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M1 Finance and Wealthfront are two of the most popular robo advisors on the market. Both offer a range of investment options and use advanced algorithms to help users make informed decisions about their investments. But there are some significant differences between them, and you’ll want to make the right decision before investing in one or the other.
In this article, we’ll take a closer look at M1 Finance and Wealthfront and compare them to help you decide which one is the best fit for your investment needs.
While they are both robo advisors, M1 Finance and Wealthfront offer features that look pretty different when compared side-by-side.
Buy Individual Stocks
Buy Fractional Shares
Loan / Line of Credit
Financial Planning Tools
M1 Finance Features
M1 Finance offers a unique and free way to set up and customize your portfolio. When you open an account, you decide how to invest your money by choosing a pie-shaped portfolio.
M1 Finance offers nearly 100 expert-build portfolios, or you can choose from thousands of stocks and ETFs to build your portfolio.
M1 Invest is limited to one trading window per day (two for M1 Plus), so even though you can buy individual stocks, M1 isn’t suited for day trading or swing trading.
To take advantage of M1 Finance as a robo advisor, your contributions can be automatically invested, and your portfolio will automatically rebalance to stay on track. While you can make manual trades, it’s not necessary.
M1 Borrow allows investors to take out a low-cost loan for up to 40% of their balance. You will need a minimum balance of $5,000 to use M1 Borrow. The base rate for a free M1 account is 7.25% APR and drops to 5.75% for M1 Plus users.
M1 Plus costs $125 per year and offers premium features. The premium account offers a lower borrowing rate, 1% cash back on purchases, and 3.30% APY on cash balances. Depending on how you use M1 Finance, your savings account or cashback from spending could cover the cost per year.
M1 Checking is a high-yield cash account with a debit card and direct deposit. M1 Checking allows you to consolidate your finances and instantly move money between your investments, loans, and spending account. It also gives you a high 3.30% APY on your cash balance, which is a lot more than most checking accounts offer.
Unique M1 Finance Features
One of the best features that M1 Invest offers is how you invest by choosing or building an investment pie.
This unique way to invest combines the ease of a robo-advisor with the options of a stock trading platform. Investors can choose from over 6,000 stocks and purchase fractional shares to avoid uninvested cash. That means when an Apple stock is $350 per share, you can invest $50 and buy 1/7th of a share.
Custom pies and fractional shares give investors more control over where their money is invested. M1 Finance also allows for easy, socially responsible investing.
M1 Finance Mobile App
Nowadays, it’s always convenient to keep track of your finances on the go. Their mobile app has an average rating of 4.7/5 on the Apple Store and 4.5/5 on the Google Play Store.
Many reviews say that the app is easy to use and well-organized. The critics report difficulties signing up and creating a portfolio, so we suggest doing that on your computer and downloading the app once you’re set up.
Wealthfront is a “hands-off” robo advisor. They take advantage of a software-only approach that makes managing your investment portfolio easy while keeping your fees low.
The downside of a software-only approach is the lack of flexibility, and Wealthfront should be considered more of a set-it-and-forget-it investment platform. When opening your account, you will decide on your investment goals and risk tolerance. Once you deposit your money, they invest it into low-cost index funds.
Wealthfront offers tax-loss harvesting for every user, unlike M1, and for portfolios over $100,000, stock-level tax-loss harvesting, saving you even more money on taxes.
The excellent Wealthfront Cash Account earns 3.8% APY. Your high-yield Cash Account will also come with a debit card, zero fees, and unlimited transfers. The FDIC insures Wealthfront’s Cash Account for up to $2 Million.
If your balance is $25,000 or more, you can access a low-cost line of credit through a Portfolio Line of Credit. You can borrow up to 40% of your balance at a low 6.65% – 7.90% APR.
Unique Wealthfront Features
What makes Wealthfront stand out in the crowd of robo-advisors?
The main features that make Wealthfront unique compared to M1 Finance are the tax-loss harvesting and the ability to link your other financial and investment accounts for a more robust financial planning dashboard. The Wealthfront Cash Account also offers a higher APY than M1’s (and most other cash accounts on the market.)
By looking at your finances, cash flow, and spending, Path estimates homeownership costs, how much you can spend during retirement, and help plan for time off work. Path also gathers relevant third-party data to give insights into the cost of various scenarios.
Wealthfront offers the 529 college savings plan, but M1 Finance does not. If you’re looking for a place to begin saving for your children’s college tuition, this is one of the best ways.
Wealthfront Mobile App
The Wealthfront mobile app is available in the Apple and Google Play stores. The Wealthfront app has an average rating of 4.8/5 and 4.5/5, respectively.
Reviewers say that the app is simple and easy to navigate. The mobile app is a great way to view your finances in one place by linking your accounts to Wealthfront and using Path.
The Wealthfront critics report lagging and troubles when linking different accounts.
M1 Finance vs. Wealthfront: Account Types
M1 Invest offers all of the standard accounts. Remember that you must invest $500 to open a retirement account and $100 for non-retirement accounts.
