Morgan Stanley at Work has purchased the technological assets of Blooom, a defunct robo-advisor that abruptly closed its doors last month.
Morgan Stanley did not elaborate on how it will use the new technology, but said only that it sees the potential in what Blooom was offering.
The firm also hired all of Blooom’s 13 employees, according to published reports.
“The retirement business is a core leg of growth for Morgan Stanley at Work and the wealth management business at large,” said Brian McDonald, head of Morgan Stanley at Work, in a statement. “As such we are always looking for new ways to meet our client’s evolving needs [and] we see managed solutions for 401k plans as a growing trend that will help differentiate our retirement offering.”
The Blooom purchase comes weeks after Morgan Stanley announced that it is phasing out its Morgan Stanley Access Investing robo-advisor business to utilize the digital advice technology it obtained when it acquired E*Trade in 2020.
It has been a tumultuous couple of weeks for the Overland Park, Kan.-based robo-advisor. Despite having almost 29,000 clients and handling a reported almost $6 billion in assets, the firm announced to its clients in a terse email that it would no longer serve as their asset manager.
Blooom had carved out a niche in the retirement space by offering management services for an individual’s 401(k) retirement savings plan. While many firms provide a similar service for their own plan, Blooom was unique in that it would offer to manage a person’s funds regardless of who ran the platform.
It would take ownership of a client’s credentials and have the authority to log into that client's 401(k) plan and make investment changes and decisions on the client’s behalf.
Martinsville, N.J.-based Condor Capital Wealth Management was a client of Blooom’s. The robo-advisor managed its IRA, according to David Goldstone, manager of investment research at Condor. He said when his firm received word about Blooom abandoning its responsibilities it left no additional information nor did it mention anything about a transition to New York-based Morgan Stanley.
Goldstone speculated that the cost and resources necessary to do business could have been what doomed the firm. Regulatory burdens could have also overwhelmed it.
“There's going to be extra scrutiny because you're not just making decisions for people, you're also taking their credentials,” he said. “There are some regulatory hurdles you have to get over and maintain to be able to do this on behalf of clients.”
In addition, the number of resources and development that would have to go into creating such a system had to be significant, Goldstone said. Yet, the company was only charging up to $250 annually, he said.
“I was surprised to see them close in such an abrupt manner,” he said. “They were successful in achieving the scale [but] I have no idea what the profitability picture was.”