M1 Finance: Full Review of the Finance “Super App”

UTC by Adedamola Bada · 7 min read
M1 Finance: Full Review of the Finance “Super App”
Photo: M1 Finance / Twitter

Check out the full review of the M1 Finance automated investment platform – it’s key characteristics, best things about the platform, and things to improve.

Started in 2015 by Founder and CEO Brian Barnes, M1 Finance is an American firm that combines investing, borrowing, and cash management into one easy-to-use automated platform.

The service employs a robot-based advisory system to provide several options for trading, which are simply known as pies. These “pies” contain several investment alternatives for the user of the service, but the customer has the freedom to select the types of securities they wish to trade-in. Once the selection has been made, the service begins to divide the funds across these securities automatically, unlike other services that use the consumer risk level to distribute money across investments.

The organization currently has two subdivisions, the Tree, and the Plus; both of those offer three service options, Invest, Borrow, and Spend

Invest – this is the main function of the firm, allowing users to have a stake in a wide variety of securities, with over 1000 available ETFs for trading.

Spend – This feature was launched in the early part of 2020, and it gives the user a withdrawal account and a debit card, a medium via which the user can borrow or take out a small number of funds from investment gains. The Plus account charges a fee of $120 per year for a few added benefits.

Borrow – this is a secondary feature which allows users borrow money from the service in line with their accounts, with the freedom to borrow as high as 30% of an account value up to $10000, with repayment interest as low as 4% per annum on the free account, but only 2% on the plus.

The service charges zero fees off investments, and does not require a base amount to begin investing; but carries trades across several platforms, from Joint & Taxable Accounts, all the way to NON-profits and Socially Responsible Investment accounts.

The following are the set of investment sectors offered by M1 Finances:

  • General – this entails creating a modified pie entailing the investments you are interested in
  • Retirement – this option is available for young people who are looking to prepare for post-work life ahead or old people who did not begin early.
  • Responsible – for people who intend to put their money strictly in what they believe in, like green firms.
  • Sectors – this enables people to trade in some sectors like tech, art & antiquities, or even real estate.
  • Hedge Funds – this entails using pre-existing tactics for trading created by experts like business Mogul – Warren Buffett.
  • Stocks & Bonds – a pie consisting of various elements, strictly limited to the stock market and the bond market, with the ratio of stocks to bonds divided based on the user’s discretion.
  • Others – this covers a variety of tips and tactics to help the user decide what security they are willing to trade in; more common among newbie investors.

M1 Finance Operations

Trade Period – in compliance with the rule that no trades can be carried outside the period, all investing processes begin at 0900 hours as soon as the Stock Exchange in New York opens.

Gains – while employing this service, there can be no amount left idle, which is why all profit realized on investment is automatically re-invested as soon as the value gets to $10.

Account type – given that this is an online service that does not handle physical money, all trading accounts are margin accounts as soon as the value gets to $2000, allowing the user the freedom to take some money out of the account without upsetting trades.

Pros and Things to Improve

Since its slow start in the first year of the firm in 2015, the firm has enjoyed tremendous success, especially with the ever-growing need for technology to simplify things for the populace. Despite lacking in some areas, the overall performance of the online establishment has been nothing but stellar. The mobile application available on the app store of all iOS devices has been given a 4.5 star out of 5-star ratings.

Pros

  • The service does not charge its customers any levy for trading or maintenance of the account
  • There are several available investment portfolios to choose from, nearly a hundred available, including Socially Responsible Investing to align with consumer values, tenets, and beliefs.
  • The user profile contains every aspect of the consumer’s finances, its division into investments, spending accounts, and even borrowed funds.
  • The service also provides customers with the option of investing in individual stocks and sub-divisions of full shares.
  • Given that there are no fees or percentage cuts off customer investment made, the service is open about how it makes its money, which is done mainly through interests gathered on the funds and other utilities provided on the Borrow account.

Things to Improve

  • Given that the system employs automated trading techniques, the timing of trades is not determined by you, regardless of your wish to carry a particular trade at a different time.
  • The system however deducts a certain portion of accounts that have been idle for up to 90 days and have less than $20 embedded within.
  • Unlike several other fintech online organizations, M1 Finance does not include Financial Advisors, meaning there is very little a confused user can do to alleviate fears and problems faced. The service however has a FAQ section for general difficulties.
  • While the user portfolio outlines finances, it does not help with financial planning; be it budgeting, saving towards a particular project, or even retirement goals.
  • The online service, unlike most Robo-advisor based platforms, does not engage in tax-loss harvesting, a technique which helps investors gain off tax returns, but instead deal in Tax minimization, which only reduces the amount paid in taxes off a sold security.
  • M1 Finance does not recognize any external investments that you may have made, even if it is organized by your place of work ahead of retirement.
  • While the firm does not regard itself to be a helping service, it offers very limited assistance to customers in terms of education in terms of trading tips and strategies.

All in all, the best things about M1 Finance are:

Account Creation – The user account is relatively simple and straightforward to set up, with a basic three-step process. One, the user will have to set up a profile using their e-mail address, creating a password for the platform, and then building the portfolio. Next, the user will then be charged with the task of setting up a trading account, where the process of selecting pies occurs. Finally, the user will then need to fund the account with whatever amount they have, and then the process is completed.

Services – the online firm’s services are near perfect, if not perfect. It covers every option, with automatically scheduled deposits which are made based on the user’s choice, an avenue to lend customers money, a withdrawal account which gains automatic interest over a while, and a wide range of investment options to select from.

Functionality – both the website and the mobile app are fully functional. The User interface is properly designed such that the screen is not overcrowded, not even when modifying and selecting pies to choose from. The UI does not experience any lags, ensuring a seamless experience.

Fees – The service charges no amount or commission on the basic accounts and investments, regardless of whatever amount is contained within aside from the regular fees required by registered agencies in the nation.

Conclusion

The coronavirus pandemic has affected several businesses, not excluding the M1 Finance industries. Given that it is mainly an online service, there has been no need for a temporary shutdown. The firm has seen mixed results, with more people temporarily out of jobs making use of the borrow option, along with the decline of some securities like real estate & housing, and the upward performance of tech-based services like Amazon, and Netflix.

M1 Finance is one of the leading major powerhouses in the American fintech industries, and the world at large, boasting of one of the most efficient and profitable ways to acquire money via investments. It is also the hope of several users that the service employs the use of financial advisors, to give the service that extra touch of human application that should take it to the next level.

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