Several years ago, I had the pleasure of interviewing Chris Costello, co-founder of Blooom. With Blooom, you can get help selecting and managing your 401k or 403b. Think of Blooom as the Betterment or Wealthfront of 401k accounts. It’s a robo advisor that has figured out how to help employees manage their workplace retirement accounts.

Related: Which is Best: Wealthfront or Betterment?

In this interview with Chris, we get an update on what’s been happening at Blooom. As you’ll hear, one of the big changes is how they charge for their services. They have shifted away from a percentage of assets managed, instead moving toward a low, flat rate. It’s a move that has substantially decreased the costs of their service.

They also now offer financial planning advice to their clients. Those who use Blooom can call and speak to a representative about important financial decisions they are facing. Whether it’s saving for a college education or deciding whether to pay off the mortgage, Blooom can help. This service is also a departure from many of the other robo-advisors out there.

Here’s a rundown of our chat:

Rob: Chris, welcome to the show.

Chris: Thank you very much. I appreciate you having me back again.

Rob: Looking forward to it. It’s been a couple of years—

Chris: Yeah, it’s hard to believe.

Rob: You founded Blooom in 2013, right?

Chris: That’s right, in the early part of 2013. It started out with just me, Kevin, and Randy. The three of us co-founded it. Kevin and I had been business partners at wealth management firms, both big brokerage firms. Then we started our own investment advisory firm back in 2004. Kevin and I have actually worked together since 1999 but all three of us have known each other actually since way back in the days of college, which was in the early ‘90s.

Rob: That’s got to be fun, working with college friends?

Chris: It’s really quite amazing that melding friendships and business, especially in the high-pressure crucible of building a rapidly growing start-up, it is pretty special. I joke sometimes that before Blooom, Kevin and I had probably gone 17 years without ever getting crossways with each other. And since Blooom has started in the last 4 years, we’ve probably been sideways with each other a dozen times. It’s just a different animal. More pressure and a different environment. But it is pretty cool getting to build something like Blooom with friends.

Rob: I bet. By the way, it’s good to get crossways with each other. If you guys agreed on everything then what would be the point of both of you being there?

Chris: That’s for sure.

Rob: For folks that might not know much about Blooom, why don’t we just start by having you tell us, in a nutshell, exactly what Blooom does for people?

Chris: Certainly. A vast majority of Americans these days are participating in an employer-sponsored retirement account. The majority of these, about 80 percent, are called a 401k. If you work for a non-profit it might be a 403b. Or it could be a T.S.P. if you’re a government worker. When we looked around the general landscape we saw some tools and services popping up to help people with accounts outside of these employer-sponsored retirement accounts like IRA rollovers and Roth IRAs or stock trading accounts. We saw a huge need to build a very simple service to help people with these employer-sponsored accounts. And Rob, you and I both (and most of your listeners) know we are probably not going to get a pension—a traditional pension like our grandparents did where they’d work for a company for 40 years, retire, get a gold watch and a check in the mailbox every single month for the rest of their lives. I’ve got a friend who is a police officer and many friends who are teachers—they’re going to still get that pension, but the rest of corporate America, at least 90 percent of us will probably never see that pension. Like it or not, these 401ks and 403bs are the one thing that’s going to make a difference in terms of someone’s ability to retire. Kevin and I came from the world where we spent— I spent probably the first well first 18 years of my career helping people that generally had seven-figure accounts, make the transition from work life into retirement. Kevin and I both had this nagging thought that as we were helping these people, that these very wealthy individuals arguably needed our help, the least. Meanwhile, Americans who have $30,000, $80,000 or $120,000 in their 401k probably needed this help and service we were providing even more. That, plus the fact that I just was asked so many darn times by friends or neighbors if I’d take a look at their 401k’s, I just got tired of seeing my friends, my neighbors, or my own sister with their 401k completely screwing up their retirement nest egg. You could look at it Rob, and in about two and a half seconds you could see very quickly that this person obviously did not have any strategy. It was a cobbled together, a hodgepodge of random investments in their 401k because the 401k had been turned into this DIY proposition. People are messing these accounts up.

Related: What to Do When Your Employer’s Retirement Plan Sucks

Rob: Right.

Chris: They might be paying too much in fees. They’ve got the wrong allocation. The risk profile is completely off for their stage in life. That was kind of the backdrop that led us to start this back in 2013.

Rob: Okay. Again, I want to make sure people understand how this works. I signed up for an account at Blooom. I don’t use your paid service but I have an account at Blooom and it allowed me to connect my two 401k accounts (which are both with Fidelity) to Blooom. So, it imported a certain amount of information about those two accounts and then you guys go about analyzing them.

