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

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.

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.

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.

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.

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.

Features

M1 Finance

Other M1 Plus perks include low-interest rates when borrowing, automated transfers, and access to custodial accounts. Additionally, you can invest twice in a single day, provided your portfolio is worth over $25K. You can also send physical checks directly from the mobile app if you sign up for M1 Plus.

Betterment

Although both M1 Finance and Betterment are robo-advisors, there are some big differences between their features. For instance, Betterment only offers loans under certain circumstances, while M1 Finance puts borrowing at the center of its offerings.

Referral Programs

M1 Finance runs a referral program that earns referrers and referrals $50. The platform also offers an affiliate program if you want to promote the platform more seriously. Affiliates make up to $100 when their invitees deposit $1,000.

Betterment also has a referral program. However, the platform’s website states that the reward for inviting friends and family is “a special referral offer.” One such offer waves account fees for 90 days for the referrer and 30 days for the referral.

M1 Finance interacts and responds to client queries via email, phone, and instant help which allows users to chat with a bot. Communications through email are answered within one business day, while the phone number option is marked for “urgent requests.”

On the other hand, Betterment supports client communication through physical mail, email, and a chatbot.

If you haven’t signed up with M1 Finance yet, use our M1 Finance referral link from this M1 Finance referral article and follow the steps on how to register successfully.

Education and Research

M1 Finance educates its customers through various channels, including articles, a help center, and a dedicated section for frequently asked questions. Meanwhile, Betterment has a blog, help center, and FAQs section. When you need more assistance, the platform offers an option to meet directly with an advisor.

Pros and Cons

M1 Finance

Betterment

Conclusion

In conclusion to this M1 Finance vs Betterment article, M1 Finance is best for users who need to invest, spend, and borrow against their portfolios. However, M1 Finance users need to know how investing works since the platform doesn’t provide much hand-holding. On the other hand, Betterment is best for clients whose primary interests include saving and spending.

Although both platforms provide automated financial advisory services, they are built for different clients. For instance, M1 focuses on saving and borrowing while Betterment concentrates more on saving and spending. Also, Betterment is ideal for beginners while experienced investors will feel right at home with M1 Finance.