Blooom stands out in an increasingly crowded field of robo-advisors by narrowing its focus on one segment: workplace retirement plans like 401(k)s. By tending to Americans’ retirement assets, Blooom offers management services that often are overlooked by other advisors.
The company exclusively manages defined contribution plans — 401(k)s, 403(b)s, 457s, 401(a)s and thrift savings plans. Blooom’s model is simple and straightforward: There’s no account minimum, and management costs a flat fee of $10 a month, regardless of account size. Like other robo-advisors, Blooom relies on automated technology and human advisors to make the most of a client’s plan offerings. It also checks for rebalancing opportunities at least every 90 days. But customers looking for advisors to manage non-401(k) funds will need an account elsewhere.
Blooom is best for:
- Employer-sponsored plan participants
- Hands-off investors
- Investors with higher-than-average risk tolerance
Blooom at a glance
|Account management fee||401(k) analysis is free.
Account management: $10/month
|Investment expense ratios||Not rated||Investments used are limited to 401(k) offerings, though Blooom will prioritize funds with the lowest expense ratios.|
|Account fees (annual, transfer, closing)||None|
|Portfolio mix||Investments used are limited to 401(k) offerings, but customizable by client. Blooom prioritizes index funds, with occasional use of actively managed funds. The service first reviews funds already owned.|
|Accounts supported||Employer-sponsored plans: 401(k), 457, 403(b), 401(a) and TSP|
|Tax strategy||Not rated||Not applicable|
|Automatic rebalancing||Portfolios are checked at least every 90 days and rebalanced, as needed. Other events may trigger a rebalance.|
|Customer support||Live chat and email support. Financial advisors are available by chat, email and phone to answer financial planning questions.|
» Want to check out other providers? Here are our top picks for best robo-advisors.
Where Blooom shines
401(k) management: Blooom stands out for its niche strategy: managing employer-sponsored retirement plans. Even though 401(k)s are the primary retirement savings vehicle for many people, it’s rare for advisors to manage them. Most advisors deal exclusively with individual retirement accounts and taxable accounts. The field isn’t completely lacking competition: Vanguard Personal Advisor Services and Personal Capital both offer 401(k) guidance, though not direct management. Blooom excels in its ability to manage any 401(k), no matter where the account holder works or where the account is held. There’s no need for your employer to have a partnership with the service.
No account minimum: Beginner savers can have Blooom manage their accounts right from the start, giving them a better shot at getting off on the right foot.
Free analysis: Anyone can register for an account to analyze a 401(k) for free, and it’s a fairly painless process. Create a Blooom account and link your 401(k) by selecting your provider and logging in on Blooom’s site. Using a flower as a symbol of your 401(k)’s health — see the illustration to the right — the company shows how your existing allocation is faring and suggests ways to improve it. Do-it-yourselfers could easily take those recommendations and change their asset allocations on their own, without signing up for the monthly plan. But Blooom is banking on customers seeing the value of such information on a regular basis. Investors wanting help can sign up for management with Blooom, which includes rebalancing at least every 90 days. Blooom sends customers an email notification each time it makes an adjustment.
Investment expense audit: Employer plans generally offer limited investment options, many of which carry higher-than-average fees. Blooom works within the investments available in the account by classifying each into one of 14 asset classes. The company’s algorithm then selects the fund in each bucket with the lowest internal expense ratio. Although there are many instances when there’s only one fund in each category — and, as such, no way to lower expenses — this method can help investors lower their expenses overall while maintaining an appropriate asset allocation and diversification. Blooom says it saves clients a median $113 in hidden fees in the first year.
Financial advisors: Blooom offers email and chat support to customers, while financial advisors also are available via phone during weekday hours. The company says these advisors are available to answer any financial planning question, including questions that fall outside of 401(k) management, such as debt repayment, budgeting and preparing for major life events.
Cost: Blooom hopes customers see as much value in managing their 401(k) as they do in paying for things like Netflix each month. There’s something to be said for the clean, flat monthly fee. Investors know exactly how much they’re paying, and the fee is charged to a credit or debit card rather than skimmed from the account balance. But there’s a downside to flat fees, too. To compare costs with other advisory services, both robo and human, it’s important to evaluate that fee as a percentage of the assets under management.
Here are a few examples of Blooom’s pricing at various account levels:
|Account balance||Fee as percentage of assets per year|
Blooom says its median account balance is $47,556 — $10 a month on that balance works out to an annual fee of 0.25%. For comparison, human advisors typically charge around 1% of assets under management, and robo-advisors typically range from 0.25% to 0.35%. Given that Blooom is one of the few robo-advisors that manages 401(k)s, and that the company offers customers access to financial advisors, we think that’s a reasonable charge.
Where Blooom falls short
Limited investor assessment: While Blooom’s sign-up process offers simplicity — linking your 401(k) account takes a matter of minutes — it may not be comprehensive enough from an investing standpoint. The questions determining how Blooom allocates your assets don’t go beyond your birthday and target retirement age, and no mention is made of risk tolerance or investment goals. Some of that can be explained by the company’s focus on employer retirement plans: It rightly assumes the goal of every client is retirement. However, investors of every age vary in their risk tolerance, and that should be considered.
Aggressive allocation: Several NerdWallet staffers — ranging in age, though all under 40 — linked their 401(k) accounts to Blooom. All were given the same asset allocation recommendation of 100% exposure to stocks. Blooom says about half its customers were too conservative with their portfolio before using its services — and its algorithm tends to favor equities until the investor is roughly 20 years from retirement. Many investors may consider this too aggressive; few people have the stomach for this strategy, even with an investment manager like Blooom watching their backs. Investors who don’t agree with the allocation that Blooom recommends can change it by moving a slider during the sign-up process.
Is Blooom right for you?
Blooom is NerdWallet’s pick for the best robo-advisor for 401(k)s because it brings much-needed investment management to employer-sponsored retirement plans. That’s a significant benefit, because such plans usually are the primary retirement vehicle for people who have them. Few other robo-advisors have tapped this market, and those that have either require high account minimums or don’t provide the kind of comprehensive management that Blooom offers. If you’re looking for a robo-advisor for your 401(k), Blooom is the best option.
But before signing up, do the math to figure out what percentage of assets you’ll pay based on your account balance and how that will change as your balance grows. Check into whether you have access to comparable services via other providers. You can cancel the service at any time, and it’s easy to do because your 401(k) remains where it is. Investors can also test drive the service with the company’s free analysis tool.