M1 Finance Review 2024 (original) (raw)

Extensive portfolio customization suitable for sophisticated investors

Updated November 08, 2024

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M1 Finance

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Our Take

M1 Finance gives you a low-fee way to automate your investing using portions of pre-built portfolios called “Pies.” Although it's not a true robo-advisor, M1 Finance still scores highly for its automation tools, expansive portfolio selection, and no-cost approach to portfolio management. M1 hasn’t drastically expanded its available assets since adding crypto in 2022. Still, the selection is already quite wide, including over-the-counter (OTC) securities in addition to over 6,000 stocks and ETFs.

M1 Finance has recently changed its fee structure by removing the M1 Plus program, which previously charged its members a 36annualfee,givingthemaccesstopremiumperkssuchasmorecash−backrewardswithM1′screditcardandlowerratesformarginloans.AsofMay15,2024,M1Financewillnowstartchargingitsmembers36 annual fee, giving them access to premium perks such as more cash-back rewards with M1's credit card and lower rates for margin loans. As of May 15, 2024, M1 Finance will now start charging its members 36annualfee,givingthemaccesstopremiumperkssuchasmorecash−backrewardswithM1′screditcardandlowerratesformarginloans.AsofMay15,2024,M1Financewillnowstartchargingitsmembers3 a month. There is a 90-day grace period for new users before the monthly fee kicks in. Moreover, members with a total balance of at least 10,000inoneormoreaccountsoranM1PersonalLoanwillnotbechargedthemonthly10,000 in one or more accounts or an M1 Personal Loan will not be charged the monthly 10,000inoneormoreaccountsoranM1PersonalLoanwillnotbechargedthemonthly3 fee. We'll take a deeper look at M1 Finance's platform to help you decide whether it fits your portfolio needs.

M1 Finance combines self-directed brokerage features with pre-built portfolios and automated portfolio management capabilities. M1 Finance does not provide advisory services and therefore is not considered a traditional robo-advisor.

Editor's Note

On May 15, 2024, M1 ended its premium program formerly known as M1 Plus. Members will not be charged a 3platformfeeiftheyhaveabalanceof3 platform fee if they have a balance of 3platformfeeiftheyhaveabalanceof10,000 or more in their total aggregated M1 accounts or have an M1 Personal Loan. However, members that do not possess either can expect to be charged a $3 platform fee after a 90 day grace period for new accounts.

Pros & Cons

Pros

Cons

Account Overview

Account Minimum 100(100 (100(500 for retirement accounts)
Fees $3 monthly after 90 day grace period (can be waived if specific criteria met)
Goal Planning Retirement
Available Assets Individual stocks, ETFs, REITs, cryptocurrency
Interest Paid on Cash Balances 4.25%
Customizable Portfolio Yes
View Portfolio Before Funding Yes
Customer Service Email, chat, call
Financial Advisor Available No
Cash Management Interest and bill pay
Tax-Loss Harvesting No
External Account Sync/Consolidation Inbound transfers, no aggregation
Mobile App Android, iOS

Account Setup

Getting started with M1 Finance is a straightforward process. After creating a username and password, you’ll be prompted to begin M1’s onboarding flow, where you’ll learn how the platform works and answer some general questions regarding your investment experience. The portfolio construction part of the process allows you to select one of the pre-built Pies or customize the portfolio to your specifications.

You’ll be asked to select an account to get started. M1 supports brokerage, traditional IRA, Roth IRA, SEP IRA, custodial, and trust accounts, but you can also open a non-investment account like the high-yield cash account or a personal loan account. Keep in mind that the minimum to open an investment account is 100(100 (100(500 for IRAs). Once your portfolio has been finalized, your account selected, and banking information added, you’re ready to start investing.

Source: M1 Finance

Goal Planning

Since M1 focuses on automating portfolio management for experienced investors, goal planning and financial calculators are intentionally omitted. For the same reason, there is no access to human consultants since the platform is not an advisory offering. There is, however, an extensive article library on M1’s blog, which covers some general financial education and investing topics at a high level.