Chris: Yes.

Rob: It’s all done by computers. There’s no human being behind it. Obviously, you guys programmed it but, it’s a robo-advisor I guess. So, when I pick one of them—I can pick either one or both for you guys to analyze. And when I pick one of them, you represent the health of my 401k with a flower. And my flower is sort of wilted over to one side with an insect on it which I think is bad. And I’ve got three boxes that are all red, with thumbs down. I’m guessing that’s not good either. Let me start with the first one that says, “Yikes! You’re paying around $1,000 in hidden investment fees.” I take it that includes the expense ratio of the funds I’m in?

Chris: That’s exactly it.

Rob: Does it include anything else? Is there any way for Blooom to detect administrative fees, for example?

Chris: No, no. And we are just looking at those darn hidden fees. Most people who are saving money for retirement really have no idea what they’re paying in hidden fees. I remember for a good many years meeting with people who would bring their statements in from their employer 401k and I’d ask them, “Do you know what you’re paying?” Many would actually say, “I’m not paying anything. My employer is paying everything.” And that’s just not true. Anytime you’re investing in a fund or any type of a pooled investment vehicle inside your 401k, there are internal hidden expenses that usually show up on page 39 of the prospectus in very fine print. It’s very hard to ascertain what those fees are. But, we can pull that data and through the algorithm, run a quick benchmarking test on it to see (on average) where you stack-rank in terms of your expenses. Everybody that’s got a 401k at an employer only has so much control over what those expenses are. A lot of it comes down to whether your employer’s 401k advisor loads the 401k plan up with really low-cost funds or are there a lot of junk fees in there? Here’s the crazy thing. You said your 401k is at Fidelity, right?

Rob: Yes.

Chris: Your next door neighbor could also have a 401k through Fidelity and be paying 10 times the amount of fees that you are. Or, vice versa. It’s almost like this wild west of fees inside these 401k plans. What we try and do is at least analyze and benchmark whether the fees are high. Then, the way in which Blooom can combat those fees for our clients is, our algorithm has been programmed so that when we’re in your 401k about to build your investment portfolio for you, the algorithm is programmed to select the fund out of each of the major asset classes as we’re trying to fill the buckets of the large-cap, mid-cap, small-cap and international, bonds, tips, money markets and all those major asset classes, the algorithm will pull the fund out of each of those asset classes that has the lowest internal expense ratio. So, if there’s a good selection of index funds inside of somebody’s 401k then oftentimes we can move the needle quite a bit inside that 401k in terms of expenses. If they were in a lot of actively guessed funds where the fees are a lot higher and we are able to move those into index funds that are inside the same fund lineup, the change in pre-Blooom and post-Blooom internal fees can sometimes be significant.

Rob: Let me stop you there if I can because I want to ask you a couple of questions. When you evaluate the fees is there a set benchmark you use? If the weighted average fee is below, say, 30 basis points you get a thumbs up and if it’s above that you get a thumbs down?

Chris: That’s exactly right. And I apologize. I think 30 basis points is pretty close. I should know this. I believe it’s actually 40 basis points though. If your weighted average cost across your current fun mix is below 40 basis points, it’s a thumbs up. Thumbs down if it’s above a certain level. Call us and I’ll get those exact figures for you.

Rob: That makes sense. And obviously, if you’re looking for the lowest cost funds of an asset class, an index fund is always going to—I shouldn’t say always because there are some expensive index funds, but by in large, an index fund is going to win out. Let me back up on asset allocations. Do you guys publish your preferred asset allocation plan? Not in terms of stocks versus bonds, but in the split between those two whatever— 80 percent stocks, 20 percent bonds, for example. Do you guys publish what your preferred asset allocation is among the various equities and bond options?

