It's 2016: Do You Know Where Your 401k Is?

Kansas City’s Blooom takes the jitters out of New York Stock Exchange gyrations.

Chris Costello, Kevin Conard and Randy AufDerHeide at Blooom's new HQ in Park Place, Leawood

     You walk in and ask Chris Costello, “What’s the market doing today?” and he gives you a look that says, “How should I know?” and “Why should I care?”

     You’re inclined to suggest that as CEO of a financial startup that’s targeting the nation’s 90 million 401ks, he probably should have a handle on whether the Dow is up or down, what interest rates are doing and how much oil the Saudis are going to pump in the next quarter.

     Instead, you’re likely to get a lecture that you (as a member of the financial media) are what’s wrong with America today, that your incessant shrieking about this crisis or that, and your never-ending parade of pundits predicting economic doom and gloom, has scared investors out of billions in wealth, and that “chasing the market” has led far more people to financial ruin than riches.

     “What the financial newspapers and magazines, and CNBC, have done is improperly trained people to believe that you can ‘beat the Street’ if you study the market, and you’ll reach your retirement goal. It’s complete BS. You sell a lot of newspapers and magazines when you have people screaming about the next financial crisis or the apocalypse du jour — that Chicken Little is right this time and the sky really is falling. But more wealth has been lost in this country because of bad advice than anything else (‘buying high and selling low’). It feeds into this whole performance-chasing business. What most Americans need is a good portfolio and not screw it up.”

     And with that, you are welcomed to Blooom Inc., a high-tech Kansas City money management firm of 21 employees focused on helping non-millionaires understand the investments in their smallish 401ks, and creating — and executing — strategies to improve their returns. They are 2 years old, headquartered at Park Place in Leawood, have clients in all 50 states, already have analyzed nearly $500 million worth of individual accounts — and have a pingpong table in their office for staff tournaments. Everybody’s wearing jeans, nobody is wearing a tie and there’s not a hint of mahogany paneling anywhere.

     “Eighty percent of the people with 401ks don’t have a strategy to ‘beat the Street,’” Costello says. “In fact, they don’t have a strategy at all.”

     Costello’s overarching investment advice: Contribute to your 401k consistently, have it professionally managed and DON’T PANIC every time the market takes a dive. Over a 20- or 30-year span, the market’s occasional nervous breakdowns will mean nothing. “Since World War II the stock market has been crushed 13 times, and each time it’s come back stronger. People who stay in through highs and lows are multimillionaires today. Those who sold lost fortunes.”

Do you know what your 401k is doing?

     As a certified financial planner formerly of UBS Wealth Management and Wachovia Financial Securities, Costello believes the wrong people are getting access to the best money advice but that Blooom can change that.

     “People who have $1 million invested in their 401ks will have personal managers making trades for them,” he says. “But if you’re young and you only have a few thousand in your 401k, or even just a few hundred, professional money managers aren’t going to work with you. They’ll give you a pamphlet to read, or tell you to call an 800 number for advice, maybe send you to a website.”

     As a result, Costello estimates that of the 90 million 401ks in the nation today, the vast majority are being owned in ignorance. Workers sign up for their 401k (403bs for nonprofit business accounts) on the day they go to work, get monthly statements with pie charts and graphs, but have no real idea whether they are keeping up or falling behind.

 “If you were to ask 90 million people, ‘Do you know what you’re doing with your 401k,’ we believe 85 million would say, ‘No, not really.’”

Enter Blooom

     Here’s how it works: In the privacy of your own home, any investor — “we have accounts with as little as a few hundred dollars, all the way up to a few million” — can go onto Blooom’s website,, click on a video that explains the company’s philosophy and more importantly, click on an app that will analyze the 401k you already have. (The company works exclusively with employer-sponsored retirement plans, including 401ks, 403bs, 457s and Thrift Savings Plans (TSPs).)

     The site asks your name, age, gender and when you think you’d like to retire. It also offers you a slide bar where you can tell the computer how risk-averse you are. The more risk you are willing to take, the more aggressive you can be with your holdings; the less risk the less aggressive. (Young people with time on their hands often chose riskier positions, while older people nearing retirement tend to be more risk-averse.)

