M1 Finance was incorporated with the SIPC (Securities Investor Protection Corporation) in 2015 and focuses on four areas: automated investing, free stock investing, debit card purchases, and an M1 Finance credit card.
In my M1 Finance review, every aspect of the M1 trading experience has been considered to provide users with an unbiased account of what to expect from an upstart and “ultra-low cost” brokerage is helping to lower fees across the industry.
Who is M1 Financial LLC?
M1 Finance is listed with FINRA and the SEC as both a broker and a dealer (broker-dealer in common parlance). This means they can trade your stock on the NYSE or NASDAQ directly without going through a middle man.
According to the rules for best execution setup by the SEC, M1 Finance is obligated to route your trade to the best possible fee arrangement at another broker if that is beneficial to you the customer.
However, things get complicated when the NBBO (National Best Bid or Offer) is in dispute, which can happen if a small odd lot trade is used as the best price, when the real liquidity is at a different price. In other words, you can’t really trade at the small odd lot price, so it’s not a realistic comparison for the “best price” available in the market.
Who owns the M1 broker?
The CEO is Brian Barnes, but they are owned by a consortium of venture capital firms led by SoftBank. Because M1 Finance is a private company, it’s impossible to tell what the exact ownership structure is.
M1 Finance Ratings
- Automated portfolio management
- Free checking account and other banking services
- Margin trading
- Lack of investment advice
- Poor customer service
- Rudimentary trading tools
M1 Finance Investment Options
M1 Finance offer free stock, ETF, and mutual fund investing (for no-load mutual funds), and the ability to setup rules to automatically invest portions of your cash investments into a pre-set portfolio. They do not allow derivatives trading of any kind. They do sell investment activities through PFOF (Payment For Order Flow), and as usual they try and bury that in esoteric fee pages instead of admitting that that’s how they make money.
They also have a gold club that costs $125/year for management fees, and provides for pre and post market trading, automatic 2.25% borrowing rate (versus 4.25% without M1 Plus), 1% interest rate and cash back for checking, and 1.5%-10% free cash back on the credit card (normally a $95) fee. They also offer margin loans at 4.25% as long as you maintain $10,000 in your account.
M1 was a relatively unnoticed player in the financial markets until the pandemic hit and suddenly low-cost and mobile trading became all the rage. With M1’s simple and easy to understand user interface, and $0 cost stocks, ETFs, and mutual funds, they were positioned in the right place at the right time to sign up a lot of new investor accounts.
M1 is just equities – no bonds, crypto, options, forex, or futures even if the user meets the account minimums for these products. I suppose they want to keep things simple but it’s hard to imagine investing your entire portfolio in a product that doesn’t offer basic financial instruments.
If you are/were focused on equities anyways, this won’t hurt you and M1 could be a great fit.
M1 Finance Accounts Available
The core product offerings of M1 Finance comes in four forms:
1. Commission free trading on individual stocks, ETFs, fractional shares and mutual funds some of which is traded on the New York Stock exchange. These investment strategies can be executed in taxable accounts, retirement accounts, through passive investing, trust accounts, roth IRA accounts, and through 80 “investment pies” which adjust risk tolerance automatically and are good for passive investors, tax minimization, automated investment platforms, robo advisor, responsible investing, and for tax loss harvesting.
2. Margin trading on stocks as long as users have a minimum investment $5,000 or more in their account.
3. Banking services with a checking minimum deposit of $500. You will then earn 1% APY on deposits, and you receive free ATM services. You can also send and receive ACH’s from this account just like you would a banking account.
4. Credit Cards — They are offering 1.5-10% back on purchases for free with a gold membership. Without a gold membership, the benefit costs $95/year.
M1 also offers a “robo advisor” as a taxable account, which can be part of a well-thought out investment strategy.
M1 Crypto Investing Accounts
M1 Finance does not offer Crypto investing at this time.
M1 Options Trading
M1 Finance does not offer any kind of derivates trading, which includes Options Trading.
M1 Finance Fees and Pricing
The fees for M1 Finance across each asset (Individual Stocks, Investment Portfolio, FDIC insured checking account, ETFs, investment accounts, custodial accounts, asset allocation, cash balance) are fairly simple — Stocks, ETF’s, and Mutual Funds are $0.00 in commission. They do sell your order flow for revenue which is an important thing to keep in mind. The credit card fee is $95 after the first complimentary year. Otherwise most things are free, except for esoteric situations like escheatment or TOD orders.
For the gold card cash back program, it’s free for the first year and then $10,000 must be in the account. For stock margin loans, $3,500 needs to be kept in the account whether they are in a taxable or brokerage account, or retirement account.
