Decades ago, most people who needed help managing their money and investments hired a real-life financial advisor who sat down with them in person to give tailored advice.
These days, more and more people are turning to robo-advisors and online brokerage firms that can very often help their clients achieve better results with lower fees.
However, with M1 Finance, investors don’t have to pay a flat ongoing fee for account management or investment advice. In fact, M1 Finance doesn’t charge any fees or commissions for its services.
Sounds too good to be true, right? In this M1 Finance review, we’ll take a look at this robo-advisor to help you determine if it’s a good fit for you.
Product Name: M1 Finance
Product Description: M1 Finance can probably be described best as a hybrid of a robo-advisor and a stock broker. While the service can create a portfolio suited to your needs, you can also customize your own by selecting individual stocks and funds. There are no fees associated with an M1 Finance account, making it a great choice for new investors.
- Commissions & Fees
- Account Options
- Investment Options & Asset Allocation
- Tools & Resources
- Website / App / Ease of Use
- Customer Service
When it comes to Commissions & Fees, M1 Finance shines. There are absolutely no fees associated with an M1 Finance account. Although M1 Finance offers many Account Options, you won’t be able to use certain types of retirement accounts, such as 401(k)s. In the Investment Options & Asset Allocation department, M1 Finance offers stocks and ETFs, like many robo-advisors. However, if you’d rather use M1 Finance as a stock broker, you should probably look elsewhere for investments such as options and mutual funds. And unfortunately, there are few Tools & Resources to play around with. On the bright side, M1 Finance’s Website / App / Ease of Use makes investing easy for beginners. Customer Service can be reached five days a week during business hours by phone.
M1 Finance Features
|Commissions & Fees||None|
|Types of Investments||Stocks and ETFs|
|Types of Accounts||Individual, Joint, Traditional IRA, Roth IRA, SEP IRA, Trusts,|
|Asset Allocation||Customizable Managed Portfolios|
|Automatic Portfolio Rebalancing||Yes, As Needed|
|Human Advisor Availability||None|
|Banking Services||Checking Accounts, Loans|
|App Availability||iOS, Android, Mobile Optimized Website|
|Customer Service||Email, Phone|
|FINRA CRD Number||#281242|
|SEC Registration Number||#8-69670|
- Totally Customizable Portfolios. Unlike many robo-advisors, M1 Finance allows you to customize your investments to build a portfolio that is expertly tailored to your needs.
- M1 Finance Expert Pies. M1 Finance also offers its own curated investment portfolios, or “pies” crafted to meet specific goals or align with a specific risk tolerance.
- Fractional Shares. M1 Finance invests your money in fractional shares to ensure every penny of your portfolio is working on your behalf at all times.
- Automate Your Investments. Set up an automatic investing schedule so you can sit back and watch your portfolio grow on its own.
- Automatic Rebalancing and Tax Efficiency M1 Finance works diligently to keep your pie properly allocated at all times. It also has built-in mechanisms that ensure your tax load is as low as possible.
- Borrow Money. While M1 Finance focuses most of its efforts on its advising arm, the firm also lets you borrow money against your portfolio with rates as low as 4% APR.
- No Minimum Balance. You can open an account with any amount, but you do need at least $100 to start investing with a taxable account. Retirement accounts require a minimum balance of $500 to get started.
What Is M1 Finance?
With headquarters in Chicago, M1 Finance is an investment platform that was founded in 2015. Although it’s relatively new, M1 Finance has proven to be popular in the last five years. In fact, the company currently holds over $500 million in assets under management (AUM).
We classify M1 Finance as a robo-advisor because, when you sign up, it creates a suggested portfolio based on your financial needs and risk tolerance. Like other robo-advisors, it also performs automatic rebalancing no your portfolio. However, in some ways, M1 Finance is like a stock broker too. That’s because, even though the app will suggest a portfolio for you, it’s incredibly customizable, and you can pick individual stocks and funds for your portfolio.
How Does M1 Finance Work?
M1 Finance aims to help you save time and effort by offering a set-it-and-forget-it portfolio management software that manages your chosen investments and rebalances automatically on your behalf. Setting up an account is easy, and it can be done entirely online.
M1 Finance Portfolios
M1 Finance offers investors the opportunity to choose from pre-mixed investment options or create their own. The app does this by asking you to choose among or create investment “pies” that include your chosen investments and corresponding allocations.
To get started with M1 Finance, all you need to do is open an M1 Finance account. Then select the stocks or ETFs of your choice and add them to your pie. Of course, you can also choose among “Expert Pies” that include curated investments chosen by M1 Finance staff.
Once your pie is set up, you’ll set the target weight of each slice — or the percentage of each stock or ETF you want to allocate to your portfolio. After that, you will simply fund your pie and allow M1 Finance to move your funds into the investments you’ve chosen at the percentages you agreed to.
As some slices of your pie grow larger and others shrink due to losses, M1 Finance will automatically rebalance your portfolio for you. You also have the option to add, edit, or remove slices at any time. Also note that you can have multiple pies set up through M1 Finance, including customized pies and Expert Pies.
M1 Finance Fees
M1 Finance refrains from charging any fees, including broker fees or commissions.
There are also no required minimums to open an account — only a $100 minimum to begin investing your funds in a taxable account.
M1 Finance Pros & Cons
M1 Finance Pros
- It’s Free. One of the biggest advantages of M1 Finance over some of its competitors is the fact it’s free to use. M1 Finance doesn’t charge any broker fees or commissions to use the service or gain access to their features and tools.
- Low Barrier to Entry. While M1 Finances requires at least $100 in taxable accounts and $500 in retirement accounts to start investing, you can open an account with any amount.
- Customizable or Pre-made Portfolios. While M1 Finance allows you to choose from individual stocks and ETFs to create each of your pies, you can also choose among Expert Pies that are formulated by M1 Finance staff for various goals.
- Automatic Rebalancing. Once your pies are set up and you begin funding them, M1 Finance will automatically rebalance on your behalf.
- Invest for Retirement or Other Goals. M1 Finance allows you to set up a taxable investing account or save for retirement with a traditional IRA, Roth IRA, or SEP IRA.
- Fractional Shares. M1 Finance invests in fractional shares instead of leaving excess funds idle. This strategy helps you maximize your returns over time.
M1 Finance Cons
- Not Every Type of Retirement Account. While M1 Finance does let you open an account for your SEP IRA, Roth IRA, or traditional IRA, you can’t use the service to oversee workplace retirement accounts like a 401(k).
- Limited Investment Options. M1 Finance lets you choose from ETFs and stocks traded on major exchanges, but it doesn’t let you choose among mutual funds or any other investments.
- No Tax-Loss Harvesting. M1 Finance doesn’t sell securities that have experienced a loss to offset taxes on gains and income. However, it does offer a service called “tax minimization” that works similarly.
- Few Tools. M1 Finance doesn’t offer as many retirement tools as some of their competitors. For example, it doesn’t offer a tool that allows you to see if you’re on track to achieving your retirement and income goals.
If you’re someone who needs tailored financial advice or wants to be able to speak to an investment advisor at any time, you may be better off with a robo-advisor that offers comprehensive help via live chat or the phone or a real-life financial advisor.
Also note that, because M1 Finance lets you invest only in stocks and ETFs, this service isn’t ideal for individuals who hope to invest in a broad range of investment options.
Only you can decide whether to give M1 Finance a try or go with a different robo-advisor. If you’re curious how M1 Finance works or the process involved in selecting stocks and ETFs for your pie, open a free account and give it a try.