blooom is a robo-advisor with a unique twist on managing retirement plans. While most robo-advisors rely on computer algorithms to automatically manage taxable and IRA accounts, blooom has a laser focus on managing employer-sponsored 401(k) portfolios, along with defined contribution plans: 403(b)s, 403(a)s, 457s, and thrift savings plans.
If you ever fumbled around a workplace retirement plan unsure of how to invest your money in a 401(k) then blooom was made for you. While Personal Capital and Vanguard Personal Advisor Services will advise on 401(k) plans, only blooom directly manages your account for you.
It won’t cost you a penny to connect your 401(k) to blooom and receive a free retirement account analysis, but if you want your portfolio managed then it will set you back $10 per month, which we believe is a fair price for the value provided.
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4 out of 5 stars
via Blooom secure site
Fix Your 401(k) In Minutes
Link your 401(k) to blooom and in minutes your portfolio will be analyzed and recommendations made that may better align with your retirement goals.
blooom makes the lofty claim that it can fix your 401(k) in 5 minutes and they deliver. It only takes a few minutes to link your workplace 401(k) plan to blooom, and your company doesn’t need to have a prior relationship for you to reap the benefits.
The process is so simple that it has been widely adopted by fellow investors looking to pay lower fees and optimize their retirement portfolios. Over 90,000 401(k)s have been analyzed by blooom, which directly manages over $1.6 billion.
Source: blooom; data as of Nov 7, 2017
It’s no surprise that blooom has grown so fast because the company solves a real problem. Any employee who has joined a company and found themselves puzzling over 401(k) selections can relate to the confusion about which choices are best.
To save you the hassle of researching which mutual fund to select and how much it charges in expense ratios, blooom takes over the process of selecting your portfolio holdings and allocating them.
blooom claims that a professionally managed 401(k) portfolio can grow to as much as 2x the size of an unmanaged portfolio and that 87% of participants do better with the help of a professional compared to going solo.
Is blooom Inc Right For You?
blooom is best for investors with employer-sponsored plans, who are fee-savvy, and lean towards being more risk-seeking investors.
Unless you are a mutual fund expert or investor extraordinaire, the high likelihood is blooom can help you if you have one of the following defined benefit plans:
Few retirement investors spend the time needed to research mutual fund expense ratios to really understand whether they are getting a good deal when selecting retirement portfolio holdings.
So, for the vast majority, it makes a good deal of sense to hand the responsibility over to blooom, who will continually monitor your portfolio to make sure it is optimally balanced, and rebalance it every 90 days.
Sometimes blooom may not have much choice other than to select a high cost fund because employer-sponsored plans are limited to a fixed set of choices usually. Often, only one choice of fund exists in an investment category, for example, large cap value.
But while blooom may run into a brick wall from time to time when it comes to fund selection, it can still help to select the amount you invest in each fund and the overall portfolio composition.
FEE SAVVY INVESTORS
If you are price-conscious, blooom doesn’t impose any hurdle to get started.
It’s 100% free to connect your 401(k) and analyze it, and no account minimum is imposed either.
Conservative investors may want to do a double-take before handing over control of their 401(k) accounts to blooom because portfolio compositions can lean towards a heavier weighting of stocks than bonds.
Still, it doesn’t hurt to sign up and analyze your portfolio for free to gauge whether opportunities for improved portfolio selection and allocation exist.
blooom charges a flat fee monthly regardless of how much money is in your defined contribution plan.
blooom charges a monthly fee of $10, which at first glance seems low and in the ballpark of a subscription fee to Netflix. And it is low on a percentage basis for large account sizes, but for those with smaller nest-eggs it is worth calculating the benefit of blooom versus a traditional financial advisor.
Whether you have a $10,000 portfolio or a $100,000 portfolio, blooom charges the same $10 flat fee monthly. But the difference in percentage terms of what each investor pays is stark.
The investor with $10,000 pays 1.2% of assets managed annually in fees, which rivals the charges of traditional human financial advisors.
|Portfolio Size||Annual Percentage Fee of Assets|
Online 401k Management
blooom stands alone as the only robo-advisor willing to directly manage your 401(k) retirement portfolio.
In the highly competitive field of robo-advisors, you might expect that blooom has lots of rivals but you might be surprised to know it pretty much stands alone.
Unlike standard taxable accounts, IRAs, Trusts, and a host of other financial accounts, 401(k)s are quite messy to manage.
Employers often feature a limited pool of funds and each employer has a slightly different take on which funds are offered to employees, so the process is by no means standardized.
By contrast, a robo-advisor like Betterment can select from the entire universe of index funds when building client portfolios in non-401(k) accounts, which is precisely why so few robo-advisors compete with blooom.
But tens of thousands of businesses offer 401(k) plans to employees so there is a real opportunity for a brave robo-advisor to help the average Joe or Jane out, and so far blooom stands alone as the single company willing to directly manage 401(k)s using a technology-powered algorithm.
Personal Capital and Vanguard Personal Advisor Services will provide guidance to clients who hold 401(k)s but they won’t directly manage them, so blooom really is your only answer if you want a hands-off approach to managing your 401(k).
blooom looks to improve your 401(k) performance by removing funds that don’t align with your retirement goals and inserting funds that better meet your objectives.
To improve the performance of your defined contribution plan portfolios, blooom relies on computer algorithms to:
- Analyze funds in your existing 401(k) and remove ones that don’t align with your retirement goals or have higher fees than alternatives.
- Choose index funds to keep fees low unless an actively managed fund is a better choice to gain necessary exposure.
- After choosing the optimal funds to meet your target allocation, blooom chooses funds with the most competitive expense ratios and managers’ experiences.
- Lastly, blooom cross-references and verifies results to ensure they comply with your recommended 401(k) allocation.
Both fund selections and weightings are assessed every 90 days and rebalanced if necessary.
Over time, when retirement looms closer, blooom automatically adjusts the weightings of stocks in your portfolio down lower to better suit your lower risk tolerance.
blooom Pros and Cons
blooom imposes no account minimum, analyzes your portfolio for free, connects you to financial experts, and charges a flat monthly fee, but small account sizes will pay high annual percentage fees on managed assets.
|blooom Pros||blooom Cons|
|✅ Flat Monthly Fee: blooom charges a flat fee monthly of $10 to directly manage defined contribution plan portfolios.||❌ Lack of Phone Support: No phone support is available via blooom, but email and live chat support is provided.|
|✅ Expert Financial Advice: Email and live chat support is available from financial experts so you can ask about more than retirement portfolio planning.||❌ High Fees On Small Accounts: Smaller account sizes will pay high percentage fees annually on managed assets.|
|✅ Regular Rebalancing: Every 90 days blooom rebalance your portfolio if needed and notifies you when changes are made.|
|✅ Free 401(k) Analysis: Even if you don’t sign up as a premium client, blooom will analyze your 401(k) for free.|
|✅ Zero Account Minimums: No account minimum is stipulated to get started.|
blooom Account Types
blooom caters to the following employer-sponsored plans: 401(k), 403(b), 401(a), 457 and Thrift Savings Plans.
|Thrift Savings Plan||✅|
blooom solves a real problem for retirement-oriented investors with employer sponsored plans who don’t know how much money to invest in each portfolio position nor which funds are best suited to meet their financial goals.
The few robo-advisors who do venture into the defined contribution plan space only provide guidance versus blooom, which directly manages portfolios.
For small account holders, be wary of the flat monthly fee representing a large percentage of your overall holdings. For medium and larger account sizes, the flat monthly fee offers a compelling reason to select blooom.