IIAwards - Review of M1 Finance

As part of the recently announced IIAwards, in which we celebrate innovations in the fintech and crypto industry, today we will review M1 Finance considering multiple categories.

M1 Finance was established in 2015 as a fusion of an online brokerage and robo-services provider based in Chicago. It offers a unique combination of automated investing with a high level of customization, allowing clients to create a portfolio tailored to their exact specifications.

The company does not charge any trading, withdrawal, deposit or portfolio management fees. M1 has largely focused on earning through interest on loans from M1 Borrow and through M1 Spend, in order to eliminate asset management fees for investors. However, regulatory fees and additional service fees (i.e. IRA conversion) do apply. If you are eager to update your account to an M1 plus, it will cost 100 USD during the first year and 125 USD in the following years. This option provides you with a second daily trading window as well as a discount on the interest rate when taking out a loan through M1 Borrow.

Portfolios held in stock only will not incur any fund management fees. Portfolios with ETFs can incur management fees on the underlying funds that range from 0.06% to 0.20%. Additionally, there is a 20 USD inactivity fee for accounts over 20 USD that have no activity for 90+ days.

M1 allows its clients to choose from the 80 expert-developed portfolios or develop their own trading strategy. The readily available investment portfolio templates are referred to as "Pies." The Pies are based on Modern Portfolio Theory (MPT). Most robo advisors use MPT in their algorithms. But unlike other robo advisors, with M1, there is no questionnaire used to determine your investment risk tolerance. M1 Finance has nearly 2,000 ETFs available for you to choose from, as well as any individual stocks that are available on either the New York Stock Exchange or the Nasdaq. (Preferred stocks are excluded.). The company also allows purchasing fractional shares.

M1 Finance has a web-based trading dashboard along with both iOS and Android applications available for a quick download. However, unfortunately, M1 does not offer a desktop version. They have expert pies, also known as portfolios, to help new users who are not advanced investors. Alternatively, they have 100 percent customizable pies (portfolios) where you can invest if you are a more advanced market player.

M1 monitors your portfolios to keep them in line with your investment objectives. This reduces portfolio drift as it dynamically rebalances your portfolio according to the rules you set up. You can also rebalance at any time, which is rare for a robo-advisor. In taxable accounts, withdrawals are made to limit your tax bill. M1 allows for trades to be placed up to twice a day. M1 does not currently offer automatic tax-loss harvesting like some other robo-advisors, but has "dynamic rebalancing," which optimizes rebalance and taxation in other ways by rebalancing as you add or withdraw contributions. Additionally, M1 has many platform features such as automatic investing, automatic rebalancing and fractional share investing.

The basic account opening is intuitive, straight-forward and standard. An account is created after inserting an e-mail and providing a password. During the signup process, you will be offered a suggested Pie with preselected investment categories. Each Pie is a collection of as many as 100 "slices." Each slice represents an investment — be it a stock, an ETF or even another pie.

Once you have made your Pie selections, M1 Finance will automatically buy your investments in the correct proportions, both when you initially fund your account and when you add additional funds. Once you finish customizing your portfolio, the next step is to enter in your personal information and link a bank account. Once your selected bank account is connected, you will be able to set up an account automatic transfer to fund your account regularly. At this point, your account is ready to go. After creating your core account, you can add additional account types. M1 offers individual joint accounts, IRAs and trust accounts.

In order to contact the customer support over the phone or via e-mail you need to be a registered user. However, for those who do not possess an M1 account, there are very detailed FAQs available that answer the majority of customer queries. Some of the FAQs include video walkthroughs of a particular feature. Here again, M1 expects a bit of independence and individual research from its clientele. It is also possible to schedule a free consultation with an M1 specialist, though specialists are not usually registered financial advisors.

Most of the videos available from M1 teach how to use particular pieces of the platform itself. There are many articles about retirement planning, but since M1 is not registered as an advisory service, there is little that could be construed as advice on the site. There are numerous articles on IRAs and the benefits of saving income on a regular basis. M1 does not offer any demo account options.

M1 delivers a well-designed app that mirrors all the functionality of the website. You can do anything on your mobile device, from opening and funding an account to changing how your pies are allocated. There is an adequate use of white space, so the layout is not too crowded.

M1 is intuitive, very customizable, and has a very user-friendly setup. The platform performs all of the day-to-day management of your account, including regular rebalancing. The website is also very intuitive and easy to use. It walks you through the entire process. Your account performance is relatively easy to both view and understand. M1 also integrates with TurboTax and H&R Block to allow for easy tax reporting. The portfolio management of the company is completely customizable.

The website’s security is the highest available using military-grade 4096-bit encryption for data transfers. You can also set up two-factor authentication using your mobile device. Fingerprint verification and face recognition are available on mobile devices as well. Your investments are covered with excess Securities Investor Protection Corporation (SIPC) insurance up to 500,000 USD which includes a 250,000 USD limit for cash. Other cash balances in M1 Spend and M1 Plus are FDIC insured through Lincoln Savings Bank.

In mid-2019, M1 Finance launched its M1 Spend account – this is a free checking account that offers direct integration with your other M1 services. This checking account has a zero minimum balance, no monthly or annual fees, and your money is FDIC-insured up to 250,000 USD. M1 Spend is a great option if you like to keep track of your personal finances from a single location. You will be able to transfer your money between M1 Spend, Invest and Borrow. And M1 will send you a Visa debit card to use at stores and ATMs. There are more benefits added to this account with an M1 Plus account.