May 2, 2018

Blooom Review: Is It Good?

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Blooom takes the stress of managing your 401(k) asset allocations off your shoulders. With a strict focus on your workplace retirement plan, they offer a service many other robo-advisors don't offer.

Blooom was created by a Certified Financial Planner who wanted to provide overwhelmed 401(k) investors with investment advice. Today it manages more than $2 billion in assets.

They use an algorithm based on your birthdate and targeted retirement date to create the perfect asset allocation with minimal internal costs. Their plans are strictly for retirement plans, including 401(k), 403(b), and 401(a) accounts. You cannot use the service for individual retirement accounts or taxable accounts. Despite its reputation as a robo-advisor, there is a human element to the service as well, giving investors the best of both worlds for a fee of $10 a month.

Keep reading to learn if Blooom is right for you.

Who Is Blooom Best For?

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  • Investors who don't have the time to handle their own investments: Investing is time consuming and emotional. Both of these can be obstacles to reaching your financial goals.

    Blooom helps with both issues by managing your account for you (most of which is automatic) and removing the emotional aspect of investing. You still have a say in what happens - you can always say "no." But you have the benefit of professional and "robo advice" should you want it.

  • Investors who pay individual advisors for 401(k) advice: If you are lucky enough to have found a financial advisor who will offer advice on your 401(k) - and many won't - you are likely paying an hourly fee for it. Because the advisor can't skim his fees right from your account since your plan manages it, you have to pay him on your own. Blooom charges just $10 per month, which is likely a very small fraction of the hefty fees you pay now.

  • Investors worried that they won't have enough for retirement: Knowing the perfect asset allocation to reach your retirement goals can feel a lot like searching for a needle in a haystack. According to Blooom, 45% of their clients weren't aggressive enough with their 401(k) portfolio and 8% were too aggressive with it prior to using Blooom. If you fall somewhere in those categories or lose sleep at night wondering if you'll have enough for retirement, Blooom may be helpful.

How Much Does It Cost to Use Blooom?

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As we discussed already, Blooom costs just $10 a month. Now before you jump on board because that sounds like peanuts for what they offer, put it into perspective. Consider the fee based on its percentage of your assets, as that's how most advisors charge their fee.

The more you have invested, the lower the percentage and the better the deal. For comparison purposes, let's look at Wealthfront. They charge 0.25% of the assets under management annually. Now let's say you have $1,000 in your 401(k), Blooom would cost you 12% annually. Compared to Wealthfront's 0.25% annual fee, that's a big difference and it might not make sense.

If you have $50,000 invested in your 401(k), though, your fee based on a percentage of your assets would be 0.24%. This is comparable to the fees robo-advisors like Wealthfront charge.

Is Blooom safe? Blooom goes to great lengths to protect your private information. They use 256-bit encryption and bank-level security. They also use various methods to protect you from fraudulent activity and/or hacks and enforce third-party authentication whenever changes to your account are requested.

Of course, you need to do your part to keep your information safe as well by continually changing your password and refraining from sharing your log in information with anyone else to continue to keep your account safe.

Why We Like Blooom

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  • They offer a unique service with great benefits. Blooom offers one service - managing your 401(k) investments - but it's a service you'll be hard pressed to find elsewhere. In fact, it's often difficult to find a personal advisor who will manage your 401(k) investments because they know they can't skim their fee off the top of your account. That's not to say that there isn't competition, but Blooom is unique in the exact services it offers. In other words, Blooom offers investment management services for an account that would otherwise be left to your handling.

  • You can use the service without paying for it. If you are a DIY investor confident in your skills, you could register for a Blooom account, look over their analysis and recommendations, and then implement the recommendations yourself. You could also go over the recommendations and decide if they're right for you. If it's not a strategy that you can live with, you don't have to sign up and pay for the plan. You get the information first and then pay for it, giving you ample opportunity to think it through.

  • You'll learn which investments have the lowest expense ratio. Blooom evaluates every investment option within your 401(k) plan. After segmenting them into what they call "buckets" or categories, they will choose the fund that has the lowest internal expense ratio. This may help increase your retirement fund by putting more money towards investments and less towards the costs to make those investments.

  • You can tweak the asset allocation. Blooom gives you the option to change your asset allocation right from the start or at any time that Blooom manages your assets. While they tend to choose heavy stock allocations, you can change that by clicking on "Adjust Allocation" in your account. All you have to do is move the slider back and watch the allocation between stocks and bonds change until you hit a level that will allow you to sleep at night.

  • You can cancel the service at any time for no fee. Blooom does not charge a cancellation fee or have any type of contract you must sign. It's a month-to-month service and if you don't want to use it any longer, you can just cancel it within 48 hours before the last day of the month.

  • You can use the service no matter who you work for or who holds your 401(k) plan. You don't have to work for a specific company or have a specific company hosting the plan. In fact, your employer doesn't even have to know that you signed up for service with Blooom.

  • You pay fees directly with your credit or debit card. Investment companies typically take their fee off the top of your investments, decreasing the return you receive. Blooom doesn't do that. They automatically charge a debit or credit card the $10 fee each month. This helps you see more money in your retirement account in the long run.

  • There is human interaction. Sometimes when you sign up with a robo-advisor, you get no human interaction. That can be tough. While Blooom does use an algorithm and they automatically readjust your account, you can chat online with or email a real person. In fact, a "real financial advisor" will oversee your account upon opening it and periodically throughout your service to make sure your account looks as good as it can.

  • Your account is reviewed/rebalanced every 90 days. Blooom automatically rebalances your account (if necessary) every 90 days. This way they can make sure you are sticking within the recommended allocations to meet your targeted retirement goals.

  • You can ask the advisors financial questions on any type of account. While the financial specialists are there to answer your 401(k) questions, Blooom specialists will answer general financial questions about other accounts if you ask them.

Why You May Want to Look Elsewhere

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  • You have non-401(k) retirement accounts to manage. If you don't have an employer-sponsored 401(k) or 403(b) plan, you cannot use Blooom's services. They do not offer IRAs (yet, in their words) or other taxable accounts.

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  • You want to alter your risk tolerance. Blooom comes up with your "perfect" allocation based on your birthdate and potential retirement date. They don't ask any other questions. This means you can't let an advisor or even a robot know about your risk tolerance. You may even have specific investment goals you want covered. Blooom doesn't ask questions about any of these things, making altering your allocation based on risk tolerance very minimal.

  • You don't like investing in stocks. Many investors find that Blooom automatically recommends that they invest 100% in stocks. Even if they adjust the slider to invest in fewer stocks, it's still a stock-heavy allocation. Blooom says that 45% of their current investors weren't aggressive enough in their investments. Blooom tries to change that by encouraging aggression. If stocks make you lose sleep at night, Blooom might not be the right choice.

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How Blooom Compares

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Blooom vs Wealthfront: Blooom and Wealthfront are both robo-advisors. The similarities end there. Blooom focuses on 401(k) and other employer-sponsored retirement accounts. Wealthfront focuses on IRAs and taxable accounts. Wealthfront and Blooom also differ in how they handle your funds. Blooom doesn't take custody of them; they just manage your account after you link it to their system.

 

Blooom

Wealthfront

 

Benefits and Features

Annual FeeAnalysis are free, $10/month and then $7.50/month for each additional account
0.25%
Minimum Deposit
$0
$500
Phone Support
Yes
Yes
Live Chat Support
Yes
No
Email Support
Yes
Yes
Human Advisors
Yes
No
Assets Under Management
$2.2 Billion
$8.2 Billion
Tax Loss Harvesting
No
Yes
Goal Tracker
Yes
No
Automatic Deposits
No
Yes
Online Platform
Yes
Yes
iPhone App
No
Yes
Android App
No
Yes
Single Stock Diversification
No
Yes
Fractional Shares
No
No
Taxable Accounts
No
Yes
401k Plans
Yes
No
IRA Accounts
No
Yes
Roth IRA Accounts
No
Yes
SEP IRA Accounts
No
Yes
Trust Accounts
No
Yes
529 Plans
No
Yes

Blooom: Pricing information from published website as of 04/04/2018

Wealthfront: Pricing information from published website as of 04/04/2018

Blooom vs Betterment: Betterment is another robo-advisor with the typical 0.25% of your assets under management fee offering IRA and taxable account investments. Like Blooom, they don't have a minimum account balance, but they don't touch 401(k) accounts, a gap that Blooom has filled quite nicely.

 

Blooom

Betterment

 

Benefits and Features

Annual FeeAnalysis are free, $10/month and then $7.50/month for each additional account$3/month for accounts under $10,000 with no auto-debit, 0.35% for $10,000 and under with auto-debit, 0.25% for accounts between $10,000 and $100,000, and 0.15% for accounts above $100,000
Minimum Deposit
$0
$0
Phone Support
Yes
Yes
Live Chat Support
Yes
No
Email Support
Yes
Yes
Human Advisors
Yes
Yes
Assets Under Management
$2.2 Billion
$10 Billion
Tax Loss Harvesting
No
Yes
Goal Tracker
Yes
Yes
Automatic Deposits
No
Yes
Online Platform
Yes
Yes
iPhone App
No
Yes
Android App
No
Yes
Single Stock Diversification
No
No
Fractional Shares
No
Yes
Taxable Accounts
No
Yes
401k Plans
Yes
Yes
IRA Accounts
No
Yes
Roth IRA Accounts
No
Yes
SEP IRA Accounts
No
Yes
Trust Accounts
No
Yes
529 Plans
No
No

Blooom: Pricing information from published website as of 04/04/2018

Betterment: Pricing information from published website as of 04/04/2018

Blooom vs Target Date Funds: Blooom tends to give investors a bit more flexibility and customization regarding their asset allocation than target date funds do. While they have a similar idea, slowly moving the asset allocation from equity-based to bond-based, Blooom offers many more customization features as you get closer to retirement (other than simply choosing the "targeted" retirement date).

Bottom Line

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Blooom can help you manage your 401(k) investments when you don't have the first clue where to start. Whether you just opened your 401(k) or you have had it for years, it's a service that not many other companies offer. If you are unsure about the right asset allocation or don't have the time/knowledge to rebalance your allocation periodically, it may be worth the $10 monthly fee to make sure you are on target to retire with the bank account you envision.

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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