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Blooom Review

Blooom Review

Need A Quick & Easy $370+ Every Month For Free?

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Description

Blooom is a rare robo-advisor: it focuses on managing your 401k – so you don't have to. But are they worth the $10/month fee? Find out with our review.

Blooom Review

Introduction

The robo-advisory field has become increasingly crowded since the market was pioneered by Betterment and Wealthfront in 2008.

But despite the odds, Blooom manages to stand out from the rest – and it does so by specializing in one segment of the investment sphere: workplace retirement plans, such as the 401k. While many of their competitors also offer automated retirement fund management, Blooom is the only one to focus solely on this enterprise.

Although – not all robo-advisors offer similar services, making it that much easier for Blooom to rise above.

This is an especially attractive offering for those who don't fully understand what a defined-contribution plan is or how to manage one. Many people start working in their 20s and know their contract includes a retirement plan like the 401k, 403b, 457, 401a, and Thrift Savings Plan (TSP; federal employees only). But for nearly two-thirds of Americans, that's where the knowledge ends.

The unfortunate result is that your retirement plan might not be allocated properly in accordance with your retirement goals.

But, of course, that's where Blooom comes in. As long as you have a company-sponsored, tax-deferred retirement plan, you can connect it to Blooom's services and let the company manage it on your behalf.

Not only will they manage the account – they'll also help you make smart investment choices to grow your retirement savings.

All you need to get started is an existing retirement account. Blooom offers a 100% free account analysis, even if you're not a client yet. Based on this analysis and your answers to a few basic questions (such as your age and targeted retirement date), they'll recommend an investment strategy best suited to your needs.

If you do decide to employ the company's services, you'll be prompted to link your retirement account to your Blooom account so their robo-advisor can begin identifying what funds are available for diversifying your portfolio.

Next, Blooom starts allocating funds to trades and places these in your account. From this point on, the company is managing every part of your retirement plan. They charge a flat-rate fee of $10 a month, regardless of how big or small your account – making it easier to budget.

You'll still be able to look at the nitty-gritty of your account details if you choose to. Otherwise, Blooom displays your account health using a flower:

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Of course, there's a downside to having a flat-rate fee. Depending on your account total, that $10 could be relatively expensive or relatively cheap. We'll take a closer look at how it adds up later in our review.

Quick Facts

  • Management fee: Flat-rate fee of $10/month ($120/year)
  • Account minimum: $0 (no minimum)
  • Promotion: Get a discounted rate of $99/year with promo code REEETIRE

Blooom is Best For

Blooom is best suited for the following people and features:

  • Those with an employer-sponsored retirement plan like the 401k, especially if you don't properly understand how to manage it yourself
  • Hands-off investors who prefer not to directly manage their account personally (or who don't have the time to do so)
  • Those who are already paying higher fees for a financial manager who offers 401k advice (and not many financial advisors do)
  • Free retirement portfolio analysis

Pros

Blooom has a lot going for it. Here are some areas where we feel the company really stands out among its many competitors in the robo-advisor market.

+Unique Service

As mentioned in the introduction to our Blooom review, the firm specializes in a very niche service: retirement plan investment management.

Not many of their competitors offer this service at all, let alone to the degree that Blooom does – nor do all financial advisors. After all, they can't skim their fees off your account. For the most part, you're left to handle it on your own, which can work out disastrously for you.

In 2018, Fidelity was sued once again for 401k mismanagement.

This is very much a case of “jack of all trades, master of none.” Blooom is very clearly a master at 401k investments and management.

Another area in which Blooom is rather unique is that they deal with defined-contribution plans rather than individual retirement accounts (IRAs) and taxable accounts, which is where other robo-advisors focus. SoFi Automated Investing, for example, only deals with taxable accounts.

+No Account Minimum

The key to investing is starting as soon as possible – and this is true for retirement planning especially.

This means that Blooom's $0 account minimum can help beginners get started – regardless how much money they have set aside. And because your 401k is being properly managed from the get-go, the benefits will compound over the years.

+Free 401k Analysis

Even if you aren't a client yet, you can get a free account analysis from Blooom – no strings attached.

As briefly touched upon in our introduction, this is a quick and painless process that shouldn't take you more than 10 minutes, if that. All you need to do is create a username and password, provide some basic information about yourself, and select your provider to link your retirement account. Blooom uses 256-bit TLS encryption with bank-level security measures, so your private information is safe at all times.

Next, you'll log in through Blooom's website. The analysis should be ready by the time you get to this stage – it's that quick, thanks to their robo-advisor's computer-generated algorithms. You'll find a side-by-side comparison of your current fees and asset allocation with their recommendations for improvement.

One of those recommendations will be for your investment strategy as a mix of stocks and bonds. You'll be allowed to adjust the percentage breakdown for a more (or less) aggressive strategy. (As a client, you'll be able to adjust your asset allocation again at any time.)

Finally, Blooom will compare your current diversification with their recommended values.

