M1 Finance Vs. Betterment – Which Robo-Advisor Is Worth Using?

Starting an investment portfolio is a financial goal that many people hope to achieve. But the prospect of managing their own investments seems overwhelming. And many do not feel that they can pay financial advisors to do the work for them.

Luckily we have robo advisors to fill this gap now. A robo-advisor is a digital platform that provides financial planning services that using algorithms to handle investment portfolios. Because they cut financial advisors out of the equation, robo-advisors are more affordable.

Two of the best-known robo-advisors are M1 Finance and Betterment. The question is, which is the better option? Let’s put these two head to head so you can see which is worth using!

Introduction: M1 Finance vs. Betterment

M1 Finance, Betterment, and other robo advisors have helped make investing accessible to the masses. Their modern investing platforms are easy for even beginner investors to understand. We’ll provide an overview first of these robo advisor platforms so we can break down how they are similar and different from each other.

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M1 Finance vs. Betterment: Meet the Robo-Advisors

M1 Finance

M1 Finance has investment options for active traders and passive investors that seek to build their wealth through their portfolio. It is an investment app that is available in iOS and Android. If you are looking for a checking account, M1 Finance has you covered too.

You can get a debit card that’s tied to this investing platform. This cash account will also earn rewards and cash back on certain purchases.

M1 Finance

Their service offerings include automated accounts, IRAs, trust accounts, over 80 professionally creating portfolios, and offers both joint and individual brokerage accounts. Fractional shares, margin lending, custodial accounts, and digital banking are also additional offerings that M1 Finance provides.

For investors who have borrowing, cash management, and balancing investing needs, M1 Finance can provide these services all within their one-stop-shop. M1 mostly offers stocks and exchange-traded funds (ETFs), which can be limiting for certain individuals.

There are no mutual funds or options that are available to invest in. One other service that M1 Finance lacks is the ability to access human financial advisors. Betterment and many robo advisors offer this capability.

However, you can automate your investment account and also take control of trading investments or portfolio slices if you wish.

History of M1 Finance

M1 Finance was established in April 2015 by founder Brian Barnes. He took an early interest in investing that happened in his 5th-grade classroom. His class built and managed a virtual stock portfolio as part of an assignment.

From that point, he was hooked, buying his first stock at age 10. Later in life, he found it frustrating how there were no great tools to help people manage their money and paying $10 commissions for online brokerage services he had used.

M1 Finance raised seed money and a Series A round in 2016 for a total of $20 million dollars. They limited its robo advisor annual fee of .25 percent in 2017 which helped them nearly double their user base by the next year.

In their most recent fundraising endeavor, M1 Finance has raised $75 million in Series D funding from March 2021. Their current assets under management are $3.5 billion.

M1 Finance Service Offerings

Below are the various service offerings that M1 Finance offers to investors.

M1 Service Offerings
Automated Investing Accounts or DIY Accounts

You can manage your own portfolio or take advantage of their automated investing to access portfolios, ETFs, and stocks. M1 Finance allows you to slice your investment pie by allowing how much you want to put towards each investment.

Usin their proprietary trading system, you can also automate your trading activity to take a backseat approach. This is ideal for beginner investors or anyone who prefers a passive approach to investment management.

If you want other perks like custodial investment accounts, 1.5 percent loan reductions, banking perks, and smart transfers, you’ll need to upgrade to M1 Finance’s Plus accounts. This is available for a $125 annual fee.

M1 Spend

This FDIC-insured checking account integrates with the M1 Finance app. There are two options for checking accounts: M1 Spend and M1 Plus.

M1 Spend is free and allows you to use a debit card to pay for purchases and an account to pay bill bills and receive paychecks. The APY on the checking is 0 percent and cashback earning is 0 percent.

For $125 per month, you can upgrade to the M1 Plus. You get all the perks of the M1 Spend account plus 1.5 percent APY, 1 percent cash back on all purchases, and a lower APR when you borrow money with M1 Borrow. You also get access to a second trading window and some other perks.

The value of M1 Spend overall, doesn’t seem to justify the additional expense, however.

Smart Transfer

For M1 Finance customers who upgrade to an M1 Plus membership, they get access to a feature called Smart Transfers. Based on the rules you have set up, you can make transfers from your Invest to Spend account or vice versa.

M1 Borrow

M1 accounts allow everyone to invest for free and it also will open up a portfolio line of credit. With the low-interest rates, this feature by M1 Finance makes it easy to access these loans. The terms are flexible and the cost is typically lower than other borrowing options (auto loan, HELOC, mortgage, etc.).

You must have an M1 brokerage account that has at least a $5,000 account balance to qualify for M1 Borrow. There is no credit check so your credit score makes no difference.

Your investment portfolio acts as collateral and you can borrow up to 35 percent of your account’s equity balance. There is also no repayment schedule so you can pay back the loan as you like. Keep in mind that you’ll be paying interest on your outstanding balance that’s remaining.

Retirement Accounts

M1 also offers traditional IRAs, Roth IRAs, and SEP IRAs. Access to these retirement accounts is available for no extra cost. You need to have at least $500 to open an account.

