Blooom targets employers to gain scale in robo-advisory market
According to a recent report by BI Intelligence, startups in the wealth management sector need to differentiate their products to succeed, especially as large incumbent wealth managers are embracing the technology and launching their own products which they are able to scale quickly. Blooom does so by targeting companies, offering employees 401k plans, and it has accumulated $300m AUM since launching in 2013. By offering a B2B version of its service, Blooom is able to scale more quickly that it would by targeting individual consumers. 

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Blooom, a U.S.-based robo-advisor that uses automated investment technology to manage a user's 401K, has reached a milestone.

The company, which launched in 2013, has announced that it now manages $300 million in assets under management (AUM). For comparison, Betterment, the largest robo-advisor startup in the U.S., has gained $4 billion AUM since it debuted in 2008.

Blooom has its users answer questions about their gender, age, and preferred retirement age and then connects to their existing 401k fund. The company then uses an algorithm to determine the best investments for that user, analyzes performance every 90 days, and adjusts every few years in order to help the user reach his or her retirement goal.

Blooom charges $1 for funds up to $20,000 and then charges $15 per month thereafter. For users with $20,000, this equates to approximately 1% of their fund, which is around the same rate charged by legacy financial advisors but more than other robo-advisors. But as the user's managed assets grow, the pricing becomes far more competitive.

The company likely wants to focus on attracting business customers. Many U.S. citizens have a 401K through their employers because these plans often contain additional benefits, such as employer contributions. But the management of 401K plans can become a major pain point.

So Blooom offers a business-to-business version of its service, and companies then turn around and offer Blooom to their employees. This lets Blooom scale its business far more quickly than it would by catering to individual consumers.

Robo-advisors are threatening to upend the enormous global wealth management industry in several ways, and they are likely to arrive in full force within the next few years.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on robo-advising that looks at the market for robo-advisory services, the drivers behind consumer adoption of robo-advising, why the robo-advisor market presents an opportunity to traditional wealth management firms, and how startup robo-advisors can succeed as massive legacy companies begin offering their own services.

Here are some of the key takeaways from the report:

Large incumbent wealth managers won't lose out to startups like Betterment and Wealthfront. Instead, they are embracing the technology and launching their own products, which are scaling quickly.

which are scaling quickly. Consumers across all asset classes are receptive to robo-advisors — including the wealthy. 49% of this group would consider investing some of their assets using a robo-advisor.

The majority of assets managed by robo-advisors will come from people who already have some investments. We estimate that the volume of assets that comes from people who don't currently invest will be less than 1% of the total by 2020.

Startups are going to find it difficult to scale, and will need to differentiate their products to succeed. They are already doing this by providing white label services to wealth managers, and more customized stand alone solutions.

In full, the report:



Provides a forecast for the volume of assets robo-advisors will manage by 2020.

Highlights the factors that will drive the growth of robo-advisors

Explains the different types of robo-advisor business model.

Details the outlook for incumbents and startup robo-advisors in the wealth management industry.

To get your copy of this invaluable guide, choose one of these options:

START A MEMBERSHIP Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of robo-advisors.