities and making qualified client referrals to financial advisor partners. The LRTP
certificates of deposit. program helps tax professionals obtain a securities license, teaming
HRBFAis authorized to do business as a broker-dealer in all 50 states, them with a financial advisor and providing a commission to the LRTP
the District of Columbia and Puerto Rico. At the end of fiscal year 2007, for business referred to financial advisors.
we operated 195 branch offices, compared to 219 offices in 2006 and 257 As of April 30, 2007, our Preferred Partner Program had 8,297 active
in 2005. The reduced number of branch offices is primarily due to the tax partners, of which 612 were licensed. As a result of this initiative, we
consolidation of smaller branches and the evolution of our tax- added more than 13,900 new customer accounts and assets totaling
partnering program, in which financial advisors are located in retail tax $690 million during fiscal year 2007. We expect to continue to increase
offices. the number of tax partners in the coming year.
FINANCIAL ADVISORS. Our future success is highly dependent on H&R BLOCK BANK –In March 2006, the Office of Thrift Supervision
retaining and recruiting productive financial advisors. One of our key (OTS) approved the charter of HRB Bank. HRB Bank commenced
initiatives in fiscal year 2007 was to build revenues by attracting and operations on May 1, 2006 and offers traditional consumer banking
retaining higher-producing advisors. services including checking and savings accounts, home equity lines of
During fiscal years 2007, 2006 and 2005, we added 97, 193 and 258 credit, individual retirement accounts, certificates of deposit and
advisors, respectively. These additions were offset by attrition, which prepaid debit card accounts to clients in the U.S. HRBFA utilizes HRB
caused our number of advisors to decline from 1,010 at April 30, 2006 to Bank for certain FDIC-insured deposits for its customers and HRB Bank
918 at April 30, 2007. Our overall retention rate for fiscal year 2007 was also purchases loans from OOMC, HRBMC and other lenders to hold for
approximately 80%, up from 75% last year. The retention rate for our investment purposes. In the event that, as a result of the sale of OOMC,
higher-producing advisors was approximately 92%, up from 91% in 2006. HRB Bank can no longer purchase loans from OOMC and HRBMC, the
The implementation of minimum production requirements caused our main source of future loan purchases would be third-party loan
overall advisor retention rate to lag our higher-producing advisor originators.
retention rate. Advisor productivity by recruiting class is as follows: The information required by the SEC’s Industry Guide 3, ‘‘Statistical
7m(in 000s)
Disclosure by Bank Holding Companies’’ is included in Item 7.
Revenue Total Production
SEASONALITY OF BUSINESS –HRB Bank’s deposit balances can be
Per Advisor Revenues
subject to some seasonal fluctuations related to deposits of Tax
Fiscal Year 2007 –
Services’ clients, including the H&R Block Prepaid Emerald
Pre-2005 class $257$150,612
MasterCard˛, which peak in February and taper off through the
2005 recruits 145 16,040
remainder of the tax season.
2006 recruits 154 26,331
HRBFAdoes not experience significant seasonal fluctuations.
2007 recruits 121 6,690
Financial services businesses are cyclical, however, and directly
Fiscal Year 2006 –
affected by national and global economic and political conditions,
Pre-2004 class $250$137,212
2004 recruits 157 19,579
trends in business and finance and changes in interest rates and the
2005 recruits 109 19,942
conditions of the securities markets in which our clients invest.
2006 recruits 111 13,741
COMPETITIVE CONDITIONS –HRBFAcompetes directly with a
Fiscal Year 2005 –
broad range of companies seeking to attract consumer financial assets,
Pre-2003 class $230$121,342
including full-service brokerage firms, discount and online brokerage
2003 recruits 114 16,416
firms, mutual fund companies, investment banking firms, commercial
2004 recruits 98 19,941
2005 recruits 65 8,203 and savings banks, insurance companies and others. The financial
services industry has become more concentrated as numerous
Financial advisors generally reach productivity levels equal to those securities firms have been acquired by or merged into other firms. In
achieved at their prior firm approximately 24 to 36 months after they addition, we expect competition from domestic and international
join our company. commercial banks and larger securities firms to continue to increase as
PARTNERING WITH TAX PROFESSIONALS. The H&R Block a result of legislative and regulatory initiatives in the U.S., including the
Preferred Partner Program
SM
facilitates strategic, referral-based passage of the Gramm-Leach-Bliley Act in November 1999 and the
partnerships between tax professionals and financial advisors. The implementation of the U.S.A. Patriot Act in April 2002. These initiatives
program includes the Licensed Referral Tax Professional strive to remove or relieve certain restrictions on mergers between
H&R BLOCK 2007 Form 10K