M1 Finance Review 2023

• Automatic investing
• Margin loans
• Customizable portfolios

M1 Finance blends some of the best elements of a broker and a robo-advisor to bring a service that will fit some clients absolutely perfectly. As with a broker, you’ll be able to invest in whatever you want, but as with a robo-advisor, you can automate the entire process – and the core service is totally free.

But since you’re not paying for portfolio management, the downside is that you need to design an investment plan yourself. However, M1 offers diversified investment “pies” that allow you to get in the game with low-cost funds and publicly traded stocks. You’ll also get access to a cash management account that can be drastically upgraded to provide huge benefits. Add it all up and you have a competitive player in investment management, though not with the fully featured experience of either a broker or robo-advisor.

If you need the full benefits of a broker, look at Charles Schwab or Fidelity Investments, both perennial high scorers in Bankrate reviews and which offer robo-advisors in addition. If you’re looking for more automation, then Wealthfront or Betterment offers great services, too.

Pros: Where M1 Finance stands out

Automated investing and investing pies

The real draw for investors at M1 Finance is the ability to set up an automatic investing plan and then have it run the way you want. It’s like having your broker run your financial plan on your behalf, and you can kick back and do something you find much more meaningful. It may be a great choice for those who want to build their own custom portfolio and then let it ride. 

Unlike a robo-advisor, which builds a portfolio for you, M1 Finance lets you select what you want to invest in. You create a “pie” – think pie chart – with the investments that you want. Your pies can consist of thousands of stocks or ETFs available on the platform, and you can weight the slices in your pie however you like. You can create multiple pies for different strategies even. It’s useful to know what you want to invest in because you’re basically on the spot to pick your slices. That is, unlike traditional robo-advisors, you have to manage the account yourself. 

If that’s a bit too daunting, you can select from professionally created pies. Turn to a general investing pie, for example, and select one that fits your risk tolerance (conservative, moderate, aggressive and others). M1 helpfully shows the returns of these pies (over the last one, three and five years), shows the funds that comprise the pie and explains what the specific pie hopes to achieve. So even newer investors can select a pie that fits their needs. These general investing pies are typically constructed with funds from Vanguard, so they’re low-cost. 

You’ll also be able to select from expert pies that include socially responsible investing, dividend and income portfolios, a basic stock-and-bond blended portfolio, a target-date portfolio for retirement planners and pies that mimic popular hedge funds, among many others. In each case, you’ll see the longer-term returns of the pies and their objectives, helping you gauge your selections. 

Once you’ve selected what you want to invest in, you can set up auto-invest and buy your pies automatically. If you want to buy individual stocks or funds in your portfolio, you can turn off auto-invest at any point and simply buy any stock or fund that’s in one of your pies. 

In order to reduce its costs, M1 places trades during a “trade window” each day. The morning trade window begins at 9:30 a.m., so you’ll need to have your order in before that to have it executed that trading day. You may also have access to an afternoon window starting at 3 p.m. if you’re a member of the M1 Plus program (more below).

M1 Plus

While anyone can sign up and access M1 Finance’s standard plan for free, the robo-advisor really packs in the extra features with what it calls M1 Plus, its upgraded plan at $10 a month, or $95 a year. (However, you may be able to get free months of M1 Plus when you sign up for the program.)

Here’s what that annual fee buys you: 

• An extra afternoon trade window (in addition to the morning window)
• Custodial accounts
• Smart transfers (more below)
• Margin loans at a discounted rate
• Interest on the balance in your cash management account
• 1.5 percent cash back on your debit card purchases
• Credit card with tiered cash-back rewards of up to 10 percent
• Up to 4 ATM withdrawal fees are reimbursed monthly
• Cryptocurrency trading
• A high-yield savings account with very competitive rates (new in 2023)

In May 2023, M1 unveiled its high-yield savings account, allowing you to earn competitive interest rates if you’re a member of M1 Plus. Plus, you’ll get up to $5 million in FDIC coverage for an individual account or $10 million in a joint account, meaning you’re fully protected up to those limits. Even if you’re not a member of M1 Plus, you can still earn interest on the account, though it won’t be nearly as much. It’s a great addition to the features on offer at M1. 

Depending on how you actually use your account, that extra fee may be worth it for you. But some features such as reimbursed ATM fees are available at other robo-advisors for free, and some of the top players such as Wealthfront and Betterment offer good rates on their cash management accounts without having to pay an annual fee of any kind. 

Low costs and low account minimum

It won’t take a lot to get started investing at M1. You’ll need $100 in a taxable account or $500 in a retirement account to get going. And M1 Finance allows you to buy fractional shares, so you’ll be able to get fully invested with your money.

You’ll get all the core features in the standard plan with no commission or trading expense. However, if you’ve invested in funds, you’ll still have to pay the fund’s management expenses. As mentioned, if you want the extra features of M1 Plus, though, you’ll need to pay extra. 

