M1 Finance vs. Wealthfront: Which Is Right for You? (2024)

Wealthfront and M1 Finance are both top digital wealth management platforms, but there are significant differences between their offerings. If you don't have $500 to invest right now, for example, then M1 Finance will be the better choice. It is also the choice for investors who prefer to invest in individual stocks and ETFs and select among customized portfolios.With Wealthfront, you get an all-digital robo-advisor with a basket of features such as well-diversified core portfolios, options to diversify with crypto funds, and 200-plus ETFs.

Both are among our top picks, with Wealthfront winning best overall, best for goal planning, best for portfolio construction, and best for portfolio management and M1 Finance winning best for sophisticated investors. Read on to learn the similarities and differences between these two digital investment managers and decide which is right for you.

Account Setup

Wealthfront

At Wealthfront, you can create your initial account in roughly five minutes, take the initial questionnaire, and then view the recommended Core portfolio. To create your account, you input your name, email address, phone number, and password—no Social Security number is required to view proposed portfolios. After answering the goals, time period, and risk questions, Wealthfront recommends a Core portfolio aligned with your questionnaire responses. Well-crafted, the Core Portfolio includes diverse U.S. and international stock and bond ETFs along with a real estate ETF. You can also view other investment portfolio options before funding the account.

Wealthfront users need $500 to begin investing and the management fee is 0.25% of assets under management (AUM). No financial planners are available, although the customer service representatives are well-trained and have, at minimum, Series 7 investment licenses. Users can augment or create new portfolios from a selection of over 200 ETFs and two Grayscale cryptocurrency funds. A standout feature at Wealthfront, available to all account holders who link additional financial accounts, is the Path digital financial planning tool that mimics a digital financial advisor in helping you take stock of your financial situation and goals.

M1 Finance

M1 Finance differs from most robo-advisors, as the user chooses their own pre-made investment portfolio from more than 80 options. As such, there is no initial goal and risk questionnaire to complete. The sign-up process involves listing your level of investment experience and creating an account with the typical personal information. After choosing an account type, you link your bank and fund the account.

You need $100 to get started at M1 Finance and the basic service is free. Additional features are available with M1 Plus for either $3 per month or $36 a year. After funding the account, you can choose from one or more pre-made portfolios along with over 6,000 ETFs and stock investments. M1 doesn’t offer human financial advisors, but does provide live customer service and chat on weekdays.

M1 Finance combines self-directed brokerage features with pre-built portfolios and automated portfolio management capabilities. M1 Finance does not provide advisory services and therefore is not considered a traditional robo-advisor.

Account Setup Verdict: Wealthfront

The onboarding process at both Wealthfront and M1 Finance is easy. But if you’re seeking a digital financial planner and advice, then Wealthfront is the better choice.

Account Types

Both Wealthfront and M1 Finance offer the basic account types, taxable and retirement accounts. Beyond that, there are some unique choices on each platform.

Wealthfront

• Individual taxable
• Joint taxable
• Traditional individual retirement account (IRA)
• Roth IRA
• 401(k) rollover IRA
• Simplified employee pension (SEP) IRA
• Trust
• 529 college saving plan
• High-interest cash

M1 Finance

• Individual taxable
• Joint taxable
• Traditional IRA
• Roth IRA
• 401(k) rollover IRA
• SEP IRA
• Trust
• Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UTMA) (both for M1 Plus clients only)
• High-interest cash
  

Account Verdict: Tie

Most investors will be fine with the account options on either platform. Investors with less than $500 seeking a taxable brokerage account will likely lean towards M1 Finance out of necessity. Those seeking 529 college accounts will, of course, prefer Wealthfront, while those who want a UGMA/UTMA account will lean towards M1 Finance. There is no clear winner for account types as both Wealthfront and M1 Finance have commonly used accounts along with some rarer offerings.

Account Services

Cash Management and Borrowing

Both M1 Finance and Wealthfront offer cash accounts with debit cards and lending. Auto-deposits are simple and straightforward for both platforms, as well as at most other digital wealth management platforms. Finally, neither Wealthfront nor M1 Finance offers human financial advisors, and only Wealthfront offers any financial advice through its excellent Path tool.

Wealthfront Cash is a distinct offer from the firm and requires a separate sign-up. There are no minimums or fees associated with this high-yield checking account with 5% APY. Top features include goal-based saving, a fee-free ATM debit card, bill pay, and direct deposit. Wealthfront Borrow allows account holders with at least a $25,000 account value to borrow for low interest rates and without a credit check.