Chris: We don’t. But we could and maybe we should because that is absolutely not part of Blooom’s secret sauce at all. I’ll go to my grave contending that the difference between somebody building wealth and being able to retire has absolutely nothing to do with whether or not you had 18.2 percent in large-cap or 16.3 percent in large-cap. I think there are some bands there which, as long as you’re roughly right on the allocation, then that’s 99 percent of the battle. Unfortunately, I think a lot of people spend their time ruminating and studying, trying to make a difference with what will probably amount to about a one percent difference maker. And that is, which fund should I buy? How much large-cap versus small-cap when most of the difference, Rob, is made in somebody’s lifetime of investing on much more simple things to control. There are about three things that you need to get right to be able to build wealth and hit the goals you’re trying to hit. Obviously, you’ve got to be saving money. There’s no amount of miracle that’s going to come into play if you’re not saving and socking away money. That’s something people have control over. The second thing is the bigger question, are you getting the stock to bond overall risk profile correct in your account? To use an extreme example, are you a 32-year-old that has 80 percent of your portfolio in a bond fund? Or are you a 32-year-old that’s all in cash because you think you’ve got the crystal ball to time the market? If you can just get the asset allocation right for your stage in life which is going to be more heavily weighted towards equities as you’re younger. And, that will start to wane as you get to retirement. But that doesn’t always mean somebody getting to retirement isn’t going 100 percent out of equities because most people that retire at age 60, if they’re married, there’s a pretty darn good shot that at least one of them is going to live in of their 90’s so this portfolio needs to have at least three decades of growth. They can’t throw in the towel totally on stocks at that point. The third point people need to get right is their behavior. This is a hard topic to talk about because very few people who do have an interest in finances, who enjoy this, are ever willing to admit that they might be bad actors and they might have a tendency at some point to make emotional decisions with their money whether it’s panicking out when the market is declining or chasing investments on the way up. These bad behavior type things will destroy the greatest fund allocation known to man. I used to joke sometimes that even if I had a back-to-the-future time machine that could travel forward in time and actually figure out what the best performing portfolio is going to be, then come back and implement that for my clients, if my clients bail out at the first sign that the market goes down, does it even matter that I have that time machine?

Rob: Right.

Chris: Peter Lynch used to talk about that when he was managing the Fidelity Magellan Fund in the 1980s. I read about this in one of his books. We talked about this 10 year time period where the rate of return on a per-year average was something insane. It averaged 20-something percent a year over a 10 year period. But, something like half of the shareholders of the Magellan Fund in that time period managed to lose money. How does this happen? It’s because people are behaving badly sometimes.

Rob: Yeah. I think you and I agree on this. I might add a fourth thing. That would be fees. How much money you save. Stock and bond allocation. When you’re evaluating someone’s 401k and you’re going to make a recommendation, while I agree with you that whether you’re at 16 percent large-cap or 18 percent, is it going to make a difference—you still have to pick something. Blooom still has to make a decision how much is going to go into each fund.

Chris: Yes. And I’ll tell you, that is based largely on the published glide-path allocation from Morningstar.

Rob: Okay.

Chris: We look at what Morningstar says. The first decision— the glide-path decision is made by Blooom. What I mean by that is, how much in bonds versus stocks and cash. Start there. We’ve made those decisions in the glide-path. Again, it’s not proprietary and maybe we should publish those. Most of target market clients would not necessarily ever make a decision based on cash. They said when I was 30 years or 18 years from retirement that I should have this much in bonds and I disagree with that. But there’s glide-path of stock to bond mixture that we’ve made and as far as how much large-cap versus mid-cap, versus small-cap, we’re leaning on Morningstar’s public allocations to help us fill those buckets.

Rob: Okay. I assume the allocation changes as the individual gets older. Does Bloom automatically make those adjustments to the stock/bond allocation as you near retirement?

Chris: We believe the right recommendation for somebody that has at least two decades until they retire should be almost 100 percent in a diversified portfolio of equities for a lot of historical reasons. Now, that’s our recommendation. As you go through the Blooom on-boarding process—or, for that matter, anytime after you’ve signed up, we give our clients the ability to adjust that. If they don’t want to be 98 percent stocks when they’re 30 years out from retirement, our clients have the ability to dial that back several risk levels. You might be able to drop that down to an 82 percent mixture in stocks. There’s an important point I want to make. If you come to Blooom and you’re 30 years old and want to retire at 60 and you want to have half your portfolio in bonds (for whatever reason), that’s fine. Don’t hire Blooom. We’re not even going to take you on as a client because I’ve always believed (as an investment advisor) that I should be giving our clients advice that we believe is in their best interest. And, I don’t think somebody that’s got three decades of their money should have half of it in bonds or in cash. It’s your choice. It’s your money. Go do that on your own. But, if you want our help because you don’t know what the right thing for you is, then that’s where I think Blooom makes a lot of sense. We’re going to advise somebody to be very heavily tilted toward stocks when they’re 20-plus years out from retirement. You can adjust it a little bit down off of that, but once you hit that 20-year mark, until retirement, we will start to adjust your portfolio. We will do this for you every two years. We’re going to move you along that glide-path which means we’re going to start to add more and more bonds into your portfolio as you could creep closer to retirement. Our clients can come in and even tweak that too as well. They can tweak the glide-path too for how much stocks and bonds they have along the way. Again, within the guardrails in place. Obviously, they can change their retirement date. Maybe they originally thought they were going to retire at 60 but things changed and they want to change that horizon. They can do that at any time with Blooom. That will then affect their allocation the next time we go in to rebalance.

