Risk Warning: Your Capital is at Risk.
M1 Finance is a US-only broker that offers automated trading on stocks, fractional shares, ETFs, and bonds. M1 Finance was founded in 2015 with headquarters in Chicago.
Other M1 financial services include borrowing and spending with benefits. The company offers several account types, including three different IRA accounts and a Trust account.
This review explains the differences in M1 Finance’s account types, what perks clients get with M1 Plus, and what fees M1 charges for its services.
Read on to find out about how you can trade instruments with M1 Finance and what practical features the mobile app has to offer.
M1 Finance Overview
Important: M1 Finance only accepts clients from the USA.
Rather than a traditional brokerage firm, M1 Finance operates as a cash management application that centers around three types of services to facilitate:
- Trading and investing
The M1 Finance robo-advisor is built into the app and offers on-the-go financial planning with the ability for traders and investors to execute their self-designed strategies.
Alongside individual and joint brokerage accounts, M1 offers three types of IRA accounts as well as a trust account.
When M1 clients have access to traditional stocks, exchange-traded-funds (ETFs), bonds, and fractional shares.
Pros & Cons Of M1 Finance
|Fractional shares available for traders with lower capital||Limited instrument types compared to traditional brokers (e.g. no commodities, CFDs, options, or forex pairs)|
|Over 6,000 stocks and ETFs available to trade||Only US clients are accepted|
|Customizable pie chart for cash management (+100 pre-set templates)||No professional account for traders|
|Short-term borrowing interest rates from as low as 2%*|
*Interest rates are subject to change as per variable Federal Fund target fund rates.
Broker Comparison: How M1 Finance Stands Out
|Automated Trading||Smart schedules and transfers, auto-rebalancing||Trading schedules|
|Fractional Shares||On stocks and ETFs||On stocks and ETFs|
|Margin Lending Rate||3.50% on standard accounts (min. account balance of $10,000)||2.5% and $5/month (only on securities)|
|Digital Banking Fee||1% APY||0.3% APY|
|Standard Membership Fee||Free||Free|
M1 Robo-Advisor Explained
The M1 Finance robo-advisor is an umbrella term used for the overall “smart” functionality of the mobile application.
Financial robo-advisors, including that of M1, are applications designed to provide traders and investors with insight on how to handle funds.
Much like a financial consultant or advisor, a robo-advisor is designed to provide useful insight to achieve financial goals.
What Makes A Robo-Advisor Useful?
The usefulness of a robo-advisor depends on two main factors:
- The breadth of data the algorithm can detect
- The depth of the algorithm’s capacity to manipulate that data
M1 Finance describes a robo-advisor as a technology that’s able to:
- Construct a trading portfolio
- Trade exchange-traded funds and stocks based on pre-set strategies
- Rebalance clients’ investments
- Reinvest dividends
- Minimize funds lost through tax
☞ M1 Finance’s robo-advisor can purchase fractional shares on your behalf.
Pros & Cons Of A Robo-Advisor
While robo-advisors may seem useful, there are several downsides to them. Trading is an art form that requires a keen eye, one that a machine cannot replicate in all areas.
|Refined risk-management based on historical data||Robo-advisors may miss high-risk/high-reward opportunities preferred by some traders|
|Tax-loss harvesting strategies to minimize tax losses||Might be too risk-averse as opposed to risk-tolerant|
|Lower fees than human financial advisors||Limited personalization due to pre-set algorithms|
|Auto-rebalancing (as provided by M1 Finance)||Overly frequent trading to maintain a pre-set robo-strategy|
|Built-in educational services and tutorials|
Account Types With M1 Finance
There are a total of seven different account types you can choose from at M1 Finance. The account types are split into three categories: Brokerage Accounts, IRA Accounts, and Trust Accounts.
This table explains what each account offers and who its designed for:
|Account Type||Services Offered||Who Is It For?|
|Individual Brokerage Account||Buy and sell stocks, bonds, ETFs, and fractional shares.||Individual retail traders|
|Joint Brokerage Account||An equal ownership account among two or more traders to buy and sell stocks, bonds, ETFs, and fractional shares.||Couples and families (inc. anyone over the age of 18)|
|Individual Retirement Account (IRA)||A retirement savings account with tax benefits and the ability to trade stocks, bonds, fractional shares, and ETFs.||Individuals saving for retirement|
|Traditional IRA||Tax-benefit account where contributions are made with after-tax money. Potential earnings are not taxed until withdrawn past the age of 59½.||Individuals saving for retirement|
|Roth IRA||Federally tax-free capital growth after five years of opening the account., with a minimum age requirement of 59½.||Individuals saving for retirement|
|Simplified Employee Pension (SEP) IRA||Retirement account for self-employed and small business owners with a higher contribution threshold than Traditional and Roth IRAs.||Individuals saving for retirement|
|Trust Account||Funds held for the benefit of the account holder (eg, an heir). The account can be managed like a standard brokerage account.||Individual retail traders with a min. of $5,000|
M1 Basic Vs. M1 Plus
M1 Plus is an account upgrade with benefits across all M1 Finance services. Members are required to pay $125/year to become an M1 Plus member.
