H&R Block Can Use Its Financial Prowess to Help Its Own 401K Plan

06/24/2011 Share 0 comments

Retirement investing is a long term process. This report reviews H&R Block Retirement Savings Plan. We will discuss the investment choices and present the plan rating by MyPlanIQ. Asset allocation portfolios and their performance are presented.

Plan Review and Rating

H&R Block, Inc. (HRB), through its subsidiaries, provides tax preparation, retail banking, and various business advisory and consulting services. It operates in three segments: Tax Services, Business Services, and Corporate.

H&R Block Retirement Savings Plan's 401K plan consists of 21 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.

As of Jun 23, 2011, this plan investment choice is rated as average based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:

Diversification -- Rated as poor (10%)
Fund Quality -- Rated as great (87%)
Portfolio Building -- Rated as below average (31%)
Overall Rating: average (41%)

The plan is clearly a traditional U.S. and developed country centric plan. Important asset classes such as emerging market stocks(EEM) and REITs (IYR)  are missing. This plan is rated very high in its fund quality ranking but lags dramatically in terms of diversification.

Portfolio Building

The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, we also include the moderate model portfolios of a typical 3 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

US Equity: SPY or VTI
Foreign Equity: EFA or VEU
Fixed Income: AGG or BND

Performance chart (as of Jun 23, 2011)

Performance table (as of Jun 23, 2011)

Again, because of its low cost and high quality fund choices, the plan's strategic asset allocaiton portfolio outperforms the standard three asset class portfolio.

To summarize, with the global economy being well developed and more balanced, we would expect H&R Block can use its financial savvy (that they use to help their customers in their personal finance) to improve their own 401k plan offering. Adding funds to enable exposures in emerging markets and alternative investments such as Real Estate Investment Trusts (REITs) is a good direction to pursue.

Symbols: HRB, VTI, VEU, BND, RERFX, RGAFX, DODGX, PTTRX, VWELX, 401k

Exchange Tickers: (HRB), (STABLEVALUE), (VTI), (VEU), (BND), (RERFX), (RGAFX), (DODGX), (FFFBX), (FFFVX), (FFFCX), (FFVFX), (FFFDX), (FFTWX), (FFFEX), (FFTHX), (FFFFX), (FFFGX), (FFFHX), (FFFAX), (HASCX), (PTTRX), (VMGRX), (VINIX), (VWELX)