If you’re looking for a robo-advisor to automatically manage your employer-sponsored retirement plan, you probably already know that there are a ton of options out there. One of the top contenders is Blooom. They offer a flat monthly fee and focus specifically on defined contribution plans like 401(k)s.
We’ll walk you through Blooom’s process so you can discover if it’s the right fit for your investment goals.
Blooom specifically manages defined contribution plans from employers. Employer-sponsored retirement plans include 401(k)s, 403(b)s, 457s, 401(a)s, and thrift savings plans (TSPs). So instead of making your own investment allocations with your workplace retirement account, you can have Blooom’s algorithms do it for you.
A significant advantage of using Blooom is that there’s no account minimum. So, even if you’ve just started to build your retirement funds, you can open an account, which is a huge bonus considering many robo-advisors require a minimum of $10,000 or more.
How much will you pay for Blooom to manage your account?
Besides your initial portfolio analysis, Blooom’s management fee ranges from $45 to $250 per year, depending on your package. This simplifies the process of figuring out what you’ll be paying each month based on a percentage charged by most financial advisors.
If you have more than one 401(k) account, you get a slight discount for adding those on as well. You’ll also get a notification from Blooom before processing any transaction that would result in a fee of $50 or higher. Currently, Blooom offers three pricing plans that you can choose from: Essentials, Standard, and Unlimited.
Essentials Plan – $45 per year, per account
Essentials is the most basic plan and has limited features, including:
- Portfolio analysis and management
- Reduction of hidden fees
- Automatic rebalancing
Blooom researches the funds in your account and gives recommendations based on your profile. The company then keeps your portfolio on track as your retirement target allocation shifts.
Standard Plan – $120 per year, per account
Although pricier than the Essentials plan, the Standard plan is more inclusive regarding services. Its features include:
- A personalized portfolio
- Opportunity to place trades
- Transaction activity alerts
- Access to a financial advisor who responds within 2-3 business days
- Ability to choose Blooom to place trades for you
Blooom will also alert you when the investing advisor notices a suspicious withdrawal from your account. Access to a human financial advisor also comes in handy when you need some help with your investments.
Unlimited Plan – $250 per year for unlimited accounts
Unlimited is the most expensive Blooom plan, but it comes with better perks, including:
- Personalized portfolio
- Transaction activity alerts
- Option to have Blooom place trades for you
- Access to financial advisors through live chat
The Unlimited plan gives you access to the services included in the Essentials and Standard plans and priority access to advisor services. For example, with the Standard plan you have to wait for 2-3 business days to get a reply, but the Unlimited plan allows you to access the services immediately through live chat.
Blooom also has a referral program for its faithful clients. Every member who joins the program can receive a $40 Amazon gift card every time a new member registers through their referral link. New clients will get a $40 discount, meaning they will join Blooom for as low as $5 a year.
How does Blooom Work?
With over $5 billion in assets and more than 25,000 investors, using Blooom is a breeze. Blooom’s technology is similar to what a human advisor would use, only that Blooom is relatively cheaper. The company uses a free analysis tool that reviews your 401(k) plan to determine how your investments match your ultimate retirement goals and risk preferences.
After signing up for an account, you must authorize Blooom to link to your retirement account and fill in a risk profile online. Like other robo-advisors, Blooom utilizes an algorithm to select the suitable investments for your portfolio. Blooom analyzes your account by focusing on:
- Your current investments and how they align with your retirement goals and risk tolerance
- The most suitable investments based on your goals
- The amount of money you are paying for different investments in your 401(k)
A human advisory team reviews Blooom’s investment choices to ensure your plan is on the right track. Note, Blooom has no exchange-traded funds or mutual funds of its own, so you can only access the investment options available in your employer’s plan.
Additionally, you don’t have to worry about security. Blooom protects your information by providing:
- Bank-level security
- 256-bit encryption
- Secure servers
- Third-party verification
Who should use Blooom?
Since Blooom is a robo-advisor, it’s not a viable fit for investors or active traders. Blooom recommends funds that follow a broader stock index instead of actively trading funds, which means it’s best suited for set-it-and-forget-it investors with next to no experience. Thus, Blooom is best for:
- People looking for employer-sponsored retirement plan management
- Beginner investors
- Hands-off investors
- People with an IRA at Fidelity or Vanguard
Getting Started with Blooom
To allow you to check out Blooom’s services, they offer the first month free. Plus, you can create an account without actually signing up for their services. You get a free analysis of an existing 401(k) when you do that.
You’ll then receive suggestions on how to improve your current allocations. Since this is a free service, you’re not obligated to sign up for any additional services at this point and could undoubtedly implement any of the suggested changes on your own.
