Blooom Review – A Robo-Advisor Specializing in 401K Accounts

About Blooom

Blooom is a robo-advisor that specializes in automated 401K and employee-sponsored retirement account (ESRA) investment management. While most robo-advisors accept IRA retirement accounts, Blooom takes it to the next level with ESRAs which include 401K, 403B, 401A and 457 accounts. Utilizing big data analytics and sophisticated algorithms, Blooom will assess, analysis and suggest the optimal allocations to meet retirement goals commensurate with risk tolerance levels for free. Users can decide to enable the robo-advisor to automate the management for a recurring monthly fee of $10.

Company History

Blooom was the brainchild of Investment managers Kevin Conard, Chris Costello and Randy AufDerHeide to fill a void caused by the misconception that company 401K plans were being managed in the interest of the plan holders. These passive investments can be drained with hidden fees and lack of oversight. Blooom was created to plug the leaks and automate the oversight and management of retirement planning specifically for individuals.  Smart, simple and affordable are the key traits.

How Blooom Works

Users set-up a free Blooom account to run the free 401K Check-Up by answering five questions to measure risk tolerance. Some of these questions are what you would do if your retirement balance suddenly fell quickly and what is your ideal vacation. Their machine learning algorithms improve with usage as it has analyzed over $2-billions in retirement accounts.  Users have the flexibility to adjust the risk levels as they see fit.

Blooom will analyze your current retirement investment performance, fees, allocations and report where the deficits and leakage lie. It illustrates how to improve the overall performance through optimization and diversification. For example, cutting down the number of overlapping funds can save on management fees while maintaining optimal diversification. Blooom will suggest the optimal  risk-based allocation mix to meet individual retirement goals. 

The final summary quantifies how much your retirement performance can improve by implementing the recommendations and by hiring Blooom to manage your account. Users can implement the recommendations themselves or upgrade to let the robo-advisor handle it. Paid subscribers also have access to live financial advisors via chat, email and text.

Account Requirements

Blooom accounts are U.S.-based and clients must be at least 18-years of age. To upgrade to the paid management services, your retirement plan provider needs to be in its database, which continues to expand rapidly. Users are notified during the free 401K check-up whether they qualify to upgrade or not. There is no minimum balance requirement and no other account fees other than the monthly subscription.

Blooom Pricing and Fees

Blooom is a subscription-based service costing $10-month on a recurring basis. Users can pre-pay the annual fee for a discounted rate of $99.

Indirect Fees 

As with most exchange-traded-funds (ETFs), there are indirect fees to consider in the form of expense ratios. The average indirect fee on the index ETFs range from 0.04 to 0.25% depending on the fund or ETF. 

Platform 

The Blooom platform can be access online or via mobile device through iOS and Android operating systems. 

Investing Tools

Blooom tackles employer-sponsored retirement plans, which are non-taxable accounts with very little room for trading. Aside from the calculators and blogs, there aren’t more investing tools. The robo-advisor rebalances portfolios every quarter (90-days) automatically and adjusts allocations as users get closer to retirement. There is no tax-loss harvesting or tax optimization strategies applied.

Automated Investing

Once deep investor profile is created, the robo-advisor takes over. It’s sophisticated modeling technology is a result of oceans of big data personally applied to each individual situation. Automated re-balancing and tax optimization is integrated seamlessly and transparently. 

Portfolios

Blooom doesn’t create individual portfolios like robo-advisor services for taxable accounts. Since different employers offer different investment asset classes, Blooom works within the scope of the offerings to create the most optimal allocations with the asset classes available. Individual portfolios will vary by employer.

Blooom Performance

Portfolio performance usually tracks the benchmark indexes since retirement accounts are long-only. The differentiation lies in the diversification of assets and allocations based on risk tolerance and age. The restrictions on retirement plans leaves them vulnerable during falling markets unless allocations are switched to money markets. Most robo-advisors haven’t faced a true bear market, yet. The true test of performance will be determined during corrections and bear markets. 

Comparisons

Blooom is a pure-play employee-sponsored retirement robo-advisor. While most popular robo-advisors accept retirement plans like IRAs, they are limited with 401K plans because of the wide variance of available investment vehicles. Robo-advisors like Betterment and Wealthfront can’t construct a personalized portfolio if the required ETFs aren’t enabled in the employer-sponsored retirement plan. Since Blooom continues to expand its database of retirement administrators, it’s markedly ahead of other robo-advisors. 

Key Differentiators

Blooom’s subscription based flat $10-month management fee is unique and more cost-effective than the 0.25% management fee charged by Betterment and Wealthfront. The savings add up dramatically as time goes by and with larger retirement accounts. However, access to human financial advisors are limited to online chat, e-mail and SMS. There is no fractional share purchases or tax optimization, but this is more a limitation of 401K plans. 

Trustworthiness

Blooom is a registered investment advisor and member of FINRA. Accounts are insured up to $500,000 under SIPC. Blooom makes it clear that investors are ultimately responsible for any activity in their accounts and Blooom takes no responsibility for performance. This really means that every user should still take the time and effort to understand the underlying investments and how their ESRAs function. Blooom is used by employees at some of the most recognized companies in the world including Apple, Amazon, Oracle, Cisco and LinkedIn. 

Who is Blooom Best Suited For?

Blooom is ideal for anyone with an ESRA that doesn’t want to actively manage and monitor frequently. However, users should understand that any mistakes or performance drawdowns is their own liability. Blooom clients range from 18-to-76 years old. Everyone can and should take advantage of the free 401K check-up service to see if their ESRA is in the database. The $10-per month management fee is commensurate to 0.25% management fee of a $5,000 account. However, as the account grows in value, the savings become more dramatic. It’s best suited for accounts over $7,500.    

Pros

• One of the few robo-advisors that specializes in automating ESRA management
• Free 401K check-up tool and analysis provides eye-opening insights and recommendations with no obligation to upgrade
• Database of ESRA administrators continues to expand
• Blooom is a fiduciary
• Long-term focus on retirement planning and goals
• No account transfers needed as Blooom can manage ESRA accounts through online access, if the plan is in the database

Cons

• No phone access to human investment advisors
• No IRA, HSA or 529 college savings plan advisory services