M1 Finance vs. Betterment: Which Robo-Advisor Is Best for You?

Both M1 Finance and Betterment let you invest in portfolios of ETFs, but, apart from that, the two platforms are very different. We have reviewed over 30 robo-advisor portfolios, and we will help you compare Betterment and M1 Finance based on your goals.

SustainFi   Updated April 1st, 2022

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At a glance

  • Both M1 Finance and Betterment let you invest in portfolios made up of ETFs (and, in the case of M1 Finance, stocks). But, because the platforms are so different, the best option depends on what you are looking for
  • Best for self-directed investors: M1 Finance. M1 Finance lets you easily create custom portfolios, buy fractional shares and borrow against your investments at low rates 
  • Best for low fees: M1 Finance. M1 Finance doesn’t charge account management fees
  • Best full-service robo-advisor: Betterment. You can fully outsource your investments to Betterment, which will create a balanced portfolio for you
  • Best for access to human advisors: Betterment. You can buy packages or a premium membership to get access to human financial advisors

Keep reading to learn more.

Minimum investment

 $100

Minimum investment

$10

Management fee

None ($125/year for Plus accounts)

Management fee

0.25%-0.40%

Socially responsible options

Yes

Socially responsible options

Yes

Fractional shares

Yes

Fractional shares

No

Margin loans

Yes (2.0%-3.5%)

Margin loans

No

Tax-loss harvesting

No

Tax-loss harvesting

Yes

What is M1 Finance?

M1 Finance is an investment platform rather than a full-service robo-advisor; it’s a cross between an online broker and a robo-advisor. M1 Finance offers an easy-to-use app that lets you build customizable portfolios (called “pies.”)

The pie portfolio model allows you to easily add a stock or an exchange-traded fund (ETF) as a piece of the pie. You choose what percentage to invest in each asset.

If you don’t want to “bake” your own pies, M1 Finance comes with over 80 premade options. The app even offers two socially responsible pies, the Responsible Investing and the International Responsible Investing Pies. In addition, M1 Finance offers fractional shares and lets you borrow to invest.

Despite its flexibility, M1 Finance is a platform for investing, not for day trading. For example, you can only buy and sell during the daily trading window (two windows for M1 Plus members.) (If you are interested in trading more frequently, check out Public, a social investing app.)

Brian Barnes started Chicago-based M1 Finance in 2015. His startup has recently surpassed $4.5 billion in assets under management, raising over $300 million from investors like Softbank.

🔔 Read the full review of M1 Finance.

What is Betterment?

Founded by Jon Stein in 2008, Betterment is the first and most successful robo-advisor judging by assets under management (which reached $29 billion in early 2021). The robo-advisor uses algorithms based on the Modern Portfolio Theory to create the right portfolio to meet your goals, such as saving for retirement or growing your wealth.

🔔 Check out the full Betterment review.

M1 Finance vs. Betterment: Account types

Both M1 Finance and Betterment support:

  • Individual and joint taxable investment accounts
  • Retirement accounts for traditional, SEP, and Roth IRAs, plus rollover 401(k)s
  • Trusts

In addition, M1 Finance offers custodial accounts (UTMA/UGMA accounts) for children. Custodial accounts are for M1 Plus members only.

💰 The winner: M1 Finance. M1 Finance wins if you need a custodial account for your child.

M1 Finance vs. Betterment: Checking accounts

Both M1 Finance and Betterment can set you up with checking accounts.

M1 Spend is a free bank account that comes with a Visa debit card. M1 Plus members get 1% APY on their money and 1% cash back on qualifying purchases. The account is FDIC-insured for up to $250,000. M1 Plus members get reimbursed for up to four ATM transactions each month. M1 Finance has also recently launched a rewards credit card that gives you rewards in the form of the stock of the companies you spend with.

Betterment offers two cash management accounts:

  • Betterment Cash Reserve, a high yield savings account, is FDIC-insured and pays a 0.35% APY as of April 2022
  • Betterment Checking Account, a no-fee checking account that comes with a Visa debit card. The account is FDIC-insured for up to $250,000 and reimburses all ATM fees. You can get cash back rewards from thousands of brands like Dunkin, adidas and Walmart

💰 The winner: Tie. Although M1 Finance offers a higher APY, you need to be an M1 Plus member to qualify.

M1 Finance vs. Betterment: Minimum investment

Both M1 Finance and Betterment have low minimums compared to human financial advisors, some of whom require $250,000 to work with you.

M1 Finance asks you to deposit $100 into your account to start building pies. The minimum goes up to $500 for IRAs.

There is a $10 minimum for the Betterment Digital plan. The premium plan, which gives you access to fiduciary financial advisors, requires a $100,000 investment.

💰 The winner: Betterment. The $10 minimum wins compared to $100 with M1 Finance.

M1 Finance vs. Betterment: Management fees

Unlike full-service robo-advisors, M1 Finance doesn’t charge a management fee. M1 Finance makes money on lines of credit and optional extras like Plus memberships. (However, accounts with less than $20 and no trading activity for over 90 days are charged a $20 maintenance fee.)

M1 Finance Plus memberships cost $125 per year and offer access to perks like an extra trading window and discounted borrow rates. Plus accounts also let you set up Smart Transfers, a service that sweeps excess cash into your investing account. As a Plus member, you also earn interest and get cash back on your M1 Spend account.

In contrast, Betterment charges an annual fee of 0.25% of assets under management ($25 annually on a $10,000 investment). Betterment Digital charges the same management fee for traditional and ESG portfolios. 0.25% is one of the lower fees among full-service robo-advisors. The premium plan costs 0.40%.

Neither M1 Finance nor Betterment charges any account opening fees.