Smart transfers

Smart transfers are M1’s way to help you automate your financial life. You can set rules and allow your account to act automatically. For example, you can set smart transfers to keep a minimum balance in your cash account and move the rest of your money over to invest. 

You could set up your account to take out a margin loan if your cash account drops too low, or you could move cash to several different accounts, a taxable account and an IRA, say. You can also set them up to move money from one savings goal to another. The point is, you’re able to automate so much of your financial life that you won’t even need to think about it anymore.

It’s a cool feature, for sure, and rivals such as Wealthfront have rolled out similar features. But if there’s a downside, it’s that you have to be a member of M1 Plus to avail yourself of this perk.

Margin loans

M1 Finance offers the ability to access a margin loan, and it’s what the robo-advisor calls M1 Borrow. When interest rates were lower, M1 passed that on to clients with crazy low margin rates, but now that rates have risen sharply, margin rates are less attractive but still compare favorably to those of rivals. 

In its basic plan, the robo-advisor adds a markup to short-term interest rates, giving it one of the lowest margin rates in the industry. But if you’re part of M1 Plus, the robo-advisor drops its markup by 1.55 percentage points. That’s hard to beat these days. Remember, the total margin rate will fluctuate as the Fed adjusts interest rates.

And you won’t need $25,000 (as you would at Wealthfront) to access a margin loan. At M1, you’ll need just $2,000 to take out a margin loan, and you’ll be able to tap the account for up to 40 percent of your account’s value. This line of credit is available in taxable accounts. 

Like other margin loans, M1’s margin loan has no fixed repayment schedule, and as long as you have an outstanding balance you’ll accrue interest expenses. However, if your account value declines, you may be on the hook to replace the borrowed money, depending on the equity in your account and how much you’ve borrowed. Again, this is standard for margin loans. 

So this feature allows you to remain invested and be able to tap your funds, when needed, at a low interest rate. If you’re thinking about going with a broker instead, Interactive Brokers offers a low margin loan rate without having to buy into a specific plan, like M1 Plus. 

Is the extra fee for M1 Plus worth it for the interest savings? While the annual fee of $95 does get you some other perks, let’s assume the lower cost of margin is what you’re really after. You’ll start to break even on margin expenses with an average outstanding margin balance of $6,129 over the course of a year. In other words, you’d need an account of nearly $15,322 at max leverage to break even. 

But M1 Plus does get you some other features, as mentioned above, that may draw you in.

Cons: Where M1 Finance could improve

No advisory services or financial planning

While this review has spent a lot of time discussing how M1 Finance is like a robo-advisor, it’s necessary to mention that it is not a robo-advisor, nor does it employ financial advisors to work with clients. In this regard, it’s more like a traditional broker. And that means it doesn’t offer real financial planning to help you meet goals, for example. It lets you mimic professional portfolios or helps you design your own, but planning how your money fits into your life is up to you.

If planning is important to you, check out Betterment or Ellevest, both of which offer robust services. They also offer access to human advisors, though it costs more than the standard service. 

No tax-loss harvesting

M1 Finance does not offer tax-loss harvesting on its accounts, which is too bad, since so much of the rest of the account feels automated. Tax-loss harvesting involves selling losing investments to help offset any gains and reduce your overall taxes. It’s a standard feature among the top robo-advisors, and both Wealthfront and Betterment offer versions of it. 

What M1 Finance does offer, however, is what it calls tax minimization. This process involves reducing your tax burden by categorizing your investments by their tax effects and then, when you sell a specific stock or ETF, prioritizing those that minimize your tax burden. It’s not tax-loss harvesting, but it can reduce your taxes at the margin. 

Cash management account

The cash management account here – what the company calls M1 Spend – is nothing special, particularly when put side-by-side with other cash accounts at rival robo-advisors. 

The basic cash management account gives you a debit card, FDIC insurance of up to $250,000 and one ATM fee reimbursement per month. You’ll also pay international fees at a very low rate if you spend in foreign countries. And there’s no minimum balance fee. 

As mentioned above, M1 Plus gets you a few extras, including some cash rewards for spending, interest on your cash balance, early direct deposit and more ATM reimbursements, among other things. And of course, that attractively high-yield on a savings account. These features alone won’t justify the fee, especially as rivals charge little or nothing for similarly robust cash accounts, but add them all together with the other benefits of M1 Plus and it could well be worth it, especially since you’re not shelling out for any management fees here. 

For example, Betterment and Wealthfront allow you a no-cost cash account, even if you’re not investing there. You’ll get a decent interest rate, no monthly minimums, fee-free ATMs or reimbursed ATM fees. Wealthfront and Cash App both offer direct deposit up to two days early.