Updated. My favorite option in the now-crowded “robo-advisor” category is technically not a registered advisor at all, it is . Here’s a quick rundown of what makes them different:
- Fully customizable. You pick your own target asset allocation “pie”. (You can add ETFs or individual stocks.) You can simply copy one of the many model portfolios out there, or customize it as you like. You have full control! M1 handles the boring stuff, like rebalancing or dividing a $100 contribution across 8 different ETFs. Here is my pie which I named the .
- No commissions. Free stock/ETF trades with a low $100 minimum account size for taxable accounts and a $500 minimum for retirement accounts.
- 0.00% management fee! Most robo-advisors charge an annual management fee of 0.25% to 0.50% of assets (or force you to own something bad, like ).
- Free dynamic rebalancing. M1 will rebalance your portfolio back to the target allocation for you automatically (for free) whenever you chose. All new deposits (and withdrawals) will be invested (or sold) dynamically to bring your portfolio back toward your target asset allocation. You don’t need to do any math or . You can also manually rebalance on-demand.
- Fractional shares (dollar-based). For example, you can just set it to automatically invest $100 a month, and your full amount will be spread across multiple ETFs. Dollar-based transactions were one of the advantages of buying a mutual fund, but fractional shares solve this problem. ETFs are also usually more tax-efficient.
- Real brokerage account that you can move out. Some roboadvisors hold special, proprietary funds that you have to sell if you ever leave, possibly creating a big tax bill. M1 is really just a regular brokerage account, so you can move your ETFs and stock shares out to another broker whenever you want.
M1 Finance checks off nearly all the boxes of my brokerage wish list. They do all the managing for me, but according to my rules. But since I can choose the exact ETFs that they purchase, if I decide to stop their service down the line, I just end up with a brokerage account filled with ETFs that I can easily move elsewhere. I suppose the only thing they could add would be to have the high availability of customer service of a huge company like Fidelity or Schwab. Otherwise, I really like their feature set and I have been putting my recent annual IRA contributions into M1.
How do they make money? They have a variety of income streams, most of which are optional:
1) Interest on idle cash (can be minimized as you can auto-invest all idle cash in the investment account)
2) M1 Borrow (margin loan interest)
3) M1 Spending (debit card generates fees for them)
4) Payment for order flow (same as Robinhood and TD Ameritrade)
5) M1 Plus (premium $125 a year subscription that gets you higher interest rates and debit card cash back).
$30 referral bonus. There is currently a $30 referral bonus only available if you open with a (that’s mine), make an initial deposit of $100 for taxable accounts and $500 for IRAs within 30 days of sign-up, and not withdraw the initial deposit within 30 days. This is a limited-time offer, the standard offer is only $10.
M1 transfer bonus. By transferring over your portfolio from another brokerage, you can earn additional money with their transfer bonus. Transfer an outside brokerage account or IRA to M1 and earn up to $4,000. After opening an M1 account, simply upload your outside brokerage statement and they will do the transfer work for you.
Bottom line. is a new brokerage account that acts like a free, customizable robo-advisor with automatic rebalancing into a target portfolio. I deposited part of my annual Roth IRA contribution with them.
Disclosure: I am now an affiliate of M1 Finance, and may be compensated if you click through my link and open a new account.
Also see:
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