💰 The winner: M1 Finance. M1 Finance doesn’t charge management fees (unless you choose the Plus membership). (However, M1 Finance does not offer full-service robo-advisor services either.)

M1 Finance vs. Betterment: Socially responsible investing

Both M1 Finance and Betterment offer socially responsible investing (SRI) options. SRI, also known as ESG, portfolios score better on environmental, social, and governance metrics like carbon emissions, diversity, and shareholder treatment. Read our ESG investing guide to learn more.

M1 Finance comes with two premade Responsible Investing Pies, though you can design your own. The pies invest in U.S. and foreign stocks with high environmental, social, and governance (ESG) scores. They are made from Nuveen ETFs, which cost 0.38%-0.39% ($38-39 on a $10,000 investment each year).

🔔 We’ve created an ESG investing pie that is fossil free and costs only 0.11%. Check it out here or read more about the ESG investing pie.

Betterment offers three socially responsible investing options: Broad Impact, Climate Impact, and Social Impact Portfolios. 

  • The Broad Impact Portfolio invests in funds with high ESG scores, such as the iShares ESG Aware MSCI USA ETF (ESGU)
  • The Climate Impact Portfolio invests in funds with a lower carbon footprint than the stock market, such as the iShares MSCI ACWI Low-Carbon Target ETF (CRBN). According to Betterment, carbon emissions per dollar of revenue for the 100% stock Climate Impact Portfolio are half of those of the conventional (Core) Portfolio
  • The Social Impact Portfolio adds diversity and inclusion ETFs like the SPDR SSGA Gender Diversity Index ETF (SHE) and the Impact Shares NAACP Minority Empowerment ETF (NACP). SHE includes companies with greater gender diversity in senior leadership. NACP provides exposure to companies with strong diversity policies

💰 The winner: Tie. M1 Finance lets you create custom portfolios that suit your goals, but their premade Responsible Investing Pies are not bad either. Betterment gives you three impact investing options, more than any other full-service robo-advisor. Betterment may be easier to use if you are just learning about investing in general and ESG investing in particular.

M1 Finance vs. Betterment: Individual stocks and fractional shares

M1 Finance lets you add individual stocks and fractional shares to your pies.

Fractional shares allow you to buy a piece of a share if buying the entire thing is more than you would like to spend. For example, one share of Tesla (TSLA) stock costs $1,000, but if you only want to spend $100, you can buy 1/10 of that share. Buying fractions of shares limits how much cash is sitting in your account unspent.

Betterment doesn’t let you buy individual stocks or fractions of them.

💰 The winner: M1 Finance.

M1 Finance vs. Betterment: Margin lending

M1 Finance gives margin loans to customers with over $5,000 in their investment account. The platform charges 3.5% interest (2% for M1 Plus members), and you can borrow up to 35% of the value of your account.

🔔 Learn more about M1 Borrow.

💰 The winner: M1 Finance. Betterment doesn’t offer margin loans.

M1 Finance vs. Betterment: Tax-loss harvesting

Tax-loss harvesting is a tax reduction strategy that involves selling a fund or stock that has experienced a loss. By realizing this loss, you can offset taxable gains on other investments. The sold fund is replaced with a similar one, maintaining an optimal asset allocation.

Betterment offers automatic tax-loss harvesting at no additional cost at the ETF level. A more advanced tax-loss harvesting strategy, selling individual stocks that have lost money (also called direct indexing), is not available. (If you are interested, you can check out Personal Capital.)

In addition to tax-loss harvesting, Betterment offers Tax-Coordinated Portfolios. To take advantage of that, you need to open both a taxable investment account and a retirement account with Betterment. Betterment will then hold income-earning assets like bonds in your tax-advantaged retirement account and stocks in your taxable account. This will ensure an optimal asset allocation while reducing taxes.

💰 The winner: Betterment. M1 Finance doesn’t offer tax-loss harvesting.

M1 Finance vs. Betterment: Human financial advisors

The Betterment Digital plan doesn’t come with access to human advisors, though you can buy a package for an extra fee ($299-$399 for 45-60 minutes). Human advisors are Certified Financial Planners (CFP), the most rigorous certification for financial professionals. CFPs also pledge to be fiduciaries, meaning that they promise to act in your best interest.

Here are some of the packages:

  • Getting Started: $299
  • Retirement Planning: $399
  • Financial Check up: $399
  • College Planning: $399
  • Marriage Planning: $399

💰 The winner: Betterment. M1 Finance doesn’t have any human financial advisor options.

M1 Finance vs. Betterment: Rebalancing

Sometimes, when one asset class, like stocks, does much better than another one, like bonds, your portfolio may “drift” and become riskier (or less risky) than it should be. Rebalancing solves that. Both Betterment and M1 Finance can rebalance your portfolio. Rebalancing means that the robo-advisors will buy or sell investments to get to the asset allocation that suits your goals.

💰 The winner: Tie. Nearly all robo-advisors now offer this feature.

💰 The Overall Winner

  • There is no clear winner because the two platforms are designed for different types of investors
  •  Best for self-directed investors: M1 Finance. M1 Finance gives you more choices if you know how you want to invest. There are no management fees. You can add individual stocks and fractional shares or borrow against your investment account. If you want to invest sustainably and have specific requirements (like not owning oil and gas stocks), you can create a DIY portfolio of fossil free ETFs
  • Best for beginners: Betterment. Betterment will create a portfolio to suit your goals, but it will charge you 0.25% for the service. Betterment is best if you don’t know where to start and want a hands-off solution. Betterment’s three impact options are good enough for most investors

🔔 Want to compare more options? Check out the top 10 investing apps.

Compare:


Annual percentage yield (variable) is as of 4/1/2022. Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities.

NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

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