Blooom is a registered investment advisory firm that manages your 401(k) plan for you. And no, that’s not a typo; “blooom” actually does have three “o”s in the name. A firm that manages your 401(k) for you is not common, but it should be. After all, millions of people have their non-taxable investment accounts managed for them by a third party, such as an investment advisor or a robo-advisor. Why not have professional management for what is often the single largest investment account you possess?
That’s blooom’s specialty. They manage 401(k) and 403(b) plans but not taxable investment accounts and not even IRAs. They maintain that “A professionally managed 401(k) can grow two times as much as one that is self-managed.” The firm has analyzed over 26,000 401(k)s, which includes more than $1.6 billion in total assets. They found 83% of 401(k)s are managed incorrectly! That’s what they aim to fix.
With offices in Leawood, Kansas, and Kansas City, Missouri, blooom was founded in 2013. There are very few players in the 401(k) management space, and one of the big advantages blooom provides is they have the ability to manage any 401(k) plan, no matter where the plan is held or who the employer is. You don’t even have to have your employer enter into a partnership arrangement with the service.
And just as important, blooom is a fiduciary, which means they are required by law to act in your best interest, not theirs.
How Does Blooom Work?
When you sign up with blooom, they manage your account for you, but you still maintain full control of the account at all times. You don’t even have to open up a new account or transfer the one you have. Blooom can work with any 401(k) plan that has online access.
The signup process is simple, and once you sign up, blooom will adjust your 401(k) plan within 30 days. They do this by factoring your current age against your expected retirement age. They then use an exponential glide path that moves your account closer to the needed bond exposure for a typical retiree. That means your portfolio will naturally be more heavily oriented toward stocks in your younger years and move more toward bonds as you get older.
They use a four step process to analyze your 401(k):
- They look at the options in your 401(k) and eliminate the funds that don’t make sense for you to own.
- They lean toward using index funds, but occasionally it will make sense to use actively managed funds to gain investment exposure where needed.
- Once they’ve identified the appropriate funds that will get you closest to your target allocation, blooom’s algorithm will select the ideal investments based on expense and manager experience.
- A blooom advisor double-checks the results and cross-references with your recommended 401(k) allocation.
As is typical of robo-advisors, blooom uses an algorithm to handle most of the work involved in establishing and maintaining your portfolio. However, your portfolio is also subject to review by licensed advisors to make sure everything is operating the way it should. Any time investment adjustments are made to your 401(k), blooom will send you an email advising you of the changes.
Investment selection. Blooom works with the investment options that are available in your 401(k). As noted above, they lean toward index funds, but they also add actively managed funds if necessary to gain certain investment exposure. They create a target allocation comprised of the funds available in your plan that most closely support your desired allocation. All of this will be determined by Blooom’s proprietary algorithm.
Unlike typical robo-advisors, however, blooom enables you to make changes to your investment mix. Once your application is set, you still have the option to change it. You simply have to click the button that says Adjust Allocation, and you’ll be able to make the changes. Future rebalancing will be consistent with those changes. In addition, you can also change your target retirement date, simply by clicking Adjust Retirement.
It’s important to understand you have ultimate control over your 401(k) plan. Blooom acts only as an advisory service, and you’re always free to contact your plan trustee to make the changes you choose. Blooom will advise you any time changes are made in your account, whether those changes were initiated by you or by blooom.
Rebalancing. Blooom will do a portfolio review every 90 days to make sure your account is staying within the recommended allocations. If changes need to be made, they will be handled automatically. This will enable your account to be adjusted for changes in market values. Regular rebalancing has been shown to add an additional 0.5% to the annual return on investment, and this is part of the benefit that comes from working with blooom.
Blooom Features and Pricing
|Account Fees||$5 monthly with less than $20,000; $19 monthly with $20,000-499,999; $99 with more than $500,000|
|Accounts Available||401(k); 403(b)|
|Customer Service||Email and Live Chat|
|Promotions||Save up to $20 per Month|
- ETFs and mutual funds used — Based on investment selections available in your 401(k) plan.
- Assets under management — Blooom has over $300 million in assets under management.
- Annual fees/cost — Blooom charges a flat fee, with no hidden fees, and you can cancel at any time. You start with a free account analysis, and from there the fee structure works on a sliding scale:
- Accounts up to $19,999, $5 per month.
- Accounts from $20,000 up to $500,000, $19 per month.
- Accounts over $500,000, $99 per month.
The monthly fees can be paid via credit or debit card; that way your plan account balance is never reduced.
It’s important to understand the investments in your 401k may also have internal expenses. However, blooom seeks to use the most cost effective funds that are available in your 401(k) allocation in order to minimize those expenses.
Blooom Pricing Promotion Through Investor Junkie
As a special blooom promotion, if you sign up with blooom through Investor Junkie, you will receive discounted monthly fees. The promotional fee structure is:
- Accounts up to $19,999, $4 per month ($1 off).
- Accounts between $20,000 and $500,000, $15 per month ($4 off).
- Accounts over $500,000, $79 per month ($20 off).
- Investment management for accounts that are usually unmanaged — For most people, their 401(k) plan is their largest single asset. But they are typically relegated to choosing between the investment options available. Investment management services are not provided. But that's what blooom offers.
- Reasonable fee structure — At $15 per month, a $100,000 401(k) can be managed for $180 per year. That's an annualized fee of 0.18%, which is near the very bottom of the spectrum for robo-advisors and well below fees charged by traditional investment advisors.
- Works with many different plans — Some 401(k) management services work only with plans provided by select employers. Blooom can work with any plan that has online access.
- Fees are high on small account balances — For example on a 401(k) with a balance of $3,000, you'll pay $4 per month with the Investor Junkie discount, or $48 per year. That works out to be 1.6% per year, which is high.
- Available for 401(k) and 403(b) plans only — Blooom will not work with IRAs or with taxable investment accounts. At this stage of the game, it is set up specifically to work with the two major employer-sponsored plans.
- Simple risk profile — Blooom determines your asset allocation by only two metrics — your age and stock/bond ratio. No consideration is given to your risk tolerance.
Is blooom worth a try? Considering how reasonable the fee is — and that you can cancel at any time — it’s well worth giving the service a try. This is especially true if you are among the majority of employees who have little real understanding what’s going on inside of your 401(k) plan.