Read More: How to Rebalance Your Portfolio

Rob: What’s Blooom’s recommended allocation for someone in the year that they actually retire?

Chris: In the year that they actually retire it is—going off memory here, it is right around about a 55 or 60 percent weighting in the stocks and about a 45 or so percent weighting in bonds. And about a 5 to 10 percent weighting in cash.

Rob: Okay. And I take it when someone makes a monthly contribution to their 401k, when Blooom sees that, they automatically go in and decide which funds should be invested in?

Chris: Actually, at this point the way these plans work is, when we initially go into someone 401k, we fix their allocation and get them situated correctly. We’re also mimicking the instructions in the 401k for their future contributions. Any time new money hits the account, it gets automatically deployed into that same asset allocation we set for them.

Rob: So Blooom can change the contribution elections for their clients based on the ultimate asset allocation that you recommend and they agree with?

Chris: Exactly. Obviously, we’re in no way touching how much they’re contributing but we have to change their future contributions to match what they’re currently going into. That’s a point I always like to make because I think sometimes it gets lost. There’s a number of solutions out in the marketplace that will give you advice on your 401k. One of the takeaways I’d like your listeners to know is that if you hire Blooom, Blooom is actually going to go into your account and place the trades for you. This is not something where you’re going to get an email from us giving you instructions and we’re crossing our fingers hoping you do that. If you’re hiring Blooom, it’s the same thing I used to do for my wealthy clients when I would place the trades for them. We are doing the same thing for our clients at Blooom. We will go into our client’s 401ks and place the trades in their current allocation. And, just like we talked about a moment ago, in their future contributions as well.

Rob: Okay, now to the big question. How much does this cost?

Chris: About two months ago, I think we got the pricing about as simple as it can ever be in all of the wealth management and financial services as well. Very early on we made a decision to not charge basis points. A lot of your listeners may be able to rattle off basis points in their sleep—

Rob: I hope they can’t, particularly if they want to sleep for long. They shouldn’t even be able to call them bps.

Chris: Yeah, that’s the industry jargon. Bips. Blooom is very anti-industry jargon in about everything we do and most of Blooom’s target-market clients would not be comfortable. I don’t necessarily understand bps and I don’t mean to disrespect them. It’s just not a world that they live in all the time and so we made a decision early on that we were going to charge flat-fee pricing—a dollar amount so that nobody had to make a calculation on what they were going to be charged. You saw very clearly what the fee was going to be. The last update we made to pricing was to make it as simple as it could get so we decided to go with a Netflix-like pricing. To be a Blooom client, it will cost you $10 per month, period. That is all Blooom charges. And with that you get the full 401k management that we’ve been talking about, both initially and then ongoing through periodic rebalances, through adjusting your glide-path as you get close to your retirement. The $10 also includes access to a financial advisor at Blooom. It’s not a face-to-face meeting. It’s not a phone call. It’s not Skype. It’s a digital chat feature where any of our Blooom clients can ask our advisors here at Blooom any money-related question they might have. We get questions that come in all the time like, “Hey, I was listening to this commercial for Quicken and it made me wonder if I should refinance my mortgage. Would you have any advice?” Our advisors would respond by asking a few questions like what their current rate is and if they’re going to be in their house for awhile? What do you owe? Then they’ll actually get back to them with a recommendation as to whether or not refinancing makes sense. Another question we get all the time is, “I’ve still got student loan debt and was wondering how much (or if at all) I should be contributing my 401k?” We get questions like, “I’ve got kids and I’m wondering what a 529 is? Is it something I should be doing?” We don’t currently manage IRAs. What we’re managing right now is employer sponsored accounts, but our clients ask IRA questions all the time. We’ll do our best to kind of give them some guidance on perhaps the allocation, where it should be held or where we’re going to recommend that maybe they move the IRA to— things of that nature. So both 401k management and the “ask the advisor” are included in that $10 per month cost.

Rob: How do you manage to pull this off at $10 a month?

