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M1 Finance vs. Wealthfront: Investment Platform Comparison

Wealthfront was one of the first robo-advisors on the scene, and it remains a major player in the space thanks to low management fees and impressive value-added features.

M1 Finance is a newer but no less impressive self-directed investing platform, with virtually no commissions or management fees and add-ons like portfolio margin borrowing and a cash back credit card.

M1 Finance and Wealthfront aren’t identical, of course.

M1 Finance has an impressive account opening bonus and a self-directed interface that appeals to investors who prefer to pick their own stocks and funds. Wealthfront has a more robust set of tools and content for investors seeking financial advice and guidance — although nothing approaching what you get from traditional human advisors.

Not sure which is right for you? Use this overview to work through the relative strengths and weaknesses of each platform and determine the better fit for your needs.

M1 Finance vs. Wealthfront: Overview

M1 Finance and Wealthfront both feature low- or no-cost automated investing platforms, but they’re by no means identical.

M1 Finance features self-directed investing and a low-cost margin borrowing tool, while Wealthfront comes with an excellent cash management account and the option to get personalized financial advice from staff.

M1 Finance vs. Wealthfront: Account Opening Bonus

M1 Finance has a generous account opening bonus that routinely ranks among the best brokerage account promotions on the market. Wealthfront’s account opening bonus is a lot less generous.

M1 Finance’s Account Opening Bonus

Open a new M1 Finance account and initiate an account transfer by November 15, 2023, to earn up to $15,000 in bonus cash.

M1 Finance distributes bonuses based on the following transfer thresholds:

  • $250 bonus: Transfer an account worth $100,000 to $249,999.
  • $1,000 bonus: Transfer an account worth $250,000 to $499,999.
  • $2000 bonus: Transfer an account worth $500,000 to $999,999.
  • $4,000 bonus: Transfer an account worth $1,000,000 to $1,999,999.
  • $10,000 bonus: Transfer an account worth $2,000,000 to $4,999,999.
  • $15,000 bonus: Transfer an account worth more than $5,000,000.

Your new M1 Finance account type must match your old account type to be eligible — for example, you must transfer from a taxable account into a taxable account. The offer isn’t valid on ACH deposits, wire transfers, or direct 401(k) rollovers.

If you qualify for the promotion, you should receive your bonus on August 15, 2024

Promotion Period: August 15, 2023 (12:00 AM EST) through November 15, 2023 (11:59 PM EST). 

Wealthfront’s Account Opening Bonus

For a limited time, get $30 bonus cash when you open a Wealthfront Cash Account and fund your new account with at least $500 in new money. Terms apply. Open your account here.

M1 Finance vs. Wealthfront: Account Types

Both M1 Finance and Wealthfront offer multiple account types, including taxable brokerage accounts, tax-advantaged investing accounts, interest-bearing deposit accounts, and portfolio lines of credit that allow qualifying account holders to borrow against their taxable investment portfolios’ values.

M1 Finance’s Available Account Types

  • M1 Invest. M1 Invest offers taxable and tax-advantaged accounts (traditional IRAs, Roth IRAs, and SEP IRAs). All M1 Invest account types are free of trading commissions, management fees, and minimum balance requirements. For passive investors, M1 Invest offers more than 80 prebuilt template portfolios designed to achieve specific investing goals and respect investors’ varying risk tolerances. Passive investors can also use sector- or industry-aligned “pie slices” to construct diversified portfolios. For active investors, M1 Invest allows manual stock and fund selection as well, meaning you can achieve total customization if you choose.
  • M1 Spend. M1 Spend no annual fee credit card.
  • M1 Borrow. If your taxable investment portfolio’s market value is at least $10,000, you’re eligible for M1 Borrow, a portfolio line of credit that lets you borrow against up to 35% of your portfolio’s value at rock-bottom interest rates. M1 Borrow proceeds can be used for virtually any legitimate purpose: paying down high-interest debt, covering the cost of major expenses, or increasing portfolio leverage — although the last involves significant risk. Draws need not be repaid on a fixed schedule, but interest accrues as long as you have an outstanding balance.
  • M1 Save: You can also open a high-yield savings account that’s FDIC-insured through B2 Bank

Wealthfront’s Available Account Types

Wealthfront offers taxable and tax-advantaged investment accounts with low minimum balance requirements ($500), an FDIC-insured cash management account with variable yields and checking-like features, and a low-cost portfolio line of credit.

  • Investment Accounts. Wealthfront offers taxable and tax-advantaged (IRA) investing accounts built with baskets of low-cost ETFs aligned with your risk tolerance and long-term investing objectives. Wealthfront periodically rebalances these accounts and strategically sells securities that have declined in value to reduce tax liability — a practice known as tax-loss harvesting. Wealthfront charges a flat advisory fee that works out to 0.25% of assets under management (AUM) annualized, regardless of account type or balance. Component funds’ annual expenses generally come in under .15%.
  • Cash Account. Wealthfront’s Cash Account is a cash management account with checking account features, including the potential — depending on your employer — to get paycheck direct deposits up to two days early, a debit card accepted by millions of merchants, and mobile check deposit. The yield is 5.00% APY, subject to change with prevailing interest rates.
  • Portfolio Line of Credit. Wealthfront’s Portfolio Line of Credit is a margin lending solution that lets you borrow up to 30% of your portfolio’s value at low interest rates — currently 3.70% — and with no fixed repayment schedule. The assets held in your portfolio serve as collateral for any borrowing and can be sold if your account becomes delinquent. Your account must be worth at least $25,000 to initiate a margin loan. Like M1 Borrow loans, Wealthfront’s portfolio lines of credit can be used for virtually any legitimate purpose.