Banking on M1 Finance
M1 offers electronic banking services which are quite convenient and very attractive from a fees basis. They offer global ATM fee reimbursement, ACH transfer money, smart transfers, deposit money, $100 minimum balance, a checking account, retirement accounts, margin loans at 2.25% APY, and more standard banking functions.
“Robo advisors” can also be authorized to complete auto invest in a taxable account, such as the socially responsible investing automated investor.
The firm offers 1 year of free “Gold Member” club status to all new investors. This reduces the annual fee to $0, and unlocks all the banking attri3butes M1 offers in their “Gold Club”.
M1 Versus Robinhood
M1 Finance is competing for passive investors who use the “slices” of the buckets professionals to improve their personal finance in a disciplined manner. M1 also offers a suite of banking products including cash management, smart transfers, a checking account with a 1% interest rate and cash management account.
M1 Finance Education
M1 offers extremely rudimentary educational resources which define what “a stock” is (ownership in a company).
Useful information about M1 Finance
Does the broker have any help guides, or further educational sections on the site to help users better understand the broker and investing in general?
Given the amount of 500,000 thousand Monthly Active Users, there is no excuse for M1 to not provide guides to personal finance, a required minimum balance, what retirement accounts require, and a custom portfolio versus additional investment strength. This research should provide at least the level of intermediate trading education to protect new trading accounts especially the margin account information which is vital for new trader to understand the consequences of leverage.
Instead, M1’s “research” consists of a scrolling news feed next to whatever stock or bond you are looking at.
Opening an account at M1 Finance
Opening an account to trade stocks, ETF’s, or mutual funds is very fast and only request a name, SSN, and debit or bank account number for an ACH deposit. Per the M1 website, you should expect the funds to be available the next business day after you deposit funds.
Does M1 Finance require an account minimum.
Yes, M1 Finance margin requirements require $500 in the account and $100 in your account for stocks, ETF’s and funds. M1 Gold requires $5,000 in your account for margin purposes. All other standard M1 trades do not require an account minimum.
Does M1 Finance trade penny stocks or stocks on the “pink sheets”?
Yes, M1 Finance maintains a list of active OTC securities appropriate for investment. These can be worth it for some additional investment strategies.
M1 Finance Customer Service
The only way to contact customer service is to add your information to a queue then wait for them to call you back. They are also only open between 9am – 5pm. When I reached out a talk to a human, all I received was a form feedback email to be put in a queue and wait for a human calls you back.
What happens in cash management account accounts with money left over from trading shares?
M1 Finance provides a 1% APR on cash, bill pay, and ATM reimbursement held in your digital banking with no account fees.
Does M1 Finance trade mutual funds for $0.00?
Yes, M1 Finance has a variety of mutual funds which can be charged for $0.00. Remember, the $0.00 is charged only on the initial transfer. After that, the company makes money by charging a higher interest rate to keeping the money created by the higher rates they can collect.
How to deactivate your M1 Finance account
Simply sell all your assets, and then wait the 2-5 days for the cash to “clear” in the bank before it’s available.
How do I speak to a human for information about my account?
The short answer is: you don’t. The best you can do is fill out an automatic form which probably goes to tech support. They can email you back, so expect to have your questions answered in email format.
Who is a M1 broker suitable for new investors looking for no commission fees?
M1 is exclusively suitable for new M1 customers ready to trade relatively small amounts of stocks, ETF’s, and funds with cash accounts. with $0.00 commission with very fast account setup times and minimal trading platform support.
Final verdict: is M1 Finance any good?
M1 does have some positives, one of which is the speed from opening an account to trading your first trade of stock. If that speed is important to you, then M1 advisory or brokerage services could be the way to go.
M1 also has no management fees on any of it’s accounts. However, since M1 is so clearly offered to new investors who probably shouldn’t be jumping into active trading within five minutes of opening their first brokerage account, it is hard to call this a positive.
Standard assets like mutual fund or fixed income securities which could be managed for tax minimization and portfolio management are necessary to create diversified an investment account. The lack of income assets is the most egregious example for a holistic investment account. There is almost no education or research available on the M1 trading app, even in the “Gold Club” premium account option.
That said, M1 can construct a low cost trading account for active traders without the cost of a financial advisor.
M1 Finance FAQs
Does M1 Finance have any charting or technical analysis tools I can use to trade?
No, M1 Finance will only show you a graph of the price action which is the first investment platform I have seen that does not provide even rudimentary trading tools such as candlesticks or moving averages.
Will M1 Finance provide me with tax loss harvesting?
No, M1 Finance does not calculate tax loss harvesting for the low cost brokerage account.