Chris: Well, fortunately, all the time it takes now for our technology to go into an account and rebalance, reallocate, and trade the account, is seconds. And in some cases, just minutes. We fix and rebalance an account and adjust the allocation for somebody incredibly quickly. It’s not like we’re getting on the phone like I used to do, face-to-face with clients, where I’d sit down for an hour and a half and put together an exhaustive financial plan. Usually, it’s one-off questions. It’s something that I even personally enjoy answering myself. At night after I put my kids to bed, I’ll get online and I’ll go into the queue and answer some questions for people. And Rob, you want to talk about doing some really rewarding work—that may be one of the most enjoyable aspects I have a Blooom because I know these questions I’m answering (and our advisors are answering) are coming from people that would have never gotten in the door at my last advisory firm. A lot of our clients are in their 20s and 30s and if they follow some of this advice, even though I know I’m not going to be around to see the outcome of this, it’s going to make a difference in their financial livelihoods down the road. Not to get overly dramatic, but I think all the time about my own dad, who passed away of cancer and never got a single day of retirement. What if something like Blooom would have been available 30 years ago? Maybe he could’ve got some advice or some help with his finances. What if my dad would have been able to retire just two years sooner? How much would another two years with my mom, in retirement, before he passed—what is that worth? I think that’s what gets lost sometimes when we talk about finances, robo-advisors, index funds, fees, asset allocations, and glide-paths. All that stuff is just a means to the end. This is what I love about technology, and it’s happening in obviously tons of different industries. It’s bringing a service to a group of people that never had the service before. Before the technology existed, my dad would not have had a shot. I came from extremely humble means and my mom and dad did not have the assets to qualify or get help from a financial advisor. They just didn’t. And now there are people that are getting help from a financial advisor. I’m answering some questions from our clients, and I’m the guy with 22 years experience, a CFP and I used to work with multi-million dollar clients. I love the fact that some of these companies out there, Blooom included, are bringing these types of services and helping these people in a way that literally could have that kind of impact on their life down the road.

Rob: Yeah, I know a lot of people, like your father, could have used a lot of help. It’s funny because we talk about simplifying investing on this podcast all the time but there are still people out there that still just don’t get it. They don’t want you to talk to them about asset allocation or index funds or expense ratios. They just don’t want to talk about that. But they do want to know how they can make this work in a way to help them get to retirement. I guess one question that comes to mind as I listen to you and understand Blooom is—and I guess this is kind of a devil’s advocate question, do you ever get the question, “Why don’t I just put my money in a target-date retirement fund inside of a 401k?

Chris: We get that question a lot. I think the flaw with that question is that there’s an assumption baked into how you just asked that question which is, how they would use that target-date fund appropriately? We see people come in to have their accounts analyzed by Blooom that have four different target-date funds.

Rob: Really? Four?

Chris: Yes. Four, or at least two or three of them. Or we’ll see a target-date fund and two random funds on the side. I call those the “water-cooler” funds. Do you know what I mean about water cooler funds? It’s where you’re standing around the water cooler at work and your friend is talking about how much money they made in one of their funds so you go out and buy that fund. Target-date funds are not the enemy of Blooom. I just think Blooom is like version 2.0 of target-date funds.

Rob: Yeah.

Chris: In a target-date fund, you really don’t know what you own and I actually think there is way too much bonds and cash in target-date funds for young people. Way too much. The second thing is, you’ve got be happy with all your funds being from the same fund family versus when we build it. Blooom’s building a custom target-date fund that our clients have the ability to kind of tweak a little bit. They know their allocation. And here’s the last thing, Rob. A lot of times, if the 401k lineup has a good selection of index funds, when we build that custom target-date fund, it’s a significantly lower overall cost to the client. Maybe the target-date fund is 80 basis points. When we build our custom allocation for the client it might be 40.

Rob: Well, I’ll tell you, not to pick on names… And I know you probably won’t, but I’ll just say it because I can. The target-date funds at Fidelity that I have access to in my 401k are not cheap. They’re in the 70 basis point range as I recall. There is no question that Blooom could come up with a group of index funds for my 401k that would be cheaper.

Chris: Yeah. The other thing too— wealthy people have been getting custom strategies that weren’t cookie-cutter and forever. I feel bad telling people just because they don’t have a lot of money to, “Just take this target-date fund and be happy with it.” The other thing is, your target-date fund doesn’t have the ability to answer questions on refinancing your mortgage or how to start a 529. That’s the kind of value-add that Blooom brings.

Rob: That’s true. I’ve never asked my target-date fund whether I should refinance but I’m going to guess I wouldn’t get much of an answer. Okay. I appreciate your time. I’ve saved the most important question to the end. Are you ready for it?

Chris: I can’t believe our time’s up already!

Rob: Well, actually, it’s been 30 minutes. We can keep going if there’s more you want to talk about but I’ve got one critical question I want to ask you. I may have others after that but I think this is the most important question of the show. Why are there three ‘O’s in Blooom?