Perks include lower interest rates on loans, wider trade windows, smart transfers, and cash back on debit card purchases when using the M1 payment card.
Here is a side-by-side comparison of the standard account alongside the M1 Plus account:
|M1 Standard||M1 Plus|
|ATM Fee Reimbursement||4/month||1/month|
|ACH Limit (Daily)||$50,000||$10,000|
|International Fees||N/a||0.8% to 1%|
|Debit Card Designs||5||1|
|Base Interest Rate||2%||3.5%|
|Trade Windows (Daily)||2 (min. $25,000 required to comply with day-trading requirements)||1|
What Services Does M1 Finance Offer?
The M1 Finance platform is organized around three types of financial situations:
- Trading and investing
M1 Finance isn’t just a market maker that allows trades to take place, but a platform that encourages traders and investors to explore other aspects of cash management, including smart borrowing and spending.
You can jump ahead to read about the Pie feature, a visual representation of your funds in the M1 application.
Invest With M1 Finance: Products To Trade
When you register for an M1 individual brokerage account, you’re required to select three stocks to kickstart your portfolio customization and M1 Pie.
M1 offers more than 80 pre-set portfolios that can be further customized with preferences.
There are over 6,000 assets to choose from with M1. The product categories are:
- Traditional stocks: Access to shares of international, publicly traded companies.
- ETFs: Traders can spend funds on bundles of company shares trading on exchanges. Exchange-traded funds may also speculate on individual commodity prices, like in nickel’s case, the iPath DJ-UBS Nickel SubTR ETN.
- Bonds: Bonds are securities that are considered lower-risk investments than ETFs and stocks, including corporate, U.S Treasury, and savings bonds.
- Fractional Shares: M1 splits shares into 1/100,000 chunks, meaning traders with lower capital can purchase shares above their usual price range. Fractional shares are designed for lower-capital traders.
Example Of Fractional Shares: If a client has a total available balance of $330 but wants to buy shares of Amazon priced at $3,300, they can purchase 1/10 of an Amazon share.
Borrow With M1 Finance: Low-Interest Loans
Clients can borrow money from M1 with interest rates that the service provider considers competitive. The base interest rate depends on the account type held by the client:
- Standard Account: from 3.5%
- M1 Plus Account: from 2%
Note: These variable interest rates may change at any time.
Margin account holders can borrow up to 35% of their portfolio value in less than 10 seconds.
What Can I Borrow Money For?
Although M1 Finance doesn’t specify what you can spend borrowed funds on, their website gives example scenarios like:
- HELOC (Home Equity Line of Credit) or home equity loan
- Student loans
- Credit card debt
- Business startup expenses
- Costly personal events like weddings
- Unforeseen expenses (emergencies)
M1 also states that loans can be used to increase available leverage in your financial portfolio.
Potential M1 clients should note that M1’s loans carry the same risks as other loans, despite lower interest rates.
M1 Borrow is only available on margin accounts with a minimum balance of at least $10,000. The service is not available on IRA accounts.
Spend With M1 Finance: Earn While You Spend
When you sign up for an M1 Finance account, you can opt-in for an M1 debit card. There is no minimum balance requirement to open an account.
M1 Finance incentivizes debit card use by offering:
- 1% APY earnings when you spend money with the card (or 1% without spending as an M1 Plus member)
- Transfers between Invest, Borrow and Spend accounts
- Customizable card designs with M1 Plus
How Do M1 Finance Cards Compare To Other Banks?
Like with standard cards, M1 cardholders can make payments anywhere Visa cards are accepted.
M1 Plus cardholders can also use the Smart Transfer feature to set up automated transfer triggers between different M1 accounts to manage cashflow.
M1 provides a comparison of the M1 spending card to banks like Chase Total Checking:
|M1 Standard||M1 Plus||Chase Total Checking®|
|ATM Fee Reimbursement||1/month||4/month||Variable|
|International Transfer Fees||0.8% to 1%||N/a||3%|
|Integration With Portfolio||✅||✅||Not directly|
|FDIC Insurance (Up to $250,000)||✅||✅||✅|
|Debit Card Designs||1||5||1|
Mobile App & Platform Review
US traders and financiers interested in M1 Finance have two options to register as a client. M1’s mobile app can be downloaded from the App Store for Apple devices, and Google Play on Android devices.