M1 Finance's cash management includes a high-yield savings account with a 5% APY and the Owners Rewards Credit Card offers Plus members the opportunity to earn up to 10% cash back for spending tied to companies invested in through M1. M1 Borrow offers a loan for up to 50% of the account balance, once the amount invested exceeds $2,000. M1 Plus members benefit from lower margin rates of 7.25% versus 8.75% without a membership.

Account Services Verdict: Tie

Both Wealthfront and M1 offer cash management and borrowing. M1 Plus members must pay $36 per year to get the greatest benefits from cash management and borrowing, although borrowing only requires a $2,000 investment account balance. Wealthfront doesn’t charge fees for its interest-bearing cash account, although you’ll need $25,000 to borrow from your investment account. The differences between the two offerings are minimal and probably wouldn’t be a determining factor in deciding which platform to use.

Goal Planning

Wealthfront

Wealthfront is the winner of our best for goal planning designation. Users choose from among six goals, such as retirement, college, and large purchases. Goal progress is automatically updated on your dashboard and you can also test out various goal-based scenarios with the Path digital financial planner. The Path software can answer more than 10,000 financial planning questions, such as “Can I take a year off for travel?”, “When can I retire?", and “How much do I need to save for my child’s college?”

The Path digital financial planner is available for free to anyone who creates an account at Wealthfront and provides comprehensive online financial planning advice similar to that of a human financial advisor. It uses the data from the external accounts you sync with the platform to better understand your finances and your goals for deeper insight that few digital investment advisors can match.

M1 Finance

M1 Finance, the winner of our best for sophisticated investors category, is appropriate for independent investors and, as such, doesn’t have the typical goal-planning features available at Wealthfront and other digital investment advisors. M1 Finance is designed to automatically manage the portfolio you select, and it doesn’t deviate from that tightly defined function to offer any type of financial advice. An underlying assumption of the M1 Finance platform is that you know what you are doing and you don’t need anyone telling you otherwise.

Goal Planning Verdict: Wealthfront

When it comes to goal planning, Wealthfront beats M1 Finance. That said, anyone can use the Path digital financial planner, so even those who prefer M1’s other features can benefit from Wealthfront’s planning tools.

Portfolio Construction

Wealthfront

Wealthfront’s investment portfolios, based upon modern portfolio theory, are individually tailored to the user and based upon their responses to risk, financial goals, and time horizon questions. Wealthfront clients can customize the Core portfolios with ETFs or create new investment portfolios for the firm to manage.

Wealthfront’s Core Portfolios include U.S. and international stock and bond funds along with a commodity, a real estate investment trust (REIT), and emerging market bond ETF. Investors with more than $100,000 can opt for the risk parity portfolio, which allocates capital across multiple asset classes and attempts to outperform a passive market-matching index fund portfolio. Accounts that top $500,000 can choose the smart beta factor-based portfolio.

All Wealthfront users can adjust their recommended portfolios by adding ETFs from a list of over 200 choices and several Grayscale cryptocurrency funds. Clients can also construct their own ETF portfolios and have Wealthfront manage them.

As mentioned, the separate fee-free Wealthfront Cash account enables anyone to access a high-yield cash account with a debit card.

M1 Finance

M1 Finance’s portfolio construction is best for investors with basic investment knowledge who can craft their own portfolio. M1 customers choose from approximately 80 investment portfolios with varying weights of risky versus fixed assets.The Expert Pies, M1 Finance’s term for the portfolios, are ideal for those seeking premade retirement, growth stock, cannabis stock, high-yield, or hedge-fund options. Users can stick with the Expert Pies or use the screeners to choose additional stocks and ETFs. The mix-and-match approach of M1 Finance’s portfolio construction options enables users to choose their assets and then receive automated rebalancing without a management fee.

Portfolio Construction Verdict: Wealthfront

Both Wealthfront and M1 Finance offer well-constructed portfolios, but Wealthfront does most of the work for you. The decision between the two depends upon the level of customization you prefer. M1 Finance has the most customization but also comes with the responsibility of selecting the best fit for you. Wealthfront is not as customizable but uses a questionnaire to ensure you are getting the right portfolio to achieve your stated goals.

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