H&R Block Inc., known primarily for helping millions of Americans prepare their tax returns each April, on Wednesday announced plans to reinvent itself as a broad financial services company taking on the nation's bank and brokerage companies.
The Kansas City, Mo.-based company will start by offering free financial plans to the 16 million people whose income tax return it prepares.
"This is a service whose time has come," said Henry W. Bloch, co-founder and chairman of H&R Block. "We're giving Americans a place where they will be comfortable buying financial services with a brand they already know and trust."
Mr. Bloch said he hopes consumers will look to his company to meet financial needs ranging from mortgage services, which will be offered through an alliance with E-Loan, to investment choices like mutual funds and annuities, which will be available both on-line and in person.
H&R Block has been building the investment program for the past six months, opening 94 financial service centers by converting offices it took over in its September acquisition of Olde Financial Corp. Another 100 financial service offices are slated to open this year.
Mark A. Ernst, president and chief operating officer of H&R Block, said the company will look to compete directly with banks that are pushing customers toward technology as a way of conducting their financial relationships. "We want to bring back the personal touch," he said.
With its plan to target middle-income investors - those with household income of $25,000 to $75,000 - H&R Block pits itself directly against Citigroup's Atlanta-based Primerica Inc. unit.
"It's an interesting concept. I think they could possibly have some measure of success," said Richard Williams, co-chief executive of Primerica. "But they depend on people walking in their doors, while we go out and find people," he said, referring to Primerica's door-to-door approach to financial services.
H&R Block's bid to get in on traditional bank territory comes at time when banks, following the financial services wide trend of convergence, are making inroads in tax consulting. Its success will depend largely on what type of consumer it targets, said Louisa Guthrie, senior vice president with Harris Bancorp in Chicago.
On the higher end, banks are better prepared to offer tax-consulting services because of their affiliations with accountants and attorneys, Ms. Guthrie said. "On the lower end, I think [H&R Block] can be a player because they've got scale."
Meanwhile, analysts applauded H&R Block's strategy.
Sandy Katzler, a consumer services analyst with Standard & Poor's Corp. in New York, said H&R Block is building itself into a formidable presence.
"The market is very likely to recognize them as a financial supermarket," he offered.
