NerdWallet's rating: / 5
Quick Facts
- Management fee: $1 or $15 a month
- Account minimum: $0
Blooom is best for:
- Employer-sponsored plan participants
- Hands-off investors
- Investors with higher-than-average risk tolerance
Blooom at a glance
| Overall |
|
|
| Account management fee |  |
Account analysis is free. Management fee is a flat $1/month on balances under $20,000 and $15 a month on balances $20,000+ |
| Portfolio | Not Rated | Investments used are limited to 401(k) offerings. Blooom prioritizes index funds, with occasional use of actively managed funds. The service first reviews funds already owned. |
| Account minimum |  |
$0 |
| Account fees (annual, transfer, closing) | |
None |
| Accounts supported | |
• Employer-sponsored plans: 401(k), 457, 403(b), 401(a) and TSP |
| Automatic rebalancing | |
Portfolios are checked every 90 days and rebalanced if needed. |
| Customer support | |
Email and chat support |
Where Blooom shines
401(k) management: An employer-sponsored plan like a 401(k) is the primary retirement savings vehicle for many people, yet it’s rare for an online advisor to manage them; most exclusively deal with IRA and taxable accounts. The field isn’t completely without competition: FutureAdvisor manages some Fidelity 401(k) plans free of charge, and Vanguard Personal Advisor Services and Personal Capital both offer 401(k) guidance if requested, but not direct management. But Blooom is certainly the key player here. The company excels in its ability to manage any 401(k), no matter where the account holder works or where the account is held. There is no need for your employer to have a partnership with the service.
No account minimum: Beginner savers can have their accounts managed by Blooom right from the start, giving them a better shot of getting off on the right foot.
Free analysis: Anyone can connect and analyze their 401(k) for free, a process that is about as painless as it gets: You create a Blooom account and link your 401(k) by selecting your provider and logging in right on Blooom’s site. Using a flower as a symbol of your 401(k)’s health, the company will then show you how your existing allocation is faring and what Blooom would suggest to improve upon it. At that point, DIYers could easily take those recommendations and make changes to their asset allocations on their own. Those who want assistance can sign up for management with Blooom, which includes rebalancing every 90 days. Management customers are sent an email notification each time an adjustment is made.
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 fund option into one of 14 categories. Then, the company’s algorithm selects the fund in each bucket with the lowest internal expense ratio. Although there are many instances when there is 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.
Account assistance: Blooom considers itself a second pair of eyes for your employer-sponsored plan, and many investors could use that sort of hand-holding. The company’s customer service was excellent in our tests. Users also can email Blooom any confusing plan information or correspondence, and Blooom representatives will translate it into easy-to-understand language and tell you what sort of reaction — if any — is necessary.
Straightforward pricing: Blooom charges $1 a month on accounts with balances under $20,000 and $15 a month on accounts with $20,000 or more. There’s something to be said for a clean, flat monthly fee; users know exactly how much they’re paying, and the fee is charged to a credit or debit card rather than being skimmed from the account balance.
But in order 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, and that’s where things get tricky: Whether Blooom’s fees are competitive depends on the account balance. On a $2,000 balance, $1 a month amounts to a management fee of 0.6% a year; more than most robo-advisors charge. On a $19,000 balance, on the other hand, $1 a month is a steal at 0.06%.
The same goes for accounts over $20,000 that incur the $15 monthly fee — when you first cross that threshold, you’re going to be paying a pretty penny at 0.9%. But for the average 401(k) participant with a balance of $84,400, $15 a month is only 0.21%, which is reasonable.
Where Blooom falls short
Limited investor assessment: The company sign-up process, which involves linking your 401(k) account by signing in with your username and password, is very straightforward. But it may not be comprehensive enough from an investing standpoint: The questions that determine how the company allocates your assets don’t delve any deeper than 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 — the goal of every client is rightly assumed to be retirement — but investors of every age vary in their risk tolerance, and that should be considered. For its part, Blooom says that many investors aren’t confident in their risk tolerance, and the company’s streamlined application makes the service more appealing.
Aggressive allocation: For the sake of testing, 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. Bloom says its algorithm tends to favor equities until the investor is roughly 20 years from retirement. Many investors would 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 recommended by Blooom do have the option to change it by simply moving a slider during the sign-up process.
The bottom line
Blooom fills a niche by providing management to employer retirement plans, a service that few other robo-advisors provide. This is a significant offering, as 401(k) plans hold roughly $4.4 trillion in assets, and Blooom’s service is available for all plans at all companies and plan providers. It’s certainly worth taking advantage of the company’s free plan analysis, and trying the management services comes with little commitment. You can cancel any time, and since your 401(k) always remains where it is, there’s no trickiness around moving or closing accounts.
Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email:aoshea@nerdwallet.com. Twitter: @arioshea.
No comments:
Post a Comment