M1 Finance vs Betterment: Two Similar but Different Robo-Advisors

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M1 Finance vs Betterment: two automated investing platforms that take different approaches to robo-investing. The two platforms provide very different services. Robo-advisors have put financial investing on autopilot. But before you flip the switch, you should get to know your automated advisor; it could make the difference between growing or losing your investment.

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In this M1 Finance vs Betterment article, we’ll review both platforms and let you be the judge. Our comparison concentrates on areas such as fees/commissions, top features, customer service, and pros and cons, to help you make an educated decision.

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What is M1 Finance?

M1 Finance is a robo-advisor specifically designed for experienced investors. As such, it allows users to determine their own risk levels and targets. Although it doesn’t babysit newcomers, it provides high-level automation and flexibility to users. M1 Finance is a cross-breed between a traditional brokerage and an automated financial advisor.

The platform offers clients peace of mind by using the SIPC (Securities Investor Protection Corporation) and FDIC (Federal Deposit Insurance Corporate) to insure funds held in M1 Invest accounts and M1 Spend checking accounts, respectively. Apart from insurance, M1 Finance employs the latest technologies to secure user accounts and information. We have more information about M1 Finance in our M1 Finance Review, check it out.

What is Betterment?

Betterment is an automated financial planning platform. Notably, Betterment was the first company to unveil a robo-advisor in 2008. Being among the first robo-advisors, the platform offers entry-level services, including educational materials and an easy-to-navigate interface.

The platform has low minimum account requirements – investors can start investing with as little as $10. Betterment has over 600,000 customers and 30 billion USD in assets under management as of July 2021.

Since its inception, the robo-advisor has added to its list of services to help investors plan for retirement, emergencies, and purchasing a new home. Learn how to get the most of your money with Betterment in this Betterment Review.

Available Investments

M1 Finance

M1 Finance users interact with exchange-traded funds (ETFs), fractional shares, and individual stocks. Unfortunately, the platform doesn’t support popular investment instruments such as options, mutual funds, and cryptocurrencies. For M1 users, each of the available investment instruments form a pie. Then, users can join their pies together to ease portfolio tracking and management.

Apart from investing in assets, M1 Finance supports 401Ks (IRS-recognized pension accounts) and IRAs (individual retirement accounts) for users looking to save toward their retirement goals.

Betterment

On the other hand, Betterment allows its clients to interact with stocks, ETFs, and cryptocurrencies. Instead of offering direct interaction with virtual currencies, the platform exposes investors to this asset class through ETFs.

Additionally, the platform offers access to fractional shares. Fractional shares allow an investor to invest in company shares when they don’t have the funds or the desire to invest in a full share. For instance, you can invest $50 in Google shares when the full share price is $250. These types of shares guarantee a fully invested portfolio around the clock.

In rare cases, you can face obstacles offloading fractional shares on the open market. Betterment uses “Nobel Prize-winning research” to build its investment strategies. Notably, the platform allows you to invest toward your retirement using IRAs and 401K accounts.

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Breakdown of Investments

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Fees and Commissions Comparison

M1 Finance advertises itself as a no-fee platform but charges miscellaneous fees for some not-so-common functions. For example, it charges users when they request physical paper copies of fees and taxes. Additionally, the mailing fees for printed copies differ depending on whether you require domestic or international mail. Apart from paper copy charges, M1 penalizes you for not using your account for more than three months, making outgoing direct account transfers, terminating your IRA, and liquidating securities traded on foreign exchanges. Domestic wire transfers, ACH notice of correction, and recalls are some other activities that incur miscellaneous fees.

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Summary of Fees and Commissions

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On the other hand, Betterment has a no-fee policy on checking accounts, cash reserves, and retirement accounts. However, joining the platform’s digital or premium plan requires you to pay a commission of 0.25 and 0.40 percent per year for every 100,000 USD, respectively. Betterment’s fee is distributed across twelve months and dependent on your daily balance. Therefore, withdrawals reduce the fee required. Consequently, accounts with zero balances don’t incur charges or account dormancy fees.

While Betterment waives minimum account balances for users on its digital plan, premium plan users must maintain a minimum account balance of 100,000 USD.

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Features

M1 Finance

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Invest – The platform is open to anyone seeking to build wealth through investing. M1 allows investors to build portfolios for free and offers automated portfolio maintenance.