The upside to using Blooom, though, is that you’ll keep getting this financial advice throughout the life of your 401(k), regardless of what the balance may be. Plus, even as your balance grows, that $10 monthly fee stays the same, so over time, you could potentially save money on your advisor costs.
Blooom uses both automated technology and human advisors so that you can get the best of both worlds. In addition, your account is reviewed at least once every 90 days to see if anything needs to be rebalanced. This service generally isn’t provided by the employer with which you have the retirement account. You may not realize it, but in most cases, it’s up to you to pick how you want your money invested.
However, over time as you get older, those allocations should probably change. Here’s how Blooom helps you with that. First, it looks at what investment options are available in your retirement plan from your employer and classifies them by asset type. Next, it looks at the lowest expense ratio in each category and selects one for your portfolio, which could potentially save you around $100 per year in investment fees.
Additionally, Blooom offers fraud monitoring. You’ll receive an alert if any suspicious activity occurs in your account.
And best of all, you don’t have to move your 401(k) to have Blooom manage it for you. You can link any account that has online access.
Customer Service and Support
Although Blooom is a robo-advisor, it also offers a human touch when you need it. You can get support over email or live chat at any time through the website. If you have more specific questions about your investment strategy, you can also access financial advisors over the phone during traditional weekday office hours.
When you first start working with Blooom, you can typically expect them to fix your account within ten days. Sometimes, however, it can take up to 30 days to finish the initial rebalancing.
Finally, if you decide that Blooom isn’t for you, you can cancel at any time.
It’s important to know that Blooom has its own algorithms for allocating your 401(k) based on models and confirmed by financial advisors. Ultimately, though, you’re still in charge of your retirement accounts and can make adjustments as you see fit.
So, how does Blooom manage your 401(k) portfolio?
After choosing investments to reduce hidden fees, they use an algorithm based on decades-long market data. They also make choices based on where you are in your career.
If you have at least 20 years left in the workforce, Bloom will more than likely place your entire 401(k) portfolio in the stock market. The goal here is to maximize your returns because you have time to ride out any potential market ups and downs. Blooom feels you’ll miss out on significant opportunities to grow your retirement savings if you don’t focus on stock funds.
What’s Blooom’s approach if you’re getting close to retiring?
Whether you’re nearing retirement or already retired, Blooom switches gears with your 401(k). The plan still places some of your investments in stocks for future growth, but the plan also switches more of your money to bonds.
Blooom creates a safe balance so that you’re not placing too much risk with aggressive investments, but you’re also still earning money. That way, if the market takes a hit, your retirement plans will ideally be affected at a minimum.
Making Your Own Changes
No matter what the algorithm says, you still get to have the final say over your retirement account. Once Blooom makes its allocations in your 401(k), you can choose to make whatever changes you prefer. All you have to do is click a simple button called “Adjust Allocation,” and you can tweak your account.
As your retirement plans change, you can also “Adjust Retirement.” Blooom uses your target retirement date as part of the algorithm. If you decide to retire early or stay in the workforce a few more years, be sure to update that information. This will ensure your asset allocation is as targeted as possible.
Is Blooom Worth the Money?
It depends on your asset amounts. For example, when comparing the flat fee of $10 per month to how much you have invested in your 401(k), look at that number as a percentage.
If your balance is $10,000, your $120 in annual fees equals 1.2%. That’s a lot higher than most other robo-advisors and likely higher than even a human financial advisor.
But what happens when you bump that account number up to $100,000?
The total monthly fees for the year come to just 0.12% — which is incredibly low! So, you have to look at the numbers and weigh them against your other options to determine what works best for your account as it stands today.
Since there’s no charge to cancel, and you never have to transfer your funds to use Blooom, it’s easy to wait to use Blooom until your 401(k) has reached a threshold where the services make financial sense.
Don’t Forget About the Limitations
Remember that Blooom has restrictions on the types of accounts it can manage on your behalf. You’re limited to employer-sponsored plans like a 401(k) or 403(b). If you have other accounts, such as IRAs, you’ll have to pick another service to manage them.
If you don’t mind working with multiple advisors or robo-advisors, then that can work out just fine. But if you want to streamline all of your investments into a single source, then Blooom probably isn’t right for you.
The bottom line is that Blooom is easy to use, customer-centric, and highly transparent. These are great qualities to look for in your robo-advisor.
If you’re looking for a way to maximize your workplace retirement planning, it’s definitely worth giving this niche advisor a chance.
With that flat monthly fee, you don’t have much to lose. Plus, you can even just sign up for a free analysis to see what kind of impact Blooom could have on your retirement savings.