The lack of hand-holding may be discomforting for investors seeking goal-planning tools or those who value human guidance. For seasoned investors, the focus on portfolio management creates a more streamlined investing experience centered around growing your money. It's important to remember that M1 isn’t trying to be a robo-advisor that uses basic goal and risk information to spit out a portfolio conforming to modern portfolio theory and your time horizon.

Instead, M1 is looking for investors who are seeking to reduce the management burden without sacrificing portfolio flexibility, investment options, and automation capabilities.

Investopedia Robo-Advisor Survey

According to Investopedia's 2023 Robo-Advisor Consumer Survey, when asked to choose from a list of up to three top investment goals that they are most likely to use their robo-advisor to plan for, the majority of respondents chose large purchases like houses, vehicles, and travel.

Respondents were able to select more than one, up to three.

Account Services

M1 Finance offers a variety of account services that give you more flexibility with your money. Cash movement out of and into the platform is seamless, including an option to schedule auto deposits into your portfolio on a monthly, weekly, or bi-weekly basis. You can also place individual trade orders, which allows for more flexibility. Transfers from external brokerage or retirement accounts into M1 allow you to consolidate your holdings in a single broker. In addition to these options, investors can use margin accounts to borrow up to 50% of the account value once the balance exceeds $2,000.

For margin loans, M1 members will have an interest rate of 6.50%. M1 Finance clients can also apply for the Owner’s Rewards Card, a credit card that can earn up to 10% in cash-back rewards to its cardholders. The credit card offers intriguing cash-back options that members can enjoy.

Cash Management

To complement the portfolio management product, M1 Finance offers digital banking, a credit card option, and a cash flow allocation feature that round out the platform.

Portfolio Construction

A primary differentiator of M1’s platform is portfolio construction. Investors have the ability to choose from over 80 different pre-built Model Portfolio Pies which align with a variety of strategies, including passive investing, mimicking hedge funds, and socially conscious options.

As an example, the passive portfolio can be constructed simply by using two ETFs—one equity, one bond—that track the global market and allow you to allocate between the two funds based on your risk preference. You can also create Custom Pies to choose your own holdings entirely or combine them with an existing Model Portfolio Pie.

There are a number of asset allocation options that you can leverage by using the Model Portfolio Pies. Some of these include fundamental analysis, technical analysis, value investing, buy and hold, growth investing, income investing, small-cap investing, and dividend reinvestment plans.

Available Assets

Individual Stocks Yes
Mutual Funds No
Fixed Income No
REITs Yes
Socially Responsible or ESG Options Yes
ETFs Yes
Non-Proprietary ETFs Yes
Private Equity No
Crypto, Forex Yes

Portfolio Customization

One area where M1 Finance really stands out is the extensive ability to tailor your portfolio through Custom Pies. Using the Research section of the site, you’ll find a screening tool that lets you search for a wide variety of publicly tradable ETFs, REITs, and individual stocks. From there, you’re a few clicks away from adding these selections to an existing or new portfolio for investing. As there is no set portfolio allocation based on a risk tolerance survey, your customization ability is only limited by the total pool of assets available.

Portfolio Management

Once you have your pies set up, M1 monitors your portfolio and rebalances when new funds are deposited to ensure you don’t drift too far away from your initial target allocation. This is primarily accomplished by allocating new dollars towards the parts of your portfolio that are underweight compared to the initial strategy you’ve set up.

The dynamic rebalancing as funds are added is a gradual process, but you can also force an entire portfolio to rebalance at your discretion with a click. Manual rebalancing quickly brings your portfolio back into alignment with a single transaction. The option for a manual rebalance is a unique feature that is not available at many of the digital investment management platforms that compete with M1 Finance's automated portfolio management service.

M1 members with an account balance over 25,000cannowplacetradesintwodailytradingwindows,amorningwindowthatbeginsaround9:30a.m.ET,andanafternoonwindowthatbeginsaround3:00p.m.ET.Memberswhodonotmeetthe25,000 can now place trades in two daily trading windows, a morning window that begins around 9:30 a.m. ET, and an afternoon window that begins around 3:00 p.m. ET. Members who do not meet the 25,000cannowplacetradesintwodailytradingwindows,amorningwindowthatbeginsaround9:30a.m.ET,andanafternoonwindowthatbeginsaround3:00p.m.ET.Memberswhodonotmeetthe25,000 account balance requirement can select which window they want to participate in. You can also make individual buy and sell orders, which don’t need to be related to the Pie you’ve selected. The availability of fractional shares means you’ll be fully invested without needing to hold a portion of your portfolio in cash.

Another highlight is tax management for withdrawals, which are done to minimize taxes owed. However, the lack of a true tax-loss harvesting feature may limit the tax optimization in your account. There also isn’t an aggregation feature where you can link up external investment accounts to get insight into how well you’re diversified across all portfolios.

Key Portfolio Management Features
Automatic Rebalancing Auto-deposit allocation or manually triggered
Reporting Features Statements, tax information
Tax-Loss Harvesting No
External Account Syncing/Consolidation Allows for rollovers and transfers, does not support account syncing

User Experience

Desktop

You’ll find the M1 website to be clean and straightforward, with easy sign-up instructions, clear performance metrics, and simple navigation. It includes tabs that cover your portfolio activity and holdings, buttons to buy, sell, or rebalance, and graphs that break down your allocation in detail. When it comes to improvements that make for a better user experience compared to traditional financial sites, M1 Finance certainly delivers.

Mobile

Similar to the desktop version, the M1 Finance app scores highly for its ease of use. The workflow of the website and the app are nearly identical experiences. You’ll find you’re able to do just about anything on the app that you can do on the website, so it’s just a matter of which experience you prefer.

Source: M1 Finance

Customer Service Options

Security Features

Education

There are several education resources you can leverage through M1 Finance. You’ll find the blog contains a broad range of articles centered around general investing strategies and overall best financial practices. One notable focus of this content is empowering investors with information to improve their long-term portfolio mentality. M1’s social media accounts, videos, and “The Investors Mindset” newsletter offer additional ways to access this material.

Since M1 steers away from providing financial advice and recommendations, this information is shared from a high-level perspective with the goal of improving your knowledge base. Beyond that, much of the educational content is about learning to use the platform to the fullest.

Commissions and Fees

M1 Finance doesn’t charge any portfolio management or trading fees. This is a unique aspect of the platform that puts more dollars to work on your behalf. Rather, M1 makes money through interest, payment for order flow (PFOF), lending securities, and a 3monthlyfeeforaccountslessthan3 monthly fee for accounts less than 3monthlyfeeforaccountslessthan10,000 without an active M1 Personal Loan.

ETFs purchased through the platform have its own fee that is paid directly to the fund manager, not M1, as is standard industry practice. There is also a miscellaneous fee schedule for additional account operations. Overall, the low cost of the platform is an attractive feature for investors.

There are, however, IRA termination and outgoing transfer fees of 100,inadditiontoa100, in addition to a 100,inadditiontoa50 fee on accounts of up to $50 where no trading activity has occurred for 90 days.

Category Fee
Management fees for 5,000account∣5,000 account 5,000account∣0
Management fees for 25,000account∣25,000 account 25,000account∣0
Management fees for 100,000account∣100,000 account 100,000account∣0
Termination fees $100 for outgoing transfers & IRA closures
Expense ratios Typically 0.06%-0.20%
Mutual funds N/A

The Bottom Line

M1 Finance provides a great option for experienced investors who value extensive customization options. Customization is a clear strength of the M1 platform that sets it apart from the competition. Choosing among 80 options or building your own portfolios from scratch is a fundamentally different experience if you are expecting an automated investing platform to simply match you up with an ideal allocation.

M1 has also ended its M1 Plus membership but kept the perks of membership to all investors, particularly those looking to run more of their finances through the platform. Unfortunately, smaller accounts will be charged a monthly 3fee,butoncetheaccounthasreachedatleast3 fee, but once the account has reached at least 3fee,butoncetheaccounthasreachedatleast10,000 or an investor has signed up for an M1 Personal Loan, the fee will be removed. Furthermore, while the banking side of M1 Finance isn't the focus of this review, it is worth noting that the M1 checking account has been discontinued and looks to be replaced by a high-yield cash account. This may continue to evolve in the future as M1's CEO, Brian Barnes, still owns a bank.

Although M1 is a self-directed investing platform rather than a robo-advisor, it comes with the ability to automate portfolio management. This allows individual investors who feel comfortable with screeners and strategies to eliminate some of the more monotonous tasks like rebalancing. There are some miscellaneous fees and unavoidable expense ratios for ETFs if you want to be picky, but otherwise, M1 Finance gives a self-directed investor a lot of automation power without any significant costs.

Is M1 Finance Trustworthy?

Yes, M1 Finance is trustworthy as it is registered with the Financial Industry Regulatory Authority (FINRA). It is also insured against loss of stocks and cash held by customers through the Securities Investor Protection Corporation (SIPC). The company also has high-level security with two-factor authentication and military-grade 4096-bit encryption.

What Are the Cons of Using M1 Finance?

M1 Finance focuses on self-directed portfolio selection and then automates the management of your portfolio. Essentially, you choose the mix of assets and then M1 will keep those levels using future contributions to top up underweight assets or withdrawals to sell overweight ones. Beyond this, the platform does not offer human advisors and financial planning.

In addition, there is limited access to financial tools, calculators, and goal planning. While M1 doesn't charge fees for account management or trading, tax-loss harvesting, and recommended portfolio functions are not available. Users are also unable to link other accounts to see how they're diversified throughout all portfolios.

Is M1 Finance Good for Beginners?

M1 Finance was designed for seasoned investors who are comfortable choosing their own portfolios. Beginners may run into difficulty using the platform due to a lack of access to human consultants, goal planning, and financial calculators. That said, a new investor can easily create a well-balanced portfolio using the curated Model Portfolio Pies, but you have to be aware of your risk tolerance and timelines when making selections.

How Does M1 Finance Help Save You Money on Taxes?

Investors looking for a platform to reduce their tax burden will find that M1 Finance offers little help, as it doesn't offer tax-loss harvesting. However, it does seek to minimize taxes by selling securities in order of lowest tax burden to highest. This is a pretty basic approach that is only triggered by a sale to move cash out and/or rebalancing. There isn't any ongoing management of your portfolio to swap securities of similar types to offset taxable gains.

How We Review Robo-Advisors

Providing readers with unbiased, comprehensive reviews of digital wealth management companies, more commonly known as robo-advisors, is a top priority of Investopedia. We used our 2023 consumer survey to guide the research and weightings for our 2024 robo-advisor awards. To collect the data, we sent a digital survey with 64 questions to each of the 21 companies we included in our rubric. Additionally, our team of researchers verified the survey responses and collected any missing data points through online research and conversations with each company directly. The data collection process spanned from Jan. 8 to Feb. 9, 2024.

We then developed a quantitative model that scored each company to rate its performance across nine major categories and 59 criteria to find the best robo-advisors. The score for each company’s overall star rating is a weighted average of the criteria:

Additionally, during our 2023 research, many of the companies we reviewed granted our team of expert writers and editors access to live accounts so they could perform hands-on testing.

Through this all-encompassing data collection and review process, Investopedia has provided you with an unbiased and thorough review of the top robo-advisors.

Read more about how we research and review robo-advisors.

Separately, our research team conducted a survey of 205 U.S. adults aged 18 to 72 who are current clients of one of 18 robo-advisors. While the information collected did not influence the development of our ratings model, it was instrumental in gathering the valuable insights published in Investopedia's 2023 Robo-Advisor Consumer Survey.

Participants in our 2023 Robo-Advisor Survey opted in to an online, self-administered questionnaire from a market research vendor. Data collection took place between Aug. 30 and Sept. 15, 2023, with 11 video interviews conducted with volunteer respondents from Sept. 7 to Sept. 17, 2023. Multiple quality checks, including screeners, attention gauges, comprehension evaluations, and logic metrics, among others, were used to ensure only the highest quality responses were included.