Alternatively, M1 accepts online registrations and allows you to get started right away.
How To Register For An M1 Finance Account
When you register for an M1 Finance account, you automatically opt-in for an individual brokerage account.
To register an account with M1, follow these steps:
- Go to M1Finance on your desktop or download the mobile app.
- Select ‘Get Started‘ to register.
- Enter your e-mail address and create a password. Then verify your e-mail address by clicking the verification link in your inbox.
- Select your first three stocks, ETFs, or bonds to be part of your personalized Pie dashboard.
- Provide your mobile number to verify your identity.
- Once your account and identity have been verified, you may fund your account.
The M1 Mobile App Dashboard
Upon logging in, traders are greeted by a dashboard with an upper menu, as well as five lower menu items. From the main menu, you can access the Invest, Spend, Transfer, Borrow, and Research sub-menus.
The Invest tab is the default menu that opens for customers.
Alongside the aforementioned menu options, you can access your account settings, notifications, and a summary of your current fund allocations.
What Is The M1 Pie?
In the Invest tab, users can explore M1’s signature feature — the Pie.
The pie is a pie chart that represents your fund distribution across various assets. Each slice of the Pie corresponds to the portion of money represented by the asset.
The Pie allows traders to visualize the financial portfolio, although each asset and its performance is listed below the chart.
M1’s Pie is designed to be customizable in several ways:
- Cash Targets: Clients can set a target amount for each asset type based on multiple indicators. This means that when money is deposited into the M1 account, the allocation happens automatically to meet those pre-set targets.
- Risk Tolerance: M1 offers professional Pie pre-sets that have defined risks in place.
- Ready-To-Go Layouts: There are over 80 pre-built financial portfolio strategies built for the M1 Pie.
- Combine Expert Pies With Your Own: Traders can fully customize their financial portfolio with the Pie while combining it with the Expert Pie pre-sets if they wish.
- Shrink and Grow: Assets that outperform their targets and continue to do so grow, while low-performance assets shrink when new funds are added to the account.
M1 Education Center
Registered clients have access to a Research tab in the app, where they can learn about financial concepts and market sentiment.
M1 also offers dozens of free articles on topics like:
- Return on Investment (ROI)
- What is an investment? Everything you need to know
- Understanding micro-investments and how they can benefit you
- The Capital Asset Pricing Model (CAPM)
M1 emails a newsletter called The Investor’s Mindset to over half-a-million regular readers.
How can I use the M1 Finance app?
You can use the M1 Finance app by downloading it to your mobile device via Google Play (for Android devices) or the App Store (for Apple devices). Once you register, M1 Finance guides you through how you can set up your M1 Pie chart and how you can add assets of your choice to your financial portfolio.
You can also use M1 Finance through your web browser on desktop and responsive devices.
How is M1 Finance regulated?
M1 Finance is regulated by two financial bodies. The Securities Investor Protection Corporation (SIPC) protects cash and securities lost by customers up to $500,000, not including a decline in asset value due to market conditions. Meanwhile, the Financial Industry Regulatory Authority (FINRA) is an independent financial organization with set guidelines that oversees US brokers.
Is M1 Finance safe?
As with any broker, trading assets with M1 Finance carries risks. When you deposit funds to trade assets with M1 Finance, the market may move in your favor or against you, which can result in loss of capital. If you’re considering using M1 Finance, it’s important to note that the services include borrowing funds at a variable interest rate. Whether M1 Finance is safe for you depends on your unique financial circumstances.
Is M1 Finance good for Roth IRA?
When you open a Roth IRA account with M1 Finance, the broker doesn’t charge any fees and allows you to reinvest your dividends. As with any Roth IRA account, M1 Finance encourages prospective clients to consider up-to-date Roth IRA contribution limits as stated by the IRS, as well as other IRA guidelines like age requirements and how your funds may be taxed.
Does M1 Finance offer tax guidance?
Yes, M1 Finance offers an entire section of self-help articles dedicated to guidance on taxes. You can find the Tax Documents section on the M1 Finance website, where you find insight on forms like the Tax Form Consolidated 1099, 1099-R, 5498, and 1099-INT. M1 Finance also has articles on topics like ‘Taxes On Dividends’.
Can I use M1 Finance in the UK?
No, M1 Finance does not accept customers from the UK. M1 Finance is only available to customers who are residents in the US. Only verified US customers may use the M1 Finance app when they’re located outside of the country. Non-US traders have plenty of great alternative brokers available, though.