M1 Finance vs. Wealthfront: Plans and Pricing

M1 Finance has two distinct plans with different features and pricing schedules.

Wealthfront has a single plan for all users that includes all of the platform’s features and functionality — although, as noted, the portfolio line of credit eligibility is restricted to those with portfolios worth at least $25,000.

M1 Finance’s Plans and Pricing

M1 Finance has two plans:

  • M1 Standard, also known as the “Basic Account”
  • M1 Plus, a premium account that costs $95 per year

M1 Standard has no out-of-pocket costs other than third-party fees charged by funds held in M1 Invest accounts, if any, and interest charged on M1 Borrow credit lines if drawn upon. M1 Standard’s key features and metrics include:

  • Between 1.5% and 10% cash back on Owner’s Reward Card purchases
  • A 3.5% base interest rate on M1 Borrow draws
  • One morning trading window for M1 Invest transactions — all open trade orders execute within that window

M1 Plus members get the following additional features and benefits:

  • A 5.00% yield on M1 savings account balances
  • Between 2.5% and 10% cash back on Owner’s Reward card purchases
  • A 2% base interest rate on M1 Borrow draws
  • Two daily trading windows for M1 Invest transactions
  • Crypto trades and custodial accounts

M1 Finance vs. Wealthfront: Financial Planning and Advice

Wealthfront does not broker direct relationships between clients and human financial advisors, but it does have a nice library of financial content for DIY planners, and it operates several planning modules that involve basic human-generated guidance.

M1 Finance doesn’t offer anything resembling financial planning or advice at the moment.

Wealthfront’s Financial Planning and Advice Services

Wealthfront offers one-off financial planning modules centered on common life situations, plus in-depth guides and useful apps covering other major life decisions.

  • Financial Planning Modules. Wealthfront’s one-off financial planning modules cover four common life situations and goals: saving for retirement, buying a home, paying for college education, and taking time off to travel. Each requires you to answer specific questions about your goals, plans, assets, and overall financial situation. The end result is a detailed plan that helps you understand what steps you need to take to achieve your goal as you define it. Wealthfront also offers more general financial planning support for clients who aren’t sure where to begin.
  • Guides and Apps for DIY Planners. Wealthfront also offers in-depth guides and a free financial planning app for users who’d prefer to chart their own courses. The guides cover homebuying and issues related to employee equity, such as preparing for your employer’s initial public offering (IPO) and exercising employee stock options. The app is basically a sophisticated calculator that helps you figure and project out your net worth in various scenarios.

The Verdict: Should You Choose M1 or Wealthfront?

So, should you choose M1 Finance or Wealthfront?

Your choice will come down to your preference for financial planning support and guidance, your tolerance for asset management fees, and whether you prefer to choose and manage your own investments or let the pros — or an algorithm — do it for you.

You Should Invest With M1 Finance If:

  • You Prefer Self-Directed Investing. Unlike Wealthfront, which is appropriate only for passive investors, M1 Finance has a comprehensive self-directed investing platform that’s free from commissions and trading fees. It’s the clear choice for active investors.
  • You Want to Avoid Asset Management Fees. Although M1 Invest account holders must cover third-party fees and expenses charged by component funds, M1 doesn’t charge asset management fees for balances held in its accounts. This model could increase returns in the long run, although that’s not guaranteed.
  • You Seek a Generous Account Opening Bonus. M1 Finance’s account opening bonus is worth up to $15,000 for new clients able to make qualifying transfers. Wealthfront doesn’t offer anything similar at the moment.

You Should Invest With Wealthfront If:

  • You Want Financial Planning Help. Wealthfront doesn’t have client-facing financial advisors on staff or broker relationships between third-party advisors and clients, but it does offer basic financial planning help, in-depth guides for DIYers, and a useful planning app. M1 Finance doesn’t attempt to replicate this value-added feature.
  • You Don’t Want to Pay Extra for a High-Yield Cash Account. Unlike M1 Finance, Wealthfront doesn’t require clients to upgrade a pricier plan tier to realize its best yields on cash accounts. All Wealthfront account holders get the same great yield on Cash Reserve balances.

Both Wealthfront and M1 Finance are great if:

  • You Prefer Passive Investing. Both Wealthfront and M1 Finance cater to passive investors. M1 Finance has about 80 template portfolios and many more semi-customized “pie slices,” while Wealthfront is a robo-advisor through and through.
  • You’d Like to Open a Tax-Advantaged Retirement Account. Both M1 Finance and Wealthfront offer tax-advantaged investment accounts (IRAs) for investors preparing for the long haul.
  • You Want to Borrow Against the Value of Your Portfolio. M1 Finance and Wealthfront both offer portfolio lines of credit with low interest rates. M1 Finance’s has a relatively low minimum balance to qualify — just $10,000 in market value. At $25,000, Wealthfront’s balance requirement to qualify for a portfolio line of credit is still within reach for many investors. Both are eminently flexible and come with none of the onerous collateral requirements of a home equity loan or line of credit.

Final Word

With sophisticated investing algorithms, dynamic rebalancing, and a mix of prebuilt portfolios and low-cost ETFs, M1 Finance and Wealthfront both have a lot to offer.

With self-directed trading available, M1 Finance also appeals to hands-on investors — if not active traders, and certainly not day traders — in the market for a new online stock broker.

Wealthfront isn’t quite a suitable replacement for a human financial advisor of any type, but it’s useful for hands-off investors who don’t need advice and guidance from a pro, and don’t expect to anytime soon.

In other words, enough distinguishes M1 Finance and Wealthfront to clarify the choice between the two platforms. The overwhelming likelihood is that one suits your needs better than the other. Which is which? Well, that’s up to you.

Money Crashers, LLC receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. Money Crashers, LLC is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

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