M1 Finance vs Fidelity
M1 Finance and Fidelity are two separate but similar products. M1 is a pure robo-advisor with the mission to help ordinary people get into the market with little knowledge or experience. Fidelity, on the other hand, is a traditional broker offering a robo-advice service.
The market for robo-advisors is expected to soar to an impressive $41 billion in 2027, up from just $4.51 billion in 2019.
So, which one is the better option for taking advantage of a robo-advisor to kick-start your investing career? Here’s everything you need to know about how they stack up.
M1 Finance Overview
M1 Finance has a track record dating back to 2015. Under company CEO Brian Barnes, M1 has grown from its humble roots in Chicago, Illinois, to hold more than $4.5 billion in assets under its management. More and more Americans are quickly taking advantage of its automated portfolios to plan for the future.
In our M1 Finance review, we talk about how the platform makes it so easy to start investing in a matter of minutes. Choose from a selection of automated portfolios based on your future goals, whether it’s planning for retirement or putting down a deposit on a house.
Even though it’s a fully automated service, investors can create their own portfolios via the revolutionary pie investing system. Whether you’re hands-on or hands-off, M1 investing caters to both types of investors.
M1 Finance Details
|Management Fees||$0-$125 per year|
|Account Types||Individual and joint brokerage accounts, Roth IRA, SEP IRA, and Traditional IRA, trust accounts, and custodial accounts|
|Investment Type||Stocks and exchange-traded funds (ETFs)|
The main advantage offered by M1 Finance is you can invest completely free of charge. While there are some minor fees, the vast majority of investors will pay nothing. There’s also no need to adhere to any arbitrary account minimums because they don’t exist here.
When you sign up with M1 Finance, you have access to numerous supported account types, including brokerage, trust, and custodial accounts. This is something not offered by many other robo-advisors.
M1 Finance’s fractional shares can also be a great attraction, allowing small investors to purchase percentages of a blue-chip stock such as Google or Apple when they might not be able to easily afford entire shares at a time.
Is M1 Finance Worth It?
M1 Finance is a great choice for investors of every level. M1 Finance Reddit reviews show appreciation for many of the platform’s services.
Casual investors enjoy M1 Finance’s low fees, and ability to automate their portfolios. This makes it a great choice who want to invest and not micro-manage their investments.
Experienced investors praise the platform’s analytical tools, so they can get every last piece of market data as active traders.
M1 investing allows you to create fully customizable ‘pies’ consisting of low-risk stocks and ETFs. You can also use M1 Expert Pies, which are essentially pre-made portfolios aligned to your income, risk tolerance, and goals.
These ready-made portfolios are based on varying levels of risk, ranging from ultra-conservative to aggressive.
M1 Finance Pros
- No account minimums
- No trading fees
- M1 Pie investing
M1 Finance Cons
- Limited investment options
- No tax-loss harvesting
- No human advisors available
From the traditional broker Fidelity, there’s Fidelity Go. This is a relatively recent addition to robo-advisors, in response to the 3.5 million investors who will use robo-advisor platforms in 2021.
Fidelity works by constructing portfolios via mutual funds, otherwise known as Fidelity Flex. The difference with this robo-advisor is portfolios are fully monitored by human investment experts. This ensures that portfolios are appropriately re-balanced along the way without the input of the account holder.
When compared to M1 Finance, Fidelity can be tougher to get used to. It’s not as beginner-friendly and there are management fees for those with larger portfolios. On the other hand, the presence of mutual funds and a human investment team are two huge advantages.
|Management Fees||$0/less than $10,000, $3/over $10,000, 0.35%/over $50,000|
|Account Types||Individual and joint taxable accounts, Traditional IRA, Roