Betterment and M1 Finance digital investment advisors have more differences than similarities, making it easy to decide which investing platform is best for you. Betterment won the Best for Beginners and Best for Cash Management categories in our overall 2022 review. M1 Finance won the Best for Low Costs and Best for Sophisticated Investors categories. Betterment is one of the oldest robo-advisors and follows the typical index fund investment approach with rebalancing and tax-loss harvesting. Betterment Premium adds unlimited financial planner meetings. M1 Finance, in contrast, assumes a degree of knowledge and provides scores of pre-made investment portfolios along with stock and ETF investing.

On February 8, 2022, Betterment reported that it is acquiring crypto manager Makara. Soon Betterment will offer diversified crypto portfolio investing alongside their existing investments.

  • Account Minimum: $100 ($500 minimum for retirement accounts)
  • Fee: 0%
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  • The 60+ pre-made investment portfolios offer a range of strategies for investors with various goals including retirement, income, and hedge-fund investing. 
  • M1 customers get a cash account and lending, with high cash yields and lower borrowing rates for M1 Plus clients..
  • Screeners enable targeted stock and ETF selection.
  • No tax-loss harvesting or financial advisor access make M1 better for knowledgeable investors.
  • Account Minimum: $0
  • Fees: 0.25% (annual) for digital plan, 0.40% (annual) for the premium plan 
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  • Betterment provides excellent goal-setting and tracking including integration with outside investment accounts.
  • Ideal for clients seeking digital investment management and financial planner guidance. 
  • Three sustainable ESG options, a smart-beta, and an income portfolio include strategies suited to specific types of customers. 
  • New investors will appreciate the lack of a minimum required investment investment amount.
  • Tax-loss harvesting is available for all customers.

Account Setup

At Betterment, winner of the best robo-advisor for beginners, it is a breeze to begin. Simply create a login and password, then add personal details like address and Social Security number. Next, complete the brief initial questionnaire which considers goals, time frame, and risk level. Based upon the questionnaire responses, you’ll receive a personalized investment portfolio, comprised of U.S. and international stock and bond ETFs.

Users can modify the recommended portfolio and adjust the recommended asset allocations, opt for a fixed income, smart beta, or ESG sustainable portfolio. Soon, Makara’s crypto portfolios are also expected to be made available. 

With no required minimum, small investors can begin investing immediately. The opportunity to view investment choices before funding is an advantage, although you need to input your Social Security number first. Digital clients can purchase low cost financial planning packages for personal advice. While those with $100,000 or more can choose Betterment Premium which includes unlimited access to Certified Financial Planners. Week-day phone representatives can also assist with basic questions.

M1 Finance set up is quicker than Betterment’s because there’s no initial questionnaire. M1 Finance, winner of our Best for Sophisticated Investors designation, assumes that you understand the type of portfolio you’re seeking. Create a username and password to begin the onboarding process. Crafting a portfolio at M1 Finance is in your hands. You’ll have the opportunity to choose from thousands of stocks and ETFs along with more than 60 pre-made customized portfolio options. At M1 Finance, portfolios are called “Pies” and can include up to 100 slices of individual stocks, ETFs, and customized portfolios. 

Similar to Betterment, potential M1 Finance clients can explore the platform without funding an account. You need $100 to open a brokerage, custodial, or trust account, and $500 for individual retirement accounts (IRAs). M1 Finance doesn’t offer financial advisors. 

Overall, the account setup is painless with either Betterment or M1 Finance. Before funding an account, you can peek inside each service to determine which digital investment advisor is best for you. Beyond that, the account setup at Betterment and M1 Finance highlights the distinctions between the platforms. Betterment is a typical digital investment advisor with the typical questionnaires. In contrast, M1 Finance is a combination of a do-it-yourself investment broker and a provider of pre-made portfolios with automatic rebalancing and with no initial questionnaire to guide you towards one over another. 

Goal Planning

Betterment is among the top of the digital investment management space with its flexible goal-planning features. Clients can set up multiple goals and choose separate asset allocations for each goal type and timeframe. For example, your retirement will usually have a longer time horizon and more aggressive asset allocation than your home down payment or upcoming vacation goals. 

Betterment users can also link outside accounts and receive a 360º view of all their assets. Moreover, the Goal Forecaster tool helps you calculate approximately when you’ll achieve the goal, and guides you to adjust the portfolio to increase your likelihood of success. 

M1 Finance assumes that you can handle goal planning on your own. Their nod to goal planning is included in the wide variety of article’s on the M1 Finance blog which spans a range of financial education investing topics. Beyond that, M1 Finance lacks any direct goal planning features.

When it comes to goal planning, there’s no comparison between Betterment and M1 Finance. Goal planning is Betterment’s forte, while M1 Finance leaves this aspect of financial management to the user.

Account Types

Betterment Account Types:

M1 Finance Account Types:

  • Individual taxable
  • Joint taxable 
  • Traditional IRA 
  • Roth IRA
  • 401(k) rollover IRA
  • SEP IRA 
  • Custodial (available to M1 Plus users)
  • Trust 
  • High-interest checking (higher yields for M1 Plus users)

Both Betterment and M1 Finance have the common account types to satisfy most investors. That said, if you’re a parent seeking a custodial account, then M1 Finance is the only option. M1 Finance also offers an IRA concierge for onboarding help. Retirement investors with less than $500 will choose Betterment, however, as it has no minimum for IRA investing. 

Account Services

Both Betterment and M1 Finance offer the typical auto deposits and free withdrawals, as well as cash management services. Both platforms also offer a premium level with added services for an additional fee, although they are quite distinct. 

M1 Borrow, is the loan option available at M1 Finance, while Betterment lacks margin or lending features.

Betterment Premium customers, with $100,000+ in assets have unlimited access to Certified Financial Planners for a 0.40% AUM fee. This management fee is lower than the average 1.0% fee charged by traditional financial advisors

The M1 Plus premium service costs $125 per year and includes additional benefits. Plus users can access an additional daily trading window, higher cash account interest payments and added fee-free ATM withdrawals for M1 Spend customers. M1 Plus customers also have access to lower borrowing margin interest rates. 

Cash Management 

Betterment offers two cash accounts, which is unique among digital investment managers who typically offer only one cash management option. The Cash Reserve savings and checking accounts are available separately from the Betterment investment accounts. The checking account includes an ATM and Visa cash-back debit card, while the high yield Cash Reserve savings account provides higher than average interest payments. Users are also able to set up automatic fund transfers into specific goals and direct deposits. 

M1 Spend is M1 Finance’s cash management option with a debit card. M1 Plus users receive interest on this account. The Owners Reward card is available to all users and provides up to 10% cash back for spending with companies whose stock they own. M1 Plus users can also implement a rules-based strategy to allocate extra cash towards spending or investing. 

Which platform you prefer depends upon the account services you’re seeking. If you want access to margin and a credit card, then M1 Finance makes sense. If you’re seeking a complete cash management option with savings and checking integrated with your investment account, then Betterment is the better option.

Portfolio Construction

Betterment offers Core, ESG socially responsible, Smart Beta, and Income Portfolios. The Core offer includes typical market-cap weight diversified U.S. and international stock and bond ETFs. The Core portfolio includes value and small cap equity funds, found to outperform the broad stock market index during long time periods, according to factor research. Betterment also includes an international bond ETF in their fixed income holdings. 

Betterment inventors looking for alternate investment style options might consider the Goldman Sachs Smart-Beta, BlackRock Target Income, or three ESG portfolios. In addition, the Betterment Cash accounts make it comparable to a full service investment platform with the opportunity to save for emergencies and short term goals.

Although we consider M1 Finance a member of the digital investment advisory space, it also shares features in common with self-directed brokerage accounts. Investors can choose from over 60 different pre-built Expert Pies with multiple investment strategies including robo-like general investing, hedge fund-like styles, socially responsible investing, income portfolios, and more. 

M1 Finance users can also invest in stocks and ETFs from over 6,000 choices. The screeners help investors find securities that meet specific criteria. All assets, including customized portfolios, individual stocks, and ETFs are combined into one Pie in percentages that you choose. M1 Finance will rebalance your Pie to keep these percentages consistent as funds are added or withdrawn.

  Betterment M1 Finance 
Individual Stocks No Yes
Mutual Funds  No  No
Fixed Income  Yes-ETFs Yes-ETFs
REITs  No Yes
Socially Responsible or ESG Options  Yes Yes 
ETFs  Yes  Yes 
Non-Proprietary ETFs  Yes  Yes 
Mutual Funds  No No 
Forex  No  No 
Crypto  Yes  No 

Portfolio Customization

Betterment users can adjust their asset allocation if they don’t agree with the one presented. The acquisition of Makara will also enable users to add crypto funds to their portfolios in the near future for added customization. That said, Betterment doesn’t offer the ability to add additional ETFs or other assets to their existing options like M1 Finance does. It’s also worth noting that Betterment doesn’t offer access to REIT ETFs.

M1 Finance is one of the most customizable robo-advisors that we reviewed. In addition to the 60+ customized pre-made portfolios, users can modify their pies by adding individual stocks and ETFs. You choose the percentages for each investment in accord with your personal risk tolerance and goals. This does, of course, require a degree of investment knowledge to ensure that your choices aren’t overly conservative or aggressive.

Overall, M1 Finance provides much more in terms of portfolio customization. 

Portfolio Management

At Betterment, rebalancing occurs when assets deviate 3% above or below the desired asset allocation percent. You can also link outside financial accounts to view and analyze your investments holistically. Betterment will offer suggestions based upon all linked accounts, but the portfolio asset allocation is crafted without considering the outside assets. 

After setting up your asset allocation at M1 Finance, the platform will rebalance your pie when funds are deposited or withdrawn. You can also initiate a rebalance with a click. Basic M1 Finance supports one trading window in the morning and M1 Plus members with over $25,000 can place trades during a morning and an afternoon trading window. 

While both M1 Finance and Betterment offer automated rebalancing, Betterment’s is initiated on rules-based movements while M1 Finance only rebalances when funds are added or removed from the portfolio unless you force one.

Tax-Advantaged Investing

Both M1 Finance and Betterment offer tax-advantaged retirement accounts, but the support on taxable accounts is different. Betterment offers tax-loss harvesting in taxable accounts. This strategy offsets capital gains with losses to minimize tax payments. Betterment’s tax-loss harvesting methodology is comprehensive and seeks to maximize tax savings by doing constant monitoring for opportunities as well as using client withdrawals and deposits to trigger loss-harvesting. Essentially, there are two levels of tax harvesting happening in a Betterment account. One is based on dividend reinvestments and regular rebalancing activities and the other is driven by your actions. This means a withdrawal will be used to exclusively sell off any losses, and the subsequent rebalancing will position the portfolio through substitutions to further drop the tax burden. 

M1 Finance doesn’t have the tax-loss harvesting feature but does strive to minimize taxes when withdrawals are made. The platform does this by prioritizing sales in order of the lowest tax burden to the highest and selling in that order. This is similar to Betterment’s user-triggered tax-loss harvesting, but not backed up by seeking ongoing tax loss harvesting opportunities

Betterment has a clear edge in tax-advantaged investing thanks to its comprehensive tax-loss harvesting methodology. 

Key Portfolio Management Features

  Betterment M1 Finance
Automatic Rebalancing When allocation deviates from target by +/-3%. When funds are added to or withdrawn from the account or at user's discretion.
Reporting Features  Monthly and tax statements available. Goal progress viewable online.  Monthly and tax statements available. 
Tax Loss Harvesting  Yes No
External Account Syncing/Consolidation Yes- Automatically updated after synching. Not included in asset allocation, only for analysis. No 

Security

Both Betterment and M1 Finance enable top-level financial institution-grade security protocols. They provide two-factor authentication, Securities Investor Protection Corporation (SIPC) insurance for securities, and Federal Deposit Insurance Corporation (FDIC) insurance for cash accounts. When it comes to security, M1 Finance and Betterment are evenly matched. 

It is important to note that insurance and security features protect against company failure and infiltration attempts. They do not protect against market volatility which can result in lower account values. 

User Experience

Desktop

Betterment and M1 Finance offer user-friendly websites and easy access to most platform screens. You can typically find what you’re seeking within a click or two from the home page. Betterment clients can also monitor and adjust goals from the dashboard, while M1 Finance doesn’t offer any goal planning support. 

Mobile App 

M1 Finance and Betterment mobile apps provide functionality nearly identical to their respective websites. In general, users report favorable experiences on each, with the occasional technical problem such as difficulty linking accounts. Each of these well-regarded platforms enable users to do nearly anything on mobile that they can accomplish on the desktop version.        

Customer Service

The customer service is nearly identical at M1 Finance and Betterment. The exception is the later weekday phone hours at Betterment. The additional phone consultation time from 4:00 to 6:00 pm at Betterment makes it easier for customers to contact the firm after work. 