     You type in your personal code to access your 401k. In all, it takes all of four or five minutes to log in and check the status of your portfolio, and when the program is finished, instead of giving you a pie chart, it offers you a digital flower.

     “If the flower is dried up, hanging over with flies around it, you know you’re in trouble,” Costello says. What you want is a colorful flower in full bloom. The question is how do you get from where you are to where you want to be?

     With just a few more clicks, you can become a Blooom client. The company-designed computer algorithm will sort the options in your company’s 401k plan, rebalance your portfolio into mutual funds spread across 12 key market sectors, and within milliseconds you not only have a 401k strategy, but you’ve already executed it.

    You did not have to drive downtown to talk to an investment counselor, you did not have to try to speak financialese to someone on the phone, and you did not have to pretend to understand 15 pages of charts. It was all done online and in a matter of minutes.

     “Then you can sit back and do nothing if that’s what you want to do,” says Costello. “Our computers will automatically re-analyze your investments every quarter and make adjustments. Every two years we will readjust your portfolio — which means we’ll trim some of the most expensive holdings and reinvest the money in less expensive funds.” 

     And the cost? If you had a multimillion-dollar portfolio with a professional money manager overseeing it, a typical fee for shepherding your investments would be 1 percent per year (think $10,000 per million). At Blooom, if your portfolio has a value of less than $20,000, the fee for maintaining it is $1 per month. If you have more than $20,000, the fee goes to $15 per month.

     “It’s economy of scale,” says Costello. “You will never meet with anyone here face-to-face or ever talk to anyone by phone. Everything is online. There is no human labor involved, and you get the same advice you’d get at the big Wall Street firms.” And you get the same service in terms of actual execution of trades. In short, you don’t have to know what you’re doing with your portfolio because the computer knows for you.

Future Forecast

     It’s hard to tell if Blooom’s formula will be a success over the long term, but the company of just 21 employees already has drawn the attention of major players in the industry. There have been write-ups in The Wall Street Journal, Forbes, Barron’s and Business Insider. CNBC has featured the company on its network.

     Blooom was self-funded for its first two years by Costello and his two co-founders, Randy AufDerHeide and Kevin Conard. Last October Blooom secured a $4 million round of Series A investment. The funds came from national companies QED Investors, Commerce Ventures, Hyde Park Venture Partners, Prudential and two Kansas City companies, DST Systems Inc. and UMB Bank.

     And it has been making its mark in the Kansas City area, as well. In 2015, Blooom competed against 377 companies nationwide in the Kauffman Foundation’s One in a Million competition,” and was named first-place winner by a panel of judges including Marcelo Claure, CEO of Sprint Corp.; Nicole Glaros, partner and chief product officer of Techstars; and Miriam Rivera, Google’s first vice president and deputy general counsel. The judges evaluated the teams based on long-term potential, management team and marketability. The prize was a check for $10,000 presented by Mayor Sly James.

     The company’s clients also hail from high-impact corporations, including Microsoft, Oracle, Amazon, Apple and others.

     “Right now our demographic is professionals in the 35 to 45 age range with 401ks anywhere from a few hundred dollars to a couple hundred thousand,” Costello says. “We are a little heavily weighted toward men – but I’d like to see that change.”

     Costello says women are prime candidates for Blooom. “Men tend to let their egos get in the way. They like to believe they can study the market and make their own choices. They don’t ask for help. We think women will ask for help and will like the idea of being able to do it all online.”

What’s with the extra “o”?

     The extra “o” in Blooom’s name is not the result of some typo on its application to become a Registered Investment Advisor (also known as a robo-advisor), nor is it some kind of mystical homage to the Greek god of financial services companies. According to Costello, it was a question of Internet domain name availability and the fact that already had been taken.

    Because the company wanted to stay with the imagery of a blooming flower representing your blooming 401k, the decision was made to drop in the extra “o” and plant that seed on the Web.

     It is, however, something people always ask about, and “if ever became available, I’d probably try to buy it,” Costello said.

     And yes, it plays havoc with your autocorrect, but might do some good for your 401k.