Many people who have retirement accounts have them through their employer — typically a 401(k).
Considering many investing services don’t touch these types of accounts, it’s nice to know that there are firms that do and won’t charge you an arm and a leg.That’s where Blooom comes in.
Founded in 2013, Blooom is a registered advisory firm that provides automated investment services to help you manage your 401(k) account.
It doesn’t offer management for taxable accounts or other types of retirement accounts, only 401(k)s.
However, what the company has going for it is that it’s a fiduciary, meaning that Blooom is legally obligated to act on your best interest.
The company can also manage any 401(k) plan — it doesn’t matter who your employer is or where the plan is held.
For $10 a month, you can outsource the management of your 401(k) account and get a bit of financial advice.
While that sounds like a great deal, learn what Blooom is all about below before making a decision.
Account Minimum: $0
Fees: $10/per month
Promotion: Special rate of $99 per year
How Does Blooom Work?
Blooom is a robo advisor for your employer-sponsored workplace retirement accounts —- 401(k), TSP, 403(b), 401(a) and 457 accounts — as long as it can have online access.
There’s no need to transfer your 401(k) account or open up a new one.
Signing up for the service is pretty straightforward. Once you link your account, you’ll answer a few simple questions, such as your personal details, risk tolerance and projected retirement age.
Then Blooom will factor in your current age against what you indicated as your expected retirement age and adjust your 401(k) accordingly within 30 days.
What Blooom will do is help you with an asset allocation that will weigh more heavily towards stocks the younger you are, and move towards a heavier allocation of bonds as you are closer to your expected retirement age.
Before making changes, Blooom will analzye your 401(k) by first looking at all the options available to you in your 401(k) account and opts out of any funds that don’t align with your goals.
Blooom typically favors index funds but it could choose more actively managed funds if it makes sense.
Once the robo advisor has found funds that will help get you to your goals, the algorithm will select investments based on your target allocation, manager experience and expense.
Then a human advisor on the Blooom team will double check the recommended 401(k) allocation to make sure it’s a good fit.
Just because Blooom recommends a certain asset allocation, doesn’t mean you need to need to agree. You can ask for a different percentage of stocks and bonds, but you can’t opt for diversification on other types of investments or asset class allocations.
For example, Blooom will vary between different international stock and domestic stock funds but you can’t select alternative investments or more or less small cap stocks.
The algorithm will try to choose low-cost index funds which could net you some hefty savings if you’ve been choosing higher cost mutual funds.
Every 90 days, Blooom will rebalance your portfolio based on any changes you’ve made in your percentages to stocks and bonds and their algorithm. Whenever changes are made, Blooom will send you an email about the changes.
Aside from 401(k) management services, you can also ask Blooom questions related to your finances. You’ll receive questions from human advisors.
If you try their service, give this feature a go — you should be able to ask questions on matters such as budgeting for a new house or how to make a debt payoff plan that works for your current financial situation.
Blooom is best for those who want a more hands-off approach to their 401(k) investing and want the occasional personal finance advice.
Minimum investment amount - $0
Sign-up process - Blooom has a large number of questions it’ll ask you in order to customize your asset allocations and financial advice
Gift Blooom — you can gift a year of this service to a family member or friend
Helps lower expenses — although there are expenses with the funds you have within your 401(k), Blooom works to reduce those as much as possible through your asset allocation
Asset allocation — Blooom will use investment options available to you in your 401(k) plan and chooses ETFs and mutual funds
Customer service options — Although you cannot call customer service on the phone, email, text and live chat support Monday to Friday, from 10 a.m. to 6 p.m. EST
You can get a free analysis of your 401(k) when you link your account. To manage your account, it’ll cost you a flat $10 a month.
Yes, you read that right, it doesn’t charge you a percentage of your assets under their management, unlike many other robo advisor companies.
That way you know exactly how much to pay each month no matter how much you have under management.
In addition, Blooom charges the fee on your credit card instead of taking money out of your 401(k) account.
Pros and Cons
Now that you know what Blooom offers, let’s take a look at the pros and cons of this robo advisor.
Provides management for 401(k) accounts - Blooom stands out as one of the only robo advisors that manages employer sponsored retirement accounts. It manages any 401(k) — it doesn’t matter where you work, who the account is with, or whether your employer has a partnership with Blooom as long as there is online access. Considering a 401(k) account is the main retirement savings account for many folks, having a professional service manage it for you might be a good idea if you’re looking to save on expenses.