Chris: That’s the big secret and we have this part of our recruiting—

Rob: That’s actually why I asked because I saw your ad for employees—

Chris: Yeah. Well, since I really like you, Rob, I’ll let the cat out of the bag a little bit on this.  I wish there was a good story behind it but there’s really is not. There’s kind of the pun behind that which comes from the fact that there is no reason for having three ‘O’s in it. The answer is, every single word in the English language has already been spoken for and that domain name is already taken. When we started up 4 years ago and it was Randy, Kevin and I, funding Blooom out of our own pockets. For the first couple years we weren’t in a position to spend up to six figures to acquire a well-known name so we had to get a little creative. We still had to pay money, actually, for Blooom with three ‘O’s. Someone was sitting on that domain name in Europe somewhere so we had to pay a chunk of money for that, but we hoped that the three ‘O’s would be memorable. It has obviously been a little bit of a challenge. And sometimes when the media writes a nice piece about it, we’ve got to go back and remind them to please add the third ‘O’ into the word. At some point, people said, “Why don’t you just be Bloom with two ‘O’s?” Well, that was actually already taken. It’s an online cosmetics company. So for now, Blooom with three ‘O’s we hope is memorable. There are a lot of words that don’t have correct spellings that people get used to. We hope to turn Blooom into a verb. It would be great if years from now people had questions about their money and they said they used Blooom in the context of a verb as in, “Just go Blooom it.” Maybe we could become ‘Kleenex’ in that regard.

Rob: Right, or Google. When you guys started, did any of the three of you have a background in building the kind of technology that’s behind Blooom or did you have to go out and hire contractors to do it?

Chris: Randy was the technical co-founder of the three of us but not deep enough in the weeds to actually write the code for this, so early on we outsourced a lot of the architecture and development of Blooom.

Rob: Weren’t you scared to death to make that kind of investment? That couldn’t have been cheap.

Chris: No, it was not. And I’ll tell you, we were spending $150 an hour initially to outsource this but we loved the firm we were using. Unfortunately, the firm was acquired in a kind of four-star hand to start marching towards building out the internal team and we raised our first series, A, in September of 2015 and moved from there quickly to building our own team. Now we’ve got a team of 8 technical people here. One person is still remote overseas but everything is now done in-house and it has been for a little over a year or so.

Rob: What’s the platform you build on? I don’t mean to go into technology speak but—

Chris: It’s very much built on Ruby.

Rob: Okay. I’m working on my own Rails app. I assure you it’s not sophisticated like Blooom.

Chris: The last thing I’ll say about sophistication (since you used that word) is, one of the things we try to do at Blooom, is one of the competitive differentiating features… we are very good at being simple. You’ve heard the phrase before, “One of the hardest things to do is to make something simple,” right? If there are sacred cows at Blooom it is simplicity. That’s something we’re not going to deviate from that whether it’s in our pricing or how we communicate and speak to people. Right now, a lot of people think our app is incredibly simple to get through. Well, it’s going to get radically simpler over the next few months. I think we can do even better about making it just really, really, easy to get help with your 401k. We’re not all the way there yet.

Rob: That’s great. We used to laugh in law that the brief we filed was so long. We would have made it shorter but we didn’t have enough time.

Chris: I like that.

Rob: It’s true. You’d start with 100 pages but judges got sick and tired of reading long memoranda so they’d impose a page count limit. But then we (smart lawyers) would just change the font and margins in the file. Then they said the margins had to be this size and your font has to be this size. Finally, the smart courts just brought it down to a word count. We’ve got apps like Word so now we can count the number of words. So Blooom seems pretty simple to me. It’ll be interesting to see how you guys simplify it even further.

Chris: We’ve got a lot of good ideas now they’re being added to the development queue to make it happen.

Rob: Okay. I look forward to seeing that. Let me ask you an industry question and then I promise to let you go since we now know why there are three ‘O’s in Blooom. I’ve really grown to dislike much of the financial services industry. Not all of it, but much of it including those that say, “Hey, I’m a fee-only fiduciary. I’ve got your best interests at heart. Let me charge you one and a half percent to manage your investments.” Again, that’s not all fee-only fiduciaries. There are exceptions. I’ve interviewed many of those folks that I think fall into those exceptions but, by and large, I’ve really grown to dislike the industry including the “fee-only” fiduciary. My question to you is, am I just too cynical? What’s your view on this and things like the fiduciary rule and charging people a percentage of assets under management?