Taxable (Individual and Joint)
Wealthfront also offers all of the accounts you’re likely to want. They also offer a 529 college savings plan, a tax-advantaged savings plan designed to help pay for education.
Taxable (Individual, Joint, Trust)
529 college savings plan
Fees and Pricing
M1 Finance and Wealthfront both offer low balance minimums and fees. Meeting with human financial advisors will typically cost you between 1-2% of your assets under management. The basic M1 account is free, and Wealthfront charges a flat fee of 0.25%. Using our invitation link, you can manage up to $5,000 with Wealthfront for free.
M1 Finance vs. Wealthfront: Fees and Account Minimums
The low fees and minimums make both great choices for beginner investors and those unable to make a large upfront deposit.
One of the drawbacks of M1 Finance is that it doesn’t offer any tax-loss harvesting strategy for taxable accounts. But you can save a comparable amount because they don’t charge a management fee.
Wealthfront offers a tax-loss strategy for every account, at no extra charge, as part of their basic features. When your portfolio reaches $100,000, Wealthfront implements a more in-depth tax strategy using Direct Indexing, which looks for movements in individual stocks within the US stock index to harvest more losses and further lower your tax bill.
For accounts over $500,000, Wealthfront offers a Smart Beta feature, which weighs stocks more intelligently. This relatively small tweak can have significant impacts on larger investment accounts.
Because M1 Finance and Wealthfront autonomously manage your portfolio, customer service is limited.
M1 Finance doesn’t employ human financial advisors; instead, they rely on you to research and make wise financial decisions. If you experience difficulties, their website has a helpful support section with articles and videos. These articles and videos will help you get started, transfer funds from another institution, and more.
Most customer support questions are answered by phone or email.
Wealthfront is also an autonomous service and doesn’t offer person-to-person support. They have an in-depth how-to section that can help you get started and answer most of your questions. If you need additional help, you can fill out their contact form.
Safety and Security
Keeping your money safe is a top priority. Both M1 Finance and Wealthfront offer excellent security, and your money is insured should it go out of business. The mobile apps for M1 Finance and Wealthfront are available for Apple and Android and have two-factor authorization.
With M1 Finance, your securities are protected by the SIPC for up to $500,000, and cash in your savings account is insured for up to $250,000 with the FDIC. All of your information is protected with 4096-bit encryption.
Wealthfront also covers up to $500,000 under SIPC insurance, and FDIC covers up to $2 Million in your cash account. Wealthfront doesn’t store your information, works with third-party providers with bank-grade security, and follows best practices for data protection.
$2 Million (FDIC)
Wealthfront vs. M1 Finance Security & Insurance
Wealthfront vs. M1 Finance: What’s the Verdict?
We don’t like to be indecisive, but the M1 Finance and Wealthfront robo advisors will appeal to investors for different reasons. Everyone has different priorities and preferences, and there is never a one size fits all approach to finances.
We rate Wealthfront slightly higher than M1 Finance because it’s more of a traditional robo advisor, great for a set-it-and-forget-it approach. Not that M1 Finance isn’t good for that, but it’s a little bit more complex. Wealthfront also offers tax loss harvesting on all taxable investment accounts, which can save big in the long run.
Who is M1 Finance Best for?
M1 Finance is ideal for investors who want more control over their portfolios and fee-free investment management. You can choose an expert pie and invest more passively, but the customization level makes M1 stand out.
Having the ability to choose your own investments to build a custom investment pie is beneficial if you have investment knowledge. Then you can set it and forget it as your contributions are continuously invested and rebalanced.
Investors who want a more hands-off approach can choose from a selection of expert pies and let the experts make the hard decisions for them.
If you don’t have the $500 minimum to invest with Wealthfront, you can start with M1 Finance with only $100. M1 Finance is also our top pick for the best free robo-advisors.
Wealthfront is designed for setting and reaching long-term financial goals and easy, hands-off investing. If you want to build up your retirement account with ease, need personalized financial advice, or save for your children’s college fund, Wealthfront is a great choice.
While Wealthfront’s robo advisor has higher fees than M1 Finance, their 0.25% annual fee is still very reasonable and among the lowest of the other robo advisors on the market, especially for long-term investors and those who want easy financial planning tools included. Offering tax loss harvesting for all taxable accounts is a great addition, and the ability to track your other financial and investment account across other platforms make it better for financial planning.
So, between M1 Finance and Wealthfront, which robo advisor is right for you?
Both offer excellent automated investment management with no or low management fees, low minimum investments, robust investment portfolios, outstanding high-yield cash accounts for cash management (which can legitimately replace your existing checking account,) other financial products, and portfolio customization.
Wealthfront offers more accessible and better hands-off automated investment management, while M1 Finance provides more flexibility in choosing your own individual stocks and mutual funds.
Wealthfront offers tax loss harvesting on all taxable accounts, while M1 doesn’t offer any.
Wealthfront offers a free and excellent personal finance dashboard allowing you to link your external accounts for a holistic view of your finances. M1 does not offer this.
In conclusion, we would call Wealthfront the superior robo advisor overall.