Behind the blooom deal: How Morgan Stanley at Work boosted its robo-advising tech with startup buy, but kept a human touch

Editor’s note: Morgan Stanley is a financial supporter of Startland News. The investment management and financial services company has branches in Leawood and on the Country Club Plaza.

Acquisition is scaling blooom’s tech ‘beyond our wildest dreams’

Integrating a Kansas City startup’s tech into its globe-spanning robo-advising portfolio — along with securing a soft landing for the high-profile company’s talent — deeply enriches the retirement-planning experience for clients of Morgan Stanley at Work, corporate officials told Startland News.

“Morgan Stanley came in at the absolute right time with an opportunity for us to take what we built and kind of retool it and reposition it to work inside of plans that they advise on, which is scaled beyond our wildest dreams,” said Chris Costello, CEO and co-founder of Leawood-based blooom — now executive director for Morgan Stanley at Work.

A workplace wealth division of Morgan Stanley Wealth Management, Morgan Stanley at Work helps employees with comprehensive solutions that span equity, financial wellness, retirement and financial empowerment.

The goal: a workforce that can realize the full potential of their benefits through technology and human expertise, said Brian McDonald, emphasizing the key role blooom and its team will play in supplementing existing Morgan Stanley at Work offerings.

Brian McDonald, Morgan Stanley at Work

“We were incredibly excited about what they were doing from a technology perspective,” said McDonald, managing director, head of Morgan Stanley at Work. “And it also happened to fit nicely into our design target in terms of the way that we want to enrich the retirement experience through advice capabilities powered by modern technology.”

Click here to explore workspace solutions from Morgan Stanley at Work.

Featured in 2016 as the first company on Startland News’ inaugural Kansas City Startup to Watch list, blooom created a digital, do-it-for-you financial management service working to bring affordable retirement advice to the masses — regardless of account size or where the client’s 401K was held.

The startup ceased operations in November, with news of its subsequent acquisition by Morgan Stanley breaking weeks later. Integration into Morgan Stanley at Work means blooom’s entire 13-person staff — including Costello — have now joined the company’s retirement division, which Costello described as a “pleasant surprise.”

“It’s been a source of pride to see my team being able to use their skills,” Costello said. “Not only did they hire the entire team, but there have been a ton of opportunities put in front of us.”

Bringing on the blooom team was critical to closing the deal, McDonald said.

“When Chris and I spoke early on in this process, the deal was really predicated on bringing the talent in,” McDonald said. “For us, the technology was important, but equally as important was that we were bringing the team over.”

McDonald anticipates that the combination of blooom’s technology and Morgan Stanley’s resources will dramatically scale the number of people aided in their financial planning.

“We believe that Chris and his team will help us impact millions of participants who need the guidance that blooom’s technology can offer, now connected with the wisdom of Morgan Stanley and what we do, so we thought it was a good fit for both of us,” McDonald said.

Chris Costello, blooom, in 2021

Moving beyond digital-only solutions

The acquisition developed after blooom faced the stark realization that its direct-to-consumer model required constant capital influx to be sustainable, Costello said.

One of Kansas City’s highest-profile startups since its founding in 2013, blooom’s robo-adviser technology provided individuals with simplified tools to manage their 401K portfolios and investments in exchange for an annual subscription fee.

“Nobody at that time had endeavored to build a solution intended for the masses: the people at work who have a 401K,” Costello said. “There’s about 80 million people in this country that get up every day and go to work at a company where they’re participating in a 401K, and the vast majority of them did not sign up to be their own money manager.”

As people’s financial needs evolve and become more complex, Costello expects they will need human advice in addition to technological tools, he said, making the fit with Morgan Stanley even more logical.

“We’re in this kind of transitory period where these people in their 30s and 40s are going to need more sophisticated help than just a purely digital solution can provide,” Costello said. 

“So I’m excited about being able to take what blooom has built as kind of the entree into that workplace, and to be able to incubate folks,” he continued, noting Morgan Stanley’s two physical Kansas City branches in Leawood and on the Country Club Plaza.

“Then, when the time is right, they can get help from financial advisors.”

Doug Adams, Morgan Stanley, speaks during Startland News’ Kansas City Startups to Watch in 2023 reception at MADE MOBB

Costello, who was himself a financial advisor for 18 years before founding blooom, acknowledged few startup leaders and employees have that kind of background and expertise when attempting to scale their companies — a reality check that highlights the need for Morgan Stanley at Work, as well as the team of financial advisors behind them.

In Kansas City, advisors led by Doug Adams, executive director, offer go-to solutions for founders — starting with setting up 401Ks for employees and understanding equity plans. A local financial advisor who is familiar with such workplace benefits is just as crucial as a good corporate attorney and tax person, said Costello.

Proof is in the plucking

Although blooom’s story didn’t end in exactly the way Costello had planned, he’s pleased to see the company’s team and technology continue to help people manage their finances, he said.

“One of the proudest moments as one of the founders of the company is to be able to see your idea that turned into a company have a very real chance to impact a large number of people in a very positive way,” Costello said.

Chris Costello, co-founder and CEO of blooom, speaking at an event in 2015

That potential invigorates Costello, who said he initially applied to work at Morgan Stanley in 1995 after graduating from the University of Kansas.

“What I get excited about is the thought of being able to take our little team, our platform and maybe move the needle within a very big company,” Costello said. “I think that’d be a very interesting chapter in my life and my team’s lives. … I think that’d be a big accomplishment.”

Despite trading a role leading a small startup team for a position in a global organization, Costello said he still feels like he’s in “an entrepreneurial environment,” only now with the backing of a much larger organization.

The acquisition proves how innovation occurs everywhere, Costello said, adding that Kansas City should celebrate the innovative ecosystem it has cultivated.

“To think that Morgan Stanley had the vision to pluck this company out of Kansas should be not just a source of pride for myself and the people in the blooom team, but for Kansas City as well,” Costello said. “There are innovative things happening outside of just San Francisco and New York City, and I think the transaction proved that.”