Chris: I thought this all along because I’ve seen everything as far as the extremes in business. I started off in 1995 literally as a stock broker at a firm that doesn’t even exist anymore and evolved into a financial advisor while working for one of the big wire-house brokerage firms and saw firsthand, the conflicts, sales bonuses and rewards for selling proprietary products. Everything was done on a commission basis back then and Kevin and I didn’t think that was a fair way to work with a client. We felt that charging somebody a fee based on their assets and providing them a wonderful service with no conflicts was a better way of doing things so that’s why in 2004 we left and started our first brick-and-mortar wealth management firm. We built that firm by managing money for a fee but by also delivering a lot of value around planning. Our niche of clients at that point where people who were about ready to cross from work life into retirement and there are a lot of moving parts in someone’s financial life at that point that need to be addressed. We got very good at addressing those for people. So I’ve seen brokerage and I’ve seen fee-only. I definitely think that fee-only is the most fair way of doing things. I actually think we’re going to start to see a model where there is a retainer of sorts paid for all of the financial planning and then maybe a much smaller fee for the asset management side of things. But I do love the fact that more and more of the industry is moving towards being a fiduciary whether they’re being compelled to or whether they just feel like it’s the right thing to do. It’s amazing when I hear people that will stand up and talk about how it’s okay that they don’t have to put their clients’ interests first. That amazes me. This does need to be one in which more people are fiduciary. Blooom’s obviously a fiduciary. We’re not a fiduciary because we have to but because we think it’s the right way of doing things.

Rob: But you’re a fiduciary that charges a flat-fee. I think being a fiduciary that charges a percentage of assets under management is almost an impossibility. Not legally, but as a practical matter, when a client comes to you and asks whether they should keep all their money in an IRA or a taxable account you’re managing for them, or should they take some of it and pay off pay off their mortgage, there’s absolutely no way you can give conflict-free advice if you’re charging a percentage of assets under management.

Chris: Okay, let’s take nuance that you just raised there. You’re right. To the letter of the law there’s no requirement that says you have to (in that case) as a fee-only advisor, give the advice to pay down the mortgage. I operate on the belief that if you give the right advice to the client it comes back and pays for itself in spades with more referrals. For example, at Blooom we occasionally tell people they are actually contributing too much to their 401ks because they’re still up to their eyeballs in student loan debt. And very few people are telling folks they should back off their contributions so they can pay off their debt. That’s not everybody in the industry, but I do think that there is a class of advisors out there that literally live the advice rule under, not just the letter of the law, but the spirit of the law.

Rob: There’s no question, absolutely. By the way, there are probably brokers that do the same thing, commission brokers.

Chris: That’s a good point. Yes, you’re right.

Rob: I’m curious. Since you brought up student loans and investment in a 401k, you guys have advisors that answer these questions, but are they all on the same page? Is it possible to call two different people at Blooom and get two different answers to the same question? How do you guys manage that?

Chris: We work very hard at doing that and there’s a lot of training that goes into the people that are advisors who are actually answering those questions. A lot of it has come from for the first several years when it was Kevin and I answering a lot of the questions. And we’ve got a massive repository of answers that folks are required to literally read and understand very closely.

Rob: All right, here’s a question out of left field. That repository, what tool do you use to track all of that?

Chris: The software we use at this point is Intercom and that’s the feature that allows us to communicate via chat with our clients. There’s a number of features in there that we can save responses to that the advisors have at their disposal. Once a month I actually get up and do an all-hands-on-deck kind of launch-and-learn where we do a deep dive for an hour for everybody; software engineers, client service, marketing people where we go super deep diving on topics around market timing, asset allocation—so they’re getting constantly fed this and that. Not to say I’m the one that has all the right answers, but I have been doing this for 22 years and there’s very few times I get asked a question that I have not been asked at some point before.

Rob: So, someone with student loans or other debt, do you think they should at least contribute enough to get a company match if one exists?

Chris: Bingo, yes. Exactly.

Rob: Yeah, you do?

Chris: Absolutely. Do not forego that free money but don’t contribute a penny more if you’re still paying off student loans or credit card debt or even car debt.

Chris: I looked you up online here in terms of your location while we were talking. You guys are headquartered in Leawood, Kansas?

Chris: Yes, Leawood is about the 20 minutes south of Kansas City.

Rob: Nice. Are all of your employees located there or do you have folks that are in other locations?

Chris: We have one contractor overseas and 100 percent of the other full-time employees are based right here.

Rob: Is it hard to find Rails developers in Kansas City?

Chris: It is a little bit, yeah. The thing that Blooom has going for it is, in Kansas City—and I want to be very careful how I say this, Kansas City’s start-up scene has really taken off in the last five years. One of the reasons for that is because Kansas City was one of the very first cities to get Google Fiber. That attracts a lot. The Kauffman Foundation, which is a huge global entrepreneurship foundation, is based 20 minutes from where I’m sitting right now. So there is a rich tradition of entrepreneurship in the city all the way from Garmin which was started by two gentlemen. I actually grew up down the street from one of them, the “Gary” of Garmin. And other companies like Cerner here in town and Sprint and H&R Block. The Kauffman Foundation was a foundation created by the founder of Marion Merrill Dow. At one point, Ewing Kauffman owned the Royals. It’s a huge foundation working on entrepreneurship initiatives. This city is very— it has a vibrant start-up scene. Fortunately, Blooom’s probably one of the more well-known start-ups in the Kansas City area and so far we have had very little trouble finding talent locally. We’ve even attracted people that have relocated families to Kansas City because they want to come and work here. The thing we have going for us is if you’re a 24-year-old, it might be hard to pull you out of New York or San Francisco to come to Kansas City. But, if you’re 30 and have a family, it’s a no-brainer. I would stack raising a family here in the county I’m in right now against any other county in the country. My girls can literally walk to school and their school is one of the top five public schools in the country.

Rob: It’s funny how your priorities change as you get a little bit older.

Chris: Yes. Our chief marketing officer moved his family up from Dallas, Texas and I think he feels incredibly good about the environment he’s in—the size of house he could afford versus maybe where he had been before and the cost of living in general. The commute driving is minutes through side streets and is just a pleasant calming drive in the morning. The safety. The wide open spaces. If somebody would give Kansas City a shot and they’re kind of at the family stage, I’m very confident we’ll win out on that battle.

Rob: I’m a fan of Missouri. You’re in Kansas and I know Kansas City covers both, but I went to school in Springfield, Missouri and the Chess Hall of Fame is in St Louis. As a chess player, that gets me there. Maybe if you guys are ever hiring a blogger/podcaster and really bad Rails developer— I probably wouldn’t apply but I would be a good candidate for that spot.

Chris: Are you teaching yourself Rails?

Rob: I took a boot camp a year ago with a company called, General Assembly. And what I’ve done is hire a Rails developer to build my first tool for Dough Roller which is a debt snowball/avalanche calculator. I’ve hired him to basically continue my own Rails education. As soon as we hang up I’m back to my jQuery book on Rails and we’ll see how I do. Trust me though, you guys at Blooom shouldn’t worry about me terms of my development skills. I’m still trying to be a simple calculator.

Chris: So, you won’t be a competitor?

Rob: No, I definitely won’t be a competitor of Blooom. All right. Listen Chris, I’ve kept you on the line for a while and I really do appreciate your time. I love what Blooom is doing. I’m thrilled that it is only $10 a month as opposed to an asset under management fee, because the truth of the matter is, it doesn’t matter if someone has got $100,000 or $1 million in their 401k, the same thing is happening behind the scenes.

Chris: Yes. There are so many people who are spending $10 a month on things that are never going to be this important and we just hope to reach enough of them: the people that need the help the most. Sometimes, a big chunk of our market may not be people listening to your podcast, Rob. It’s the people that are very, very disengaged. And oftentimes those are the people that need the help the most. Your listeners right now are people that have made a priority out of this or have some inclination to want to be involved in their own finances which is wonderful. The people out there that need this help even more are the ones, just like my own sister (whom I love,) that are not going to read The Wall Street Journal or Yahoo! Finance basically because she has my two nephews running around the house all night and has a career of her own. I love what you’re doing with your podcast and I certainly hope your listeners will find Blooom to be helpful. You need to be somebody that wants to delegate a little bit because Blooom’s going to do it for you. I certainly appreciate the relationship we’ve had with you over the years.

Rob: And I’m grateful for Blooom. You’d be surprised. I talk about this a lot in the Facebook group that we have, but they’re looking for tools like Blooom that can help them do what they know they should do, but do it easier and without having to worry about the allocation every month. And again, as long as it is at a reasonable cost. Obviously, I think $10 a month fits into that category. The other thing they do, by the way is, even if they’re all over their finances and they’ve got it all figured out and are on the right track, they know a lot of people who aren’t. I know a lot of them do, but hopefully they recommend the podcast.

Chris: That’s a great point. A lot of times your listeners are the look-to people of your company. People are probably approaching your listeners asking for advice.

Rob: Absolutely. Absolutely. All right, Chris. I appreciate it. And again, the best of luck to you guys at Blooom. I hope the best for you.

Chris: And the same to you with your journey with Rails. I’d love to come back on anytime. I always enjoy talking to you about this stuff.

Rob: Absolutely.

Topics: Investing

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