M1 Finance vs. Wealthfront: Which Robo-Advisor Wins?

Both M1 Finance and Wealthfront let you create investment portfolios, though the two platforms are very different. We have reviewed over 30 robo-advisor portfolios, and we will help you compare Wealthfront and M1 Finance going into 2022.

SustainFi   Updated December 18th, 2021

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At a glance

  • Both M1 Finance and Wealthfront offer diversified investment portfolios. 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 cheaper rates 
  • Best for low fees: M1 Finance. M1 Finance doesn’t charge account management fees
  • Best full-service robo-advisor: Wealthfront. You can fully outsource your investments to Wealthfront, which will create a balanced portfolio for you. The robo-advisor will also help you save on taxes

Keep reading to learn more.

Minimum investment

 $100

Minimum investment

$500

Management fee

None ($125/year for Plus accounts)

Management fee

0.25%

Socially responsible investing

Yes

Socially responsible investing

Yes

Fractional shares

Yes

Fractional shares

No

Margin loans

Yes (2.0%-3.5%)

Margin loans

Yes (2.4%-3.65%)

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.

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 Wealthfront?

Wealthfront is a top robo-advisor with a focus on tax minimization. A robo-advisor will create an investment portfolio for you based on factors like how much risk you want to take, your age, and your financial goals. 

Wealthfront’s investment team is led by Dr. Burton Malkiel, a famous economist and the author of A Random Walk Down Wall Street, an investing best-seller. Wealthfront has over $21 billion in assets under management. 

The Palo Alto-based firm was founded in 2008 as Ka-Ching, a mutual fund analysis company, but has long since pivoted to robo-advisory. Today, Wealthfront appears to be pivoting again to allow for more self-directed trading.

🔔 Check out the full Wealthfront review.

M1 Finance vs. Wealthfront: Account types

Both M1 Finance and Wealthfront 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.

In contrast, Wealthfront offers 529 college savings accounts. Wealthfront also offers 401(k)s, but it is up to your employer to decide if they want to use them.

💰 The winner: Tie. Wealthfront wins if you need a 529 savings account, M1 Finance wins if you need a custodial account for your child.

M1 Finance vs. Wealthfront: Banking

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

M1 Spend is a free savings 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 recently launched a rewards credit card that gives you cash back in the form of the stock of the companies where you spend.

Wealthfront also offers a checking account with a Visa debit card. You can set up direct deposits and deposit checks. Plus, you earn a 0.10% APY on your cash and get access to 19,000 free ATMs. Your account is FDIC-insured through partner banks.

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

M1 Finance vs. Wealthfront: Minimum investment

Both M1 Finance and Wealthfront 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.

The minimum balance to get started with Wealthfront is $500. More sophisticated features, like stock-level tax-loss harvesting, require a $100,000 balance.

💰 The winner: M1 Finance. The M1 Finance minimum investment is only $100, compared to $500 with Wealthfront.

M1 Finance vs. Wealthfront: 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, Wealthfront charges an annual fee of 0.25% of assets under management.

Neither M1 Finance nor Wealthfront 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. Wealthfront: Socially responsible investing

Both M1 Finance and Wealthfront 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 Responsible Investing Pies buy ESG ETFs from Nuveen, an asset manager. There is a domestic and a global option.

Wealthfront’s Socially Responsible Investing (SRI) Portfolio also invests in several ESG funds, picked from the iShares family of funds. Holdings include large funds like the iShares ESG Aware MSCI USA ETF (ESGU).

According to Wealthfront and based on the data from the past three to five years, the performance of the SRI Portfolio should be similar to the standard portfolio (despite slightly higher fees). In the past, SRI Portfolios have also been less volatile than standard portfolios, despite similar returns.

🔔 Read the full review of Wealthfront’s Socially Responsible Portfolio.

💰 The winner: Tie. M1 Finance lets you create any portfolio you want (you can even replicate Wealthfront’s Socially Responsible option), but it requires more legwork than Wealthfront does.

M1 Finance vs. Wealthfront: Customizing your portfolio

Both M1 Finance and Wealthfront let you customize your portfolio, though M1 Finance has more customization options. For example, they let you easily build the entire portfolio from scratch.

Wealthfront does let you customize your portfolio to a degree. You can do that by adding new funds from a pre-approved list. Wealthfront clients with access to U.S. Direct Indexing can also exclude stocks they don’t like by putting them on the restriction list. (Only clients with over $100,000 under management are eligible for direct indexing.)

💰 The winner: M1 Finance. M1 Finance lets you create custom portfolios that suit your goals. You get less flexibility with Wealthfront.

M1 Finance vs. Wealthfront: 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.

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

💰 The winner: M1 Finance.

M1 Finance vs. Wealthfront: Margin lending

Both Wealthfront and M1 Finance let you borrow against the value of your investments.

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.

Wealthfront gives margin loans to customers with at least $25,000 in their investment account. Depending on your account size, borrow rates are between 2.40% and 3.65%. You can borrow up to 30% of your account value.

💰 The winner: M1 Finance. Wealthfront’s borrow is more expensive, you can borrow less as a percentage of your account, and you need a larger account balance to qualify.

M1 Finance vs. Wealthfront: Tax-loss harvesting

Tax-loss harvesting is a tax minimization strategy that involves selling funds or stocks at a loss to offset capital gains from investments that have made money.

Wealthfront offers tax-loss harvesting to all of its customers. The robo-advisor will look for movements in ETFs to harvest more tax losses and lower your tax bill. You still benefit from tax-loss harvesting if you invest in the Socially Responsible Portfolio.

Customers with over $100,000 invested get access to stock-level tax-loss harvesting (also known as direct indexing), which is a more advanced version of tax-loss harvesting.

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

M1 Finance vs. Wealthfront: Human financial advisors

Neither M1 Finance nor Wealthfront offers human financial advisors.

Wealthfront’s website has financial planning tools to help you determine what house you can afford, whether you are saving enough for retirement and if you can take time off to travel.

💰 The winner: None. If you are looking for human advisors, you can get advisor access from Personal Capital.

M1 Finance vs. Wealthfront: 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 Wealthfront 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. If you need to borrow, M1 Finance offers cheaper rates
  • Best for beginners: Wealthfront. Wealthfront will create a portfolio to suit your goals, but it will charge you 0.25% for the service. Wealthfront is best if you don’t know where to start and want a hands-off solution

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

Compare:

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

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