At this point, those who prefer to handle their own 401k management can log out and use these recommendations to affect the changes themselves, without having to become a Blooom client. Alternatively, you can go to their competitors and see what they recommend to weigh your options before committing.

+Investment Expense Auditing

Employer-sponsored retirement plans typically offer rather limited investment options that often have higher-than-average fees.

If you sign up as a Blooom client, however, the company will look for ways to help you minimize expenses. Using the available investments, they'll categorize them into asset classes Blooom refers to as “buckets.” By selecting the investment option in each bucket that carries the lowest fees, they then help you lower your internal expense ratio.

Bear in mind: there may end up being only one investment in any given category. In such cases, there isn't any way to lower your expenses, unfortunately.

However, this won't be true for all the buckets in your account, so Blooom will still be able to lower your overall expenses without reducing your portfolio diversification. On average, Blooom claims their clients typically see around $106 extra through fee reductions in their first year alone.

+Financial Advisors

Blooom acts as a fiduciary. This means that their financial advisors give you personalized advice that works in your favor instead of trying to upsell certain products and services for the commission, even if it doesn't work in your favor.

Their registered financial advisors are exactly that: registered financial advisors. They won't only focus on your investments and retirement plan. Blooom offers advice on any financial decision you want or need to make. All you need to do is reach out to them via email, chat, or text.

+Fees Paid by Debit or Credit Card

While other online brokerages skim their fees off the top of your investments, reducing your returns, Blooom leaves your money in your account. Instead, they automatically charge you their flat-rate fee of $10/month from your debit or credit card.

This is a major bonus, as it becomes a monthly cost in the here and now rather than reducing your retirement savings.

+Flat-Rate Fee

There are both pros and cons to being charged a flat-rate fee, of course.

In order to properly compare Blooom's affordability to that of their competitors, you need to stop thinking of that $10 as $10. Other online investment platforms charge management fees as a percentage, typically 1% for human advisors and 0.25% to 0.50% for robo-advisors. So you need to consider that $10 as a percentage of your account total for comparison purposes.

Here's how it plays out at various account levels:

Account Balance $10 fee as a percentage of your assets per year
$2,000 6%
$10,000 1.2%
$25,000 0.48%
$50,000 0.24%
$100,000 0.12%

What, exactly, does this mean?

Well, taking other robo-advisors' management fees of 0.25% to 0.50% into consideration, Blooom is relatively expensive until you have about $25,000 in your account. They only really start to out-perform those competitors when your account approaches $50,000.

According to Blooom, the average client's account is sitting just shy of $50,000. So all told, that's a positive.

Considering Blooom is almost the only robo-advisor that offers 401k management (and that they specialize solely in this area, rather than juggling it with other investments), we'd say their $10 flat-rate fee is a definite pro, even if you're still working your way up to $50,000.

+No Cancellation Fee

While many of their competitors charge a cancellation fee, Blooom doesn't. If you ever feel like you can get better management elsewhere, you can cancel.

This is a major positive to it effectively being a monthly service.

Blooom does require you to request the cancellation at least 48 hours before the end of the month. This is just to make sure they have enough time to properly cancel the debit charge for your monthly fee.

Cons

Even though the relatively higher management fee for accounts below $50,000 isn't much of a contention point (all things considered), that doesn't mean there aren't still other areas where Blooom falls somewhat short of the competition.

-No IRAs or Taxable Accounts

As mentioned earlier, Blooom doesn't currently manage taxable retirement accounts or IRAs. This means if you don't have an employer-sponsored retirement plan, you'll have to look elsewhere.

-Limited Investor Assessment

This is a fairly major point of contention for us.

While you can toggle the way Blooom diversifies your asset allocation between stocks and bonds (as mentioned), this isn't the most effective way to set your risk-tolerance.

Blooom essentially treats every account as having one goal and one goal only: retirement. However, retirement goals beyond age of retirement aren't considered as well as they should be. Ideally, we'd like to see more focus put into this area.

-Stock-Heavy Allocation

Not all investors are particularly fond of stocks, especially among the younger generation. But Blooom is very focused on creating stock-heavy investment allocations.

In fact, some clients complain that the firm initially recommends 100% stock allocation (already a bad idea, if only because this seriously limits portfolio diversification). Even after toggling the allocation slider to include bonds, the result remains stock-heavy.

If you're one of those investors who prefer to diversify away from stocks, this is going to be a deciding factor that will lead you away from Blooom.

Is Blooom Right For You?

Blooom certainly closes a major gap in the market by offering much-needed investment management services for employer-sponsored retirement accounts. Few other robo-advisors do the same.

But before deciding whether or not Blooom is right for you, we recommend calculating the percentage cost their flat-rate fee translates to.

Conclusion

Whether you've only just opened your 401k (or any other defined-contribution plan) or you've already had it for years, it's clear that Blooom offers an attractive management service.

This is especially true if you want to avoid mismanagement due to a lack of knowledge and/or time.

At the end of the day, it's up to you to decide whether that $10 flat-rate fee is worth it. For the most part, we certainly think it is.

Related:  Ellevest Review

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