  Betterment M1 Finance 
Phone contact available  Yes-M-F 9am-6pm ET  Yes-M-F 9am-4pm ET
Pre-funding phone consultation with certified advisor  No  No
Online chat available  Yes-chat bot  Yes-chat bot 
Website FAQ section  Yes - HIgh quality Help Center articles  Yes - HIgh quality Help Center articles

Fees

The fees are straightforward at each company. Betterment charges a flat 0.25% AUM for all Digital clients. Premium users with more than $100,000 will pay 0.40% for the service which includes unlimited financial advisor access. Digital customers can also purchase low-cost financial planning packages to discuss goals like retirement, college planning, and for a portfolio check up. Fees for these packages range from $299 to $399.

M1 Finance basic is free. You get all of the features with no management fee or trading fees. M1 Plus costs $125 per year and offers upgraded trading, lower borrowing rates and higher cash account interest rates. 

Those looking for a fee-free investment platform might start with M1 Finance. Even the M1 Plus account is reasonably priced. That being said, the 0.25% management fee at Betterment is certainly affordable and good for investors seeking tax-loss harvesting (and crypto portfolios in the near future).

Category Betterment Fee M1 Plus Fee 
Management fees for $5,000 account Digital - $12.50  Basic - $0
M1 Plus - $125
Management fees for $25,000 account  Digital - $62.50  Basic - $0
M1 Plus - $125
Management fees for $100,000 account  Digital - $250.00
Premium - $400.00
Basic - $0
M1 Plus - $125 
Termination fees  $0  $100 for outgoing transfers & IRA closures
Expense ratios  0.09% average  0.06% - 0.20% average
Mutual funds  N/A  N/A 

Our Take

Both M1 Finance and Betterment are well regarded digital investment managers, but they are aimed at very different types of investor. Investors seeking quality digital investment management and access to financial planners for reasonable fees will find that Betterment has a lot to offer. This platform is designed for hands off investors who want a well-managed portfolio and options for ESG, income, and factor-based smart beta investing. The two cash accounts round out the platform and place Betterment in competition with full-fledged financial institutions. Betterment is one of the best digital investment management platforms out there, and can be a fit for any investor who wants their investment portfolio to run itself.

On the opposite side of the spectrum, M1 Finance is for the investor that knows what they want and isn’t afraid to get hands-on. You’ll need to understand which type of pre-made portfolio to select to achieve your investment goals. Intermediate investors will appreciate the screener and access to 6,000+ ETFs and stocks, and the margin, cash accounts, and lending put M1 Finance into competition with some full service investment brokers. Overall, the free rebalancing for basic M1 Finance customers is ideal for cost conscious investors who want a DIY portfolio without the headache of ongoing portfolio maintenance.

Frequently Asked Questions

Are Betterment and M1 Finance Better than Robinhood?

These are distinct platforms that are appropriate for different types of investors. Robinhood is brokerage with free stock, options, crypto, and ETF trading along with margin and a cash account. There’s no investment management, digital or otherwise, at Robinhood. M1 Finance is similar in that you make the investment choices yourself, but it offers rebalancing along with pre-made investment portfolios, a cash account, and lending. Betterment is very different from Robinhood as it seeks to help you plan your investment goals and then suggests the appropriate portfolios to get you there. 

Which one of these three is better depends on what you are looking for. It is worth noting that we struggle to recommend Robinhood despite its popularity due to concerns over payment for order flow and gamification

Are there any fees with M1 Finance?

The basic version of M1 Finance doesn’t charge management or trading fees. That said, there are small expense ratios levied by the fund management company whenever you invest in ETFs. M1 Plus offers added services for $125 per year. 

Methodology

Our mission at Investopedia is to provide investors with reviews and ratings of robo-advisors that are comprehensive and unbiased. Our team of researchers and expert writers, led by Michael Sacchitello, spent months evaluating all aspects of a robo-advisor’s platform, including the account setup process, goal planning tools, account service options, portfolio construction offerings, portfolio management, mobile and desktop user experience, educational content, fees, and security. As part of this evaluation, we extract critical data points that are weighted by our quantitative model that produces a powerful star-scoring system.

With the individual investor in mind, we’ve designed a comprehensive ranking methodology to find the best overall robo-advisors and the best robo-advisors across nine key categories. Each advisor is then scored across multiple variables to rate performance in every applicable category. The score for the overall award is a weighted average of the categories.

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