Most robo-advisors compete hard to invest your money by rolling out a full range of services including digital and human counseling, retirement calculators, and mobile finance apps. But few cater to retirees who are unsure whether their 401 (k) is being properly managed.
And that left a gaping market opportunity for a digital money manager called blooom, who was started by three people from the Midwest.
blooom is unique among robo-advisors as it specializes in managing 401 (k) accounts that so many robo-advisors overlook.
Unlike robo-advisors, who require you to transfer assets, blooom simply connects to defined contribution accounts you already have, so getting started with blooom is easy.
Another brownie point for blooom is pricing. blooom calculates a flat annual rate from just US $ 95.
In addition, blooom does not set a minimum account, so small accounts can benefit immediately and people with large accounts get a lot of money for their money.
4 out of 5 stars
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blooom Vs Robo-Advisors
blooom (with three “o”) focuses on optimizing 401 (k) plans for Americans. Unlike most other robo-advisors who generally service taxable accounts, traditional IRAs, Roth IRAs, and SEP IRAs, blooom only manages 401 (k) plans.
When you have a ton of money to invest at a low cost, a number of top notch robo-advisors will pop up on your radar screen.
However, most of these companies focus on standard taxable accounts as well as traditional IRAs, SEP IRAs, rollover IRAs, and Roth IRAs. Where blooom stands out from its competitors, its focus is on defined contribution plans.
It comes as a shock to many 401 (k) investors that their investment agents and mutual funds aren’t actually managing their money on their feet.
When you first sign up with these companies, you selected the percentage allocation to invest in each fund, and if you are like most people, this selection process was likely accidental. It is not uncommon for many 401 (k) investors to choose an allocation and forget about it over time.
For most retired investors, investing in 401 (k) is a murky world of fees and uncertain fund decisions. The funds you invest in have expense ratios that will gobble up your savings year after year, and the allocation may not be optimal, but how do you really know?
blooom has the ambitious goal “Fix 401 (k) s for EVERY AmericanIt’s got off to a rocky start with over $ 500 million in assets under management. The idea is to help 401 (k) help all Americans be smart, simple, and readily available.
How bloom works
First connect blooom to your existing online 401 (k) account. blooom analyzes your 401 (k) inventory and makes changes within 10 to 30 days. After that, blooom will monitor your account regularly and notify you when your portfolio is automatically rebalanced.
When you register with blooom, your assets are preserved. You don’t have to deal with the hassle of transferring money to get started.
Unlike many other robo-advisors who keep your assets in custody, blooom is simply linked to your existing 401 (k) accounts. As long as your account is online, blooom can immediately start evaluating your 401 (k) stocks.
The best way to imagine blooom is with a digital manager constantly reviewing your 401 (k) account balances to see that your allocations match your risk profile and the algorithm looks for ways to cut your costs. As soon as you have linked your account with blooom, it takes between 10 and 30 days for blooom “fix“Your 401 (k).
Dismissing account analysis at blooom is performed in an automated manner by computer algorithms, but licensed consultants and blooom account coordinators test and confirm that the realignment has been correctly completed.
After changes have been made, blooom monitors your account regularly to see if changes are required and takes action on your behalf so that you don’t have to lift a finger.
Every time changes are made you will be notified by email so don’t be surprised if you receive your 401 (k) instructions by email with a new portfolio selection.
When blooom is even brighter, you have access to experts via live chat, email or phone if specific questions about your 401 (k) arise.
Which accounts does blooom manage?
blooom only manages employer-sponsored retirement accounts, including:
So far only individual accounts are managed by blooom. Families need to sign up separately to ensure that each account is diversified and that each family member has their own Bloom profile, including age and target retirement date.
For investors looking for automated investment management for taxable accounts, traditional IRAs, Roth IRAs, SEP IRAs, rollover IRAs, and trusts are better suited, as robo-advisors like Betterment are better suited.
blooom fees against robo-advisor fees
Most robo-advisors charge a percentage of the assets under management. For example, Betterment and Wealthfront charge 0.25% annually for purely digital advice.
Schwab Intelligent Portfolios is unique in that it does not charge management fees as it earns money with expense ratios from its own funds, which make up customer portfolios.
Financial industry goliaths such as Vanguard and Fidelity offer robo-advisor services for an annual fee that is a percentage of assets under management.
In contrast, blooom charges an annual flat rate of 95 to 250 US dollars, depending on the level of service you choose:
- Essentials: $ 95
- Default: $ 120
- Unlimited: $ 250
Regardless of the size of your account, the flat rate remains the same. You won’t find any hidden “Pitfalls”In their fee schedule and you can cancel at any time.
For those with retirement savings of $ 50,000 or more in a 401 (k), blooom is an obvious win. You pay lower fees than most other robo-advisors and you don’t have to worry about the hassle of transferring assets to another custodian.
How secure is your account with blooom?
blooom uses five main methods to keep your 401 (k) account secure:
|256-bit encryption||SSL encryption is used to keep data private.|
|Bank-level security||A high level of security is applied to all personal data.|
|Secure servers||Encryption is used to ensure that online transactions are secure and data is kept confidential.|
|24/7 hacker virus scans||24/7 scanning protects you from fraud and unusual account activity.|
|Third party verification||Third party verification is used to ensure that your identity is not compromised.|
blooom portfolios against robo-advisors
Most robo-advisors include Nobel Prize-winning research Modern portfolio theoryin their algorithmic selection of funds when building client portfolios.
In general, this means aiming for returns that match your risk profile. Younger investors with longer time horizons can invest more heavily in stocks, while those approaching retirement tend to have a higher weighting on bonds.
blooom is not trying to reinvent the wheel when it comes to choosing investments, but instead changes the portfolio allocation to adapt it to the targeted risk. If your portfolio is weighted too aggressively in stocks compared to your financial goals, your risk profile and your time horizon, blooom will make the necessary adjustments.
One challenge for Blooom is the limited investment opportunity. Unlike an IRA or standard tax account, 401 (k) accounts are limited by a set number of funds provided by your employer plan sponsor. Therefore blooom tries to optimize your allocation based on the available choices and not on the universe of all stocks and bonds.
blooom Vs Robo Advisors Summary
blooom differs from other robo-advisors in three ways. First, blooom specializes in 401 (k) accounts and defined contribution plans in general, as opposed to taxable accounts and IRAs.
Second, blooom doesn’t take care of your wealth, it connects to existing online retirement accounts that manage your 401 (k) and digitally monitors the allocation and fees using proprietary algorithms.
And finally, instead of a percentage of assets under management, blooom charges an annual flat fee which is convincing value for large accounts as the fees do not increase proportionally like most robo-advisors do.
For any retired investor who is serious about optimizing their 401 (k) holdings, blooom is our preferred digital manager.
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