SummaryBlooom is a web-based robo advisor that focuses on managing your retirement investments inside 401(k) and 403(b) plans. These specific retirement accounts are called defined contribution plans and are often left unsupported by other robo advisors. For a flat fee of $10 per month, users will have their retirement investments monitored and rebalanced every 3 months. It’s great for those looking to have a robo advisor take control of their employer retirement plans!
Assets Under Management$807 Million
Number of Users7535
Fee Structure$10/month flat rate
|Single Stock Diversification|
|Tax Loss Harvesting|
Supported Account Types
|Roth IRA Accounts|
|SEP IRA Accounts|
|529 Plan Accounts|
Blooom is one of many new robo advisors on the scene of where tech meets investing. What makes Blooom a little different from the crowd, however, is that they manage exclusively defined contribution plans such as 401(k) and 403(b) plans to name a few. Most robo advisor platforms don’t offer this feature at all, which leaves plenty of room for Blooom to grow in the hearts of retirement savers.
Blooom is web-only and currently does not offer mobile app support. That’s okay in my mind, because it’s more of a “hands-off” type investment approach anyways. Once you’ve setup your account and linked your retirement plan, Blooom manages the rest by rebalancing your portfolio for you every 3 months. For just $10 per month you’ll be ready to roll and let the app take care of the nitty-gritty of your retirement planning.
Assessing Your Needs
Most robo advisors operate similarly to a human adviser. They start by gathering your birthday, retirement age, financial goals, current financial picture, and your ideal investment risk tolerance and profile.
Blooom operates similarly and gathers your personal information (as is required by law for a financial adviser, even when digital). They assume that your financial goal is retirement, since defined contribution plans are, by definition, retirement savings vehicles. Where Blooom might fall asleep at the wheel is in assessing your risk tolerance.
Users report a lack of questions during the “get to know you” phase that would help the robo advisor tailor options to your personal risk tolerance level. In their defense, there is a “slider bar” that users have control over which can manually adjust the stock / bond allocation.
Problem is, you’d have to know enough to do this yourself and chances are you don’t know that… otherwise you wouldn’t be hiring a robo advisor to do it for you!
Blooom makes it pretty clear in their investment philosophy section that their attitude is 100% stocks, and ride the volatility swings. Unfortunately, many investors simply don’t have the stomach for this. Even if all Blooom investors fully understand the concept of a 100% equities buy-and-hold approach, the ultimate reality is that many don’t have the stomach for it.
Blooom does taper your holding into a bond heavy, stocks light position as you reach retirement. In the final years leading up to your planned retirement, Blooom will begin to sell your stocks and gobble up bonds.
We just have to hope that the timing is right, because the robo advisor is going to do it based on math and not judgment. That can be good, or bad.
Ultimately I’d like to see a robo advisor such as Blooom become much more responsive and discerning of individualized needs. In the meantime, be sure that you fully read and understand the investment philosophy the Blooom robo advisor is going to use with your money. You can find it here.
Costs and Fees
As I mentioned earlier, Blooom will charge you just $10 per month. Their pricing is transparent and flat-rate. Every user pays the same fees.
As for account minimums, you’ll be able to get started with a $0 account. Brand new 401(k) savers rejoice! But wait before you throw a party... there’s a drawback.
If Jimmy opens his first 401(k) and puts just $2500 into it and then hires Blooom, his actual fees will be really high. Why?
Because $120 in management fees represents 4.8% of his overall portfolio.
Since most human advisers will charge you about 2% per year (after a 5.5% sales load on most funds) let’s do the math and find out when Blooom becomes cheaper than a traditional adviser.
...and the numbers are in! You’ll need at least $6,000 in your 401(k) before Blooom becomes affordable relative to a human adviser.
Once your portfolio gets into the $100,000 range, the cost of using Blooom to manage it becomes fractions of a fraction compared to what a human adviser would charge you. In fact, at $100,000, a human adviser might charge $2,000 while Blooom will continue to charge just $120.
You’ll be able to manage 401(k), 457, 403(b), 401(a), and TSP accounts with Blooom. Employers do not need to be involved with Blooom in order for you to use the service with your retirement accounts.
Every 90 days or 3 months, Blooom will automatically rebalance your portfolio. Based on your predetermined algorithm the software will buy and sell stocks or bonds to balance out your holdings.
Blooom does mainly use index funds to achieve your portfolio’s goals. This means low fund fees. However, they do make exceptions and use actively managed funds in instances where those funds better achieve the goals of their clients.
Essentially Blooom will look at all the investment options available in your retirement offerings from your employer. Then they rank these based on expenses, and choose the best funds to meet your goals.
While I do like the simplicity and focus on minimizing expenses, I will say that low fees aren’t the end-all-be-all. Today, more than ever, investors seem focused on minimizing expenses, and that’s good. But we all know that just because something is the cheapest item on the shelf, doesn’t always make it the best item for us.
Blooom has carved out a niche in the retirement account world. There are woefully few 401(k) robo advisors available today and that fact alone makes Blooom an attractive choice.
In my view Blooom is most suited for someone looking to seek a second opinion on managing their retirement assets inside a defined contribution plan. The ideal user would prefer not to get involved in managing their investments, is uninterested in learning about their investment options, and wants a hands-off approach.
For investors with a higher level of DIY drive or moderate knowledge, Blooom may fall short. The heavily stock-weighted preference of its default algorithm and low-fee tilt on fund picking are simplistic and extremely easily replicated by hand.
For investors who would rather seek a plan fine-tuned to their needs and expectations, taking the DIY or human adviser approach might be a more robust choice.
If you’re looking for a robo-advisor for your 401(k), Blooom is the best option.
Blooom helps manage the complicated task of picking right mutual funds for your 401(k) plan. It's easy to use and can work with any account that has online access. Plus, it is very low cost -- just $10 per month. Unfortunately, Blooom does not consider your tolerance for risk.
Blooom’s short questionnaire and proprietary algorithm can help you analyze and better manage your 401(k), keeping you on track to meet your retirement goals.