You can purchase fractional shares, automatically reinvest dividends, choose professional portfolios, or select your investments. IRA transfers and 401(k) rollovers are also available through M1 Finance.

Custodial Accounts

UTMA/UGMA and custodial investment accounts can be opened as long as you have the M1 Finance Plus account. Trading on these accounts will become restricted once the child or dependent reaches their age of majority (18 or 21 in most cases).

Once they have reached this age, the account can be transferred to a taxable investment account or the funds can be withdrawn.

Trust Accounts

You need to make a minimum investment of $5,000 to set up a trust account with M1 Finance. Irrevocable and revocable trusts are both authorized to invest in securities. These trusts must US domestic and in good legal standing.


To get an M1 Finance vs Betterment comparison, let’s move on and talk about the latter. Betterment has become somewhat the poster child for robo advisor platforms. You get a lot more than an algorithm, however.

If you are just starting to begin investing, Betterment is an excellent platform to use as your starting point. There are no minimum investment requirements to start an account. Their basic account is 0.25 percent on an annual basis.


Betterment offers financial advice from a financial advisor too if you want more help with your retirement account. There’s also a cash reserve and management account so you can manage all your finances in one place.

Taxable accounts and tax-sheltered retirement accounts are both offered by Betterment.

Betterment uses Modern Portfolio Theory (MPT) to create and manage your investment portfolios. This is fairly typical for robo advisors to use this strategy. Modern Portfolio emphasizes asset allocation that’s based on target risk levels.

When you start an account with Betterment, you will go through a questionnaire initially. The answers will be used to determine your time horizon, risk tolerance, and investment goals.

Betterment accounts offer automated investment management so once your portfolio has been created, there’s nothing else you need to do. With passive investing, Betterment will rebalance your portfolio periodically to keep the asset allocation to your target investment percentage. Dividends will also be reinvested according to your portfolio targets.

Speaking of your portfolio, it is comprised of 14 different asset class investments. There are six stock funds and eight bond funds. A single ETF represents each of these asset classes.

For those taxable accounts, Betterment offers tax-loss harvesting. Not sure how tax-loss harvesting works? Basically, this is a strategy that sells off losing asset positions near the year of the year.

Comparable ETFs will replace these losing asset classes at a later time so that your target asset allocation is maintained. Tax loss harvesting allows investors to minimize taxes owed on regular income or capital gains.

History of Betterment

Betterment launched in 2008 which makes it the first robo advisor platform. While many other robo advisors have flooded the industry since then, Betterment has stayed ahead of the pack by keeping on top of innovation.

History of Betterment

Betterment is known to have the best modern investing platform, despite the fierce competition that’s out there.

Almost every major brokerage firm in the U.S. offers financial advice packages that include a robo advisor option. Betterment is still the largest independent robo-advisor out there with $16.4 billion in assets under management.

With low management fees, Betterment can provide full-service investment management with the absence of the costs found with working with certified financial planners. Since there are is no account minimum, you can get started with a few hundred dollars as an initial deposit to start growing your investment now.

Betterment Service Offering

Personal finance is more than just the investment markets. Here are all the services that Betterment offers below:

Betterment Service Offering
Betterment Cash Reserve Accounts

This is Betterment’s version of a savings and check account. With the savings account, you earn APY at the most current interest rate on your account value.

You can fund your savings account using Betterment’s Cash Analysis tool which finds excess cash in your checking account. Using a function called Two-Way Sweep, Betterment will put this cash into your savings when you have it turned on.

The checking accounts will come with a Visa debit card that includes FDIC insurance, no account fees, no minimum balance, and worldwide ATM fee reimbursement.

As a Betterment customer, you also get to bypass fees.

Betterment Checking Accounts

This low-fee account can also be managed by Betterment’s mobile app. You can’t deposit cash since this checking account is online-only. Checks can be deposited using the app.

Like their Cash Reserve accounts, ATM fees are reimbursed automatically. These accounts are also FDIC-insured.

Betterment Cash Back Rewards

You can also earn cashback rewards for online and in-store purchases through thousands of merchants. Based on your spending habits and location, you’ll also get personalized offers.

To find out what offers are available, just head to the earn rewards section of your account. Powered by Dosh Cashback app, you can link your debit or credit card easily

Financial Advice Packages

For those that want to take a passive investing approach, Betterment’s robo advisor platform is great. But if you want to seek some additional personal finance advice, you can set up some time to get some help from an expert.

This is part of Betterment’s premium plan and here are the advice packages available with their fees:

  • Getting Started – $299
  • Financial Checkup – $399
  • College Planning – $399
  • Marriage Planning – $399
  • Retirement Planning – $399
Access to Financial Advisors

Robo advisor services are great but sometimes you want some independent financial advice from a human. If you have an account with over $100,000 then you can also get access to their financial advisors.

Access to financial advisors is available through Betterment’s premium plan. With this premium account, you pay just a fraction of the fees that are typically charged by human advisors.

M1 Finance vs. Betterment: Pros

Here is a look at the pros of M1 Finance and Betterment below.

M1 Finance Pros

M1 Finance Pros-Rebalancing is easy

Rebalancing is easy

M1 Finance offers one-click rebalances for your portfolio allocation. You can’t get easier than that. Fractional shares are also distributed evenly on money that’s deposited.

Low Fees

Their basic account has no platform fees at all. Their premium plan, called M1 Plus does have an annual fee of $125, but their free investing platform is more than adequate for your needs.

Account Offerings

M1 Finance offers joint accounts, taxable accounts, trusts, Roth and traditional IRAs.

Purchase Individual Stocks

Their basic account will also allow you to buy individual stocks without having to pay commission. Keep in mind that these individual stocks are not a full share. Still, it does give you ownership in that stock and this is a feature that isn’t available with many other robo advisors.

Pie-Based Investing

Creating your own portfolios with pie-based investing allows you to build your account with customization at your fingertips. Slices of the pie can be removed or added at quick so that you can balance your portfolio quickly.

Investment Portfolio Options

The investment options available with M1 Finance vs Betterment has M1 Finance with the edge. They allow you to select over 80 expert-curated portfolios. The strategy and risk tolerance vary so you can choose the right fit for your needs. This is a great feature when you don’t want to choose your own individual stock and want to get set up with a portfolio that’s already built.

Betterment Pros

Betterment Pros-Tax Loss Harvesting

Tax Loss Harvesting

Betterment offers tax-loss harvesting which is beneficial to those who have taxable accounts. By selling and buying funds, they can make sure your portfolio is set up in the most tax-efficient way possible.

This is generally a manual process to have a tax coordinated portfolio but Betterment uses its robo advisor platform to do this automatically for you.

Passive Investing

As a robo advisor, Betterment allows you to take a passive approach to your investing. They will add and remove funds and rebalance your account as necessary. The management fee that is charged for this automation is minimal.

Socially Responsible Investing

Socially responsible investing (SRI), is available with Betterment. They currently offer three socially responsible portfolios. In addition to passive investing, you can invest and choose the risk tolerance for companies that follow these guidelines.

M1 Finance vs. Betterment: Cons

Now, let’s talk about where M1 Finance and Betterment are lacking.

M1 Finance Cons

Lacks a tax-loss harvesting feature

M1 Finance vs Betterment goes to favor the latter with the lack of this feature. Being able to avoid capital gains by selling securities at a loss isn’t a feature you’ll notice initially. But it becomes an issue as your show your taxable account.

No financial advisors

Personalized advice from a financial advisor can come in handy for some investors. But M1 Finance does not offer access to these personal finance resources. So M1 Finance could be a better fit for intermediate or advanced investors.

Limited Trading Window

M1 Finance has very limited times that you can make trades. In fact, with a basic account, you can only make trades one time during the day. Even if you upgrade to their premium plan, the Plus account, you only get two times during the day for trades. That’s limiting for those that want to take advantage of price increases/decreases that occur quickly.

Betterment Cons

Lacks Customization

M1 Finance vs Betterment in terms of customization doesn’t come in their favor. You can’t choose individual stocks or funds with Betterment because they pre-select everything based on your questionnaire answers.

Will not Learn about Investing

Opening a Betterment portfolio isn’t going to teach you about investing. That’s because they handle everything for you. This isn’t a disadvantage for everyone, especially those who prefer a passive investing approach.

But if you want to grow your knowledge of investing and start choosing your own individual stocks, etc. those options not available to you.

Management Fee

Betterment has low fees and you’re getting a lot of value with them. However, as time goes by and your portfolio grows, that 0.25 percent management fee for your total invested balance adds up.

M1 Finance vs. Betterment: Price Comparison

M1 Finance Pricing Structure

M1 Finance Pricing Structure

Betterment Pricing Structure

Betterment Pricing Structure

Conclusion: M1 Finance vs. Betterment

M1 Finance and Betterment have different investing styles. And ultimately the robo advisor you chose between the two comes down to which approach you prefer.

If you want to take a more proactive approach with your investments, M1 Finance is going to be the better choice among the two. There are no commission fees or annual costs to worry about with their basic account. You will miss out on tax-loss harvesting and having access to real advisors though.

For investors that prefer a passive investing approach to maintain their investments, Betterment is a better fit. Beginner investors may also find Betterment to be more ideal for their needs. Plus you can get access to financial advice down the line if you want.

Both of these platforms have their advantages and disadvantages. You can’t go wrong if you pick the one that’s best for your investing style.

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Anjana Paul

Anjana Paul is a financial writer with extensive education and experience in the financial industry. She received a Marketing and Management degree from Kansas State University and a Masters in Business Administration (MBA) from Baker University. Anjana also holds a Business Analytics Certificate from the Wharton School. Throughout her career, Anjana has worked in multiple roles within the financial industry. She has worked in banking, finance, student loans, consumer credit cards, and tech. Anjana's experience and education allow her to bring a credible, well-informed perspective to the content she writes at Wealth Pursuits, where her primary areas of focus include investing, credit, and personal finance.

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