Update with New Year’s promotions. I’ve tried out my share of robo-advisors, which always sounded nice in theory but I eventually became disillusioned as they kept generating lot of unnecessary taxes every time they change their model portfolios to chase the latest and hottest trends. My favorite service for those that want a little extra help is one where I can pick my own custom target portfolio, but the robo still does the hard work: M1 Finance. 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 make your own custom pie as you like. You have full control! M1 handles the tedious stuff, like rebalancing or dividing a $100 contribution across 8 different ETFs.
- No commissions. Free stock/ETF trades with a low $100 initial minimum for taxable accounts and a $500 minimum opening amount for retirement accounts. After your initial deposit any amount greater than $10 can be deposited.
- Free with $10,000 balance. Otherwise $3/month. Most robo-advisors charge an annual management fee of 0.25% to 0.50% of assets, or force you to own something bad, like a lot of low-interest cash. (Looking at you, Schwab…)
- Free dynamic rebalancing. All new deposits (and withdrawals) will be invested (or sold) dynamically to bring your portfolio back toward your target asset allocation. M1 will also rebalance your entire portfolio back to the target allocation for you with a few clicks (for free) whenever you choose, on demand. You don’t need to do any math or maintain any spreadsheets.
- 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 than mutual funds.
- Real brokerage account with off-the-shelf investments that you can move out. Some robo-advisors hold special, proprietary funds that you have to sell if you ever leave, possibly creating a big tax bill. (Looking at you, Fidelity…) M1 is built on a regular brokerage account, so you can move your Vanguard/iShares/Schwab ETFs and stock shares out to another broker whenever you want.
Now, for a long time, Vanguard didn’t offer automatic fractional investments into ETFs. But as of October 2024, Vanguard now offers fractional ETF investments.
Still, M1 Finance checks off many of the boxes of my brokerage wish list. The only thing they could add would be to have the high availability of knowledgeable customer service of a huge company like Fidelity or Schwab.
If you want to invest in newer factor ETFs that focus on Small-Cap, Value, Momentum, or Quality factors like those from DFA and Avantis, or a mix of dividend-oriented ETFs like SCHD/VIG/VYM, their service makes it much easier to set up a portfolio mix of different ETFs.
M1 Plus features are now available to everyone. M1 Plus was their premium subscription tier with several additional perks. As of May 2024, everyone gets these features, but they are only free with a $10,000 balance and $3/month otherwise.
- High-yield savings (currently 4.00% APY as of 1/8/24). FDIC-insured up to $5 million.
- M1 Owner’s Rewards credit card (2.5%, 5%, or 10% cash back at 70+ brands, no annual fee).
- Lower interest rates on margin borrowing (1.5% rate discount).
- Custodial accounts for kids.
- Extra 3pm PM ET trade window.
- Automated “smart” transfers.
$75 referral bonus. M1 has a $75 referral bonus if you open a new account with $10,000 and maintain it for 30 days. Here is my M1 referral link (thanks if you use it!) from which you must start opening your new account.
A bonus that amounts to 0.75% of your initial deposit with only a 30 day hold is technically a 9% annualized yield. After opening a new account, you can stack the ACAT transfer promo below.
0.5% ACAT Transfer bonus. M1 will pay 0.5% of the amount transferred into a taxable brokerage account, up to $25,000. Must transfer at least $10,000. Valid for both new and existing M1 customers. See ACAT transfer promo fine print for full details. Expires 1/31/25. Minimum hold period of one year (Can’t move money out until January 31, 2026).
$100,000 transfer would net you $500. $1,000,000 transfer would net you $5,000.
During the Promotion Period, this promotional offer is valid for new and existing M1 customers who successfully complete and settle a Brokerage Account Transfer (“BAT”) of at least $10,000 in aggregate across your account(s) (“Transfer Account Value”) (together, the “Promotion”). The appropriate M1 account must successfully receive settled funds prior to expiry of the Promotion Period (e.g., IRA to IRA). Any unsuccessful BAT will be deemed ineligible (including but not limited to, any incorrect instructions, or unsettled funds). This offer is non-transferable, and not valid with any of the following: (i) internal transfers, (ii) ACH deposits (bank transfers), (iii) wire transfers, or (iv) direct 401(k), 403(b) and/or 457(b) rollovers.
If you satisfy the aforementioned conditions, M1 will make a one-time deposit equal to 0.5% (one-half of one-percent) of the total aggregate Transfer Account Value successfully completed across your account(s) (“Promotional Payout”) not to exceed $25,000 (the “Payout Maximum”), into the cash balance of your M1 taxable investment account (the “Payment Account1”) within thirty (30) days of the Promotion Period expiry (the “Payout Date”).
1-Year 0.50% APY boost. If you open a new M1 Cash Account, they will give you an extra 0.5% APY interest for 12 months. So instead of the standard 4.00% right now, you’d get 4.50% APY. See APY boost promo fine print.
During the Promotion Period, all eligible new M1 clients, or existing M1 clients with neither an open Cash Account nor an open M1 High-Yield Savings Account (“Boosted Clients”) who successfully open and fund an M1 Cash Account with M1 Finance LLC (a “Cash Account”) can receive a one-time 0.50% APY increase over the then-applicable standard APY (a “APY Promotional Boost”) on the balance in their Cash Account (on up to a maximum balance of $200,000 per Boosted Client (the “Maximum Balance”)) for up to twelve (12) months, if all applicable requirements are satisfied (the “Promotion”).
Bottom line. M1 Finance is a brokerage account that acts like a customizable robo-advisor with automatic rebalancing into a target portfolio. You control the model portfolio, and they do the tedious work. Great for implementation of a low-cost, index or passive ETF portfolio. New pricing structure as of May 2024: Free for those with $10,000 in assets, otherwise $3 a month. New promos as of January 2025.
