M1 finance and Wealthfront are two types of roboadvisor that utilize an entirely different approach to investing. There's no chance of confusing the two as they each offer different features.
In the M1 Finance vs Wealthfront debate, this is less about competing on equal ground and more about the type of investor they're aimed at. As most M1 Finance reviews state, this is the far superior investment platform for beginners. On the other hand, Wealthfront offers a greater range of securities and offers additional features for high net-worth individuals.
So, which investment option is best for you?
M1 Finance Overview
M1 Finance is an investing app for those who are tired of paying high fees to invest their money for the future. To address this issue, CEO Brian Barnes kickstarted M1 Investing in 2015 from Chicago, Illinois. Today, M1 holds more than $3 billion in assets for investors.
This platform specializes in a mixture of automated portfolios for complete beginners and the opportunity to use the M1 pie investing feature to customize portfolios for more confident investors.
You can also read our review on M1 Finance to learn more about how this platform has altered the way the average person accesses the markets.
Getting started couldn't be simpler. Just select your investing goals and you'll receive a portfolio recommendation. You're not required to accept M1's recommendations. Feel free to take direct control of your investments.
What makes M1 stand out is the complete lack of fees on the platform, which is in direct contrast to traditional brokerages.
M1 Finance Details
- Account Minimum – $0
- Management Fees – $0-$125 per year
- Account Types – Individual and joint brokerage accounts, Roth IRA, SEP IRA, and Traditional IRA, trust accounts, and custodial accounts
- Investment Type – Stocks and Exchange-Traded Funds (ETFs)
Start your journey to investing for the future by creating an account with M1. There are no account minimums you need to adhere to, no fees for making trades, and no commissions paid to asset managers.
At Modest Money, we're big fans of M1 Finance due to this move from low-cost investing to no-cost investing.
It also surpasses many similar platforms, including Wealthfront, with the sheer range of account types available.
Investing is designed to be simple. Using the M1 pie investing system, you can easily visualize every aspect of your portfolio. Feel free to take up M1 Expert Pies for a portfolio researched and recommended by market professionals.
There are no limits when it comes to how many pies you can hold or how many investments you can make.
M1 Finance Fees
What makes investing with M1 Finance unique is the fact that there are no fees whatsoever. You won't pay any management fees, trading fees, or commissions. M1's business model is based on making a profit from its other products, such as the M1 Spend and M1 Borrow programs.
M1 offers a two-tier system for members. The upgraded version of the basic membership, M1 Plus, costs $125 per month and comes with advantages like higher ACH limits. For investors with a larger net worth, it may be a good option, but most investors have everything they need from the basic investment account.
M1 Finance Pros
- No fees
- No account minimums
- Simplified investing
M1 Finance Cons
- No tax-loss harvesting
- No human financial advisors
- No investments like options and mutual funds.
We believe that M1 Finance presents an ideal investment environment for beginners to enter the markets. Discover more about how the platform works with our detailed M1 Finance review.
Wealthfront Overview
Wealthfront Inc. has a slightly longer history than M1, after being founded in 2008 in Palo Alto, California. The company has experienced rapid growth in recent years, with it now boasting more than $20 billion in assets under management, held by 400,000 unique accounts.
Due to how the company has positioned itself as a vehicle for more experienced investors, Wealthfront enables you to invest in a variety of assets, such as stocks, bonds, real estate, cryptocurrencies, and natural resources. However, it should be remembered that these investments are held through low-cost ETFs, rather than direct ownership of the product itself.
Take note that there are fees associated with Wealthfront. It's not a no-cost investing platform like M1. Also, the way Wealthfront approaches portfolio management differs. Goal-setting is at the heart of what makes this platform work. While there aren't as many options as M1, it's still superior to traditional brokerages.
Read up on one of the many Wealthfront reviews to learn more about how this platform works and whether it's the right choice for you.
Wealthfront Details
- Account Minimum – $500
- Management Fees – 0.25% for most accounts
- Account Types – Individual and joint accounts, Roth, traditional, SEP, and rollover IRAs, trusts, high-yield cash accounts, and 529 college savings plans.
- Investment Types – 12 asset classes held mainly through ETFs
When examining the M1 Finance vs Wealthfront debate, there are huge differences between the platforms. Wealthfront is more of a hybrid between a low-cost investment option and a classic brokerage.
Wealthfront offers an array of account types, but the one that stands out is the 529 college savings plan. It's a rarity to see this type of account supported by any other roboadvisor. Be aware that the fees are higher, ranging from 0.42% to 0.46%.
While it does offer more asset classes than M1, these are held through low-cost ETFs, rather than the actual asset itself. This comes with potential risk and means you don't truly have any additional exposure to other asset classes in the event of a crash.
Wealthfront's lack of customization options is an issue, whereas M1 gives you full control over your portfolio. The level of automation within M1 is superior to Wealthfront, so if you want to set and forget your portfolio, you may want to pick M1. Its advanced screening feature gives you all the information you need to select the right investments for you.
On the other hand, if you do want to discover other assets via low-cost ETFs and move beyond classic stocks and bonds, Wealthfront is well worth creating an account with.
Wealthfront Fees
Wealthfront does charge fees. Most basic accounts will command a 0.25% management fee, with the higher rate charged on 529 college savings accounts.
You'll need to deposit a minimum of $500 to get started with Wealthfront, which isn't ideal if you're starting from a low base.
No additional fees are charged for high net-worth accounts. Accounts valued at more than $100,000 gain access to stock-level tax-loss harvesting, whereas accounts with more than $500,000 can use the automatic portfolio rebalancing system under the Smart Beta program.
It should be noted that automatic rebalancing is available with M1 for free, regardless of the value of your account.
Wealthfront Pros
- Lots of supported account types
- Goal-setting assistance
- Tax-loss harvesting
Wealthfront Cons
- No online chat for customers
- Management fees charged
- High account minimum
M1 Finance vs Wealthfront: Comparison
| Feature | M1 Finance | Wealthfront |
| Min. Investment | $0 | $500 |
| Management Fees | $0 | 0.25% (0.42-0.46% on 529 college savings plans) |
| Avg. ETF Expense Ratio | $0 (Charged by certain providers) | 0.05-0.29% |
| Account Types | Individual and joint brokerage accounts, Roth IRA, SEP IRA, and Traditional IRA, Trust accounts, and Custodial accounts | Individual and joint accounts, Roth, traditional, SEP, and rollover IRAs, trusts, high-yield cash accounts, and 529 college savings plans. |
| Tax-Loss Harvesting | None | Available |
| Financial Advisor Fee | No financial advisors available | No financial advisors available |
| Best For | Beginners | Higher net-worth investors |
M1 Finance vs. Wealthfront: Which One is Right for You?
Wealthfront offers some cool features, such as its goal-setting platform, but the presence of its fees and the lack of customization can be frustrating for beginners who want to learn the ropes for the first time.
Unless you're looking to invest in an account type not supported by M1 Finance, the easiest way to invest is with M1. Its automatic portfolio rebalancing plus the easy-to-use M1 pie system makes managing your portfolio in the long-term easier.
For total beginners, M1 Finance has to be the only choice. If you're a higher net-worth investor aiming for a big goal, Wealthfront offers several features that can contribute to your future returns. For example, the platform's stock-level tax-loss harvesting for accounts over $100,000 is a great touch.
At Modest Money, we like both platforms, but the edge has to go to M1 Finance for its stance on no-cost investing.
M1 Finance
