Blooom: How This Robo-Advisor Automates Your 401(K)

When looking for effective ways to save for retirement, many younger investors are now turning to roboadvisers, also called robos. They’re automate financial advisers that help people save for retirement while being a lot less expensive compared to human ones.

One example is a roboadviser called Blooom, which is designed to seek out the lowest fee options for the customer’s 401(k) plan. According to Chris Costello, one of Blooom’s cofounders, today’s 401(k) “Most people outside of the industry do not understand basis points pricing so we should price our services in a simple, flat fee manner. The simpler the better. Moreover, pricing should be so affordable that it will be possible for everyone (hopefully) to afford. Pricing should never be a barrier to entry to access financial services. Ever.” Information from the Center for American Progress shows that the average American will pay more than $138,336 in fees during the lifetime of their retirement account.

Blooom works in a way similar to other roboadvisers available today. It uses an algorithm to find low cost options based on what’s available in the customer’s plan. Most of the time, these will be passive index funds mirroring a market index. As these funds lack highly paid managers who constantly try to beat the market instead of following it, they can charge lower fees. The performance of these funds is usually quite good as historically, investors have gotten better results simply by following index funds. Furthermore, only 24 percent of mutual fund managers have succeeded in beating the market during the last ten years.

Blooom’s approach to investing seems to have caught the attention of a new generation of tech-savvy investors who are weary of Wall Street. The service was launched back in 2013 and is now responsible for managing more than $2 billion in assets.

[Robots are] better at driving cars, better at identifying diseases. Human error is a big thing — and they’re not greedy.

– Jesus Adrian Perez, Albuquerque, N.M. took the Blooom free analysis survey

Blooom gives every new customer a free look inside their 401(k) plan and shows them the difference that using a roboadviser can make. According to Costello, the company’s Cofounder, roughly 40 percent of users who get the free analysis end up becoming clients. There are currently over 20,000 individuals using Blooom’s service and the company states that this number is growing every single day as more investors become aware of what it has to offer. They also project that the median client is able to save $41,456 in investment fees during their working careers by using Blooom. They base the $41,456 off someone with 27 years left to retirement and an average rate of return of 7%.

S&P 500 Historical Chart
S&P 500 Index – 90 Year Historical Chart

How Blooom’s Automatic 401(k) Optimization Service Works
Linking your 401(k) account to Blooom is very simple and can be done in just a few minutes. The roboadviser will take a look at your plan and give you completely unbiased advice in its free 401(k) analysis. It takes the options available in your plan into consideration and eliminates any funds that aren’t likely to be beneficial to you based on your retirement goals. In the next step, Blooom uses an advanced algorithm to select more ideal investments for you. If you subscribe to the service for just $10 a month, Blooom will keep watching over your account and rebalance it on a regularly scheduled basis.

While the Blooom platform is available entirely online, it isn’t entirely robotic. You can get access to a Certified Financial Planner to get professional answers to any questions you may have about your 401(k).

An Affordable Way to Manage Your Investments

Many people find retirement funds to be needlessly confusing, which is why they hire financial planners to manage their 401(k) for them, hoping that they’ll make the best decisions. Unfortunately, having someone manage your investments for you is often quite expensive.

Blooom believes in offering everyone a simple and affordable way to manage their 401(k). Their roboadviser actively manages your account and makes the wisest decisions for just $10 a month.

Regular Rebalancing for Best Results
When you first sign up with Blooom, the service will take care of rebalancing your 401(k) for you. It also offers you regular rebalancing to ensure the best performance of your investments in case you change your retirement goals, the market moves in a way that knocks your portfolio off balance or a certain fund is no longer offered by your employer.

Your Money Stays Safe With Blooom
Blooom takes security and the privacy of your financial information seriously. They run regular security scans to protect their service from malicious attacks and encrypt all of your data with bank level security. As an added safety measure, only you have control over your funds. While Blooom is able to automatically carry out account adjustments for you, it doesn’t require that you move your money. The online service isn’t able to withdraw money out of your 401(k) account either, as this is something that only you can do.

Who Can Benefit From Using Blooom?

One of the best things about Blooom is that the service has something to offer to anyone with a 401(k) account, regardless of their retirement goals or the size of their portfolio. The initial 401(k) analysis that it provides is completely free and can help you figure out many ways to optimize your investments.

Following the free analysis, the service costs just $10 a month. This is less than the cost of your average gym membership and much less expensive when compared to using the services of a fee-only financial planner, which will typically set you back at least several thousand dollars. Using a professional investment advisor will cost you even more, as they tend to charge you close to 1 percent of your investable assets as a fee. The majority won’t even be interested in working with you unless you have a portfolio worth at least six figures.


Source 1$41,456 investment fee savings based on median blooom client 401k balance of $47,131 assuming $5,000 annual contribution, pre-blooom investment expense ratio of .56%, post-blooom investment expense ratio of .22%, and 30 years until retirement as of January 9, 2018. Blooom is limited to the funds available in your employer sponsored retirement account. There is no guarantee blooom can or will reduce your fund expenses.