Free Account Analysis - You don’t need to be a paying customer to have Blooom analyze your 401(k) account — it’ll do it for free. It’s simple to do so. Once you create an account, just link your 401(k) after logging into Blooom and it’ll give you recommendations based on the fees you’re paying and your asset allocation. You’re under no obligation to sign up for their service after the analysis. But since the fees are pretty low, it doesn’t hurt to give it a try to see how you like being a more hands-off investor.
No minimum - No matter how high or low your 401(k) has, Blooom will manage these accounts. You can get off on the right track even if you’re just starting to invest in your 401(k) account.
A low-cost option - For a flat $10 each month, you get your 401(k) managed and get access to financial advisors for advice. In other words, the more you have under Blooom’s management the lower percentage you’ll pay for assets under management. Since Blooom charges this recurring fee from a credit or debit card, it won’t take money from your account balance, so it can sit there and keep growing.
Access to financial advisors - Blooom offers access to registered investment advisors that can help you answer questions related to your 401(k) and other financial planning questions. It can include topics such as short-term savings goals, debt repayment and budgeting for major life changes. You can contact these advisors or customer service via email, text or live chat.
Savings on investment expenses - The bad news is that employer-sponsored plans don’t have many investment options which can mean you can be paying pretty hefty fees. Blooom can help you save money by looking at the investment options available in your 401(k) account, placing them into asset classes. It’ll then choose an investment option within those classes with the lowest amount of fees — typically the internal expense ratio. It may not be able to lower all expenses, but Bloom will try to lower your overall expenses in your 401(k) account which can still save you some cash.
No phone support - If you want to speak to a live human on the phone for account support or advice from a registered advisor, you’re out of luck. Though not a dealbreaker, there is no 24/7 account support so if you want a timely response, you’ll need to do it within their business hours.
Only available for employer sponsored plans - It’s great that Blooom offers robo advisor services for employer sponsored plans, but that’s all it offers. As in, you can’t have Blooom manage your IRA, taxable accounts or other types of investments.
Fee can be high for smaller 401(k) accounts - $10 a month (or $120 a year) is not a lot to pay for Blooom if you have a significant amount of assets under management. But for smaller account, this could be high if you think about the fee in percentages. For example, if you have $1,000 in your 401(k), it’s a 12% fee, a 2.4% fee for a $5,000 account and 0.8% for a $15,000 account. Considering other robo advisors charge an average of 0.5% for their services, it can get expensive real fast if you use Blooom.
Not as many asset allocations - Blooom’s algorithm makes the assumption that your ultimate goal is retirement. Not that this is a downfall, but it may be more beneficial to have a more thorough risk tolerance assessment. And while you can adjust the ratio between stocks and bonds, you can’t change your asset allocations — like a more diverse mix of large and small cap ETFs — which can seem limiting to some investors. More hands-on investors can find the simplistic onboard process a bit of a turn-off.
No other competitors - Though this isn’t a major downfall, keep in mind that there aren’t any known alternatives to Blooom — it’s carved out a unique niche for itself. If you want a service that manages your 401(k) plan using an algorithm, then you’ll have to stick with Blooom. The closest alternative is Personal Capital — you can have them analyze your 401(k) plan (including what fees you’re currently paying) and it’ll make recommendations such as better asset allocations and selections with lower fees. However, it doesn’t help you directly manage your employer sponsored account.
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Is Blooom The Right Choice For You?
If you’re wondering whether Blooom is worth trying out, the answer is yes. Since you’ll only need to pay a flat fee of $10 a month, you can sign up for the service and cancel anytime if you don’t like what you see.
You can always do a calculation to see the percentage you’ll pay for Blooom to manage your 401(k) account to see if it’s worth it if you want to stick with the robo advisor for the long term.
In any case, Blooom is offer a much-needed service — helping you manage your employer sponsored retirement accounts.
Like mentioned before, for many people a 401(k) account is their main retirement account and there doesn’t seem to be any robo advisors that have entered the market right now.
If you’re a more hands-on investor, you may not like what Blooom has to offer since there isn’t as much diversification in asset classes and the ability to customize holdings.
There are any socially responsible investing options either, so if that’s important to you, you’ll need to look elsewhere. Since Blooom doesnt’ offer support for other accounts, you need to sign up for another robo advisor.
Otherwise, it’s great that Blooom is a fiduciary, and it offers a simple sign-up process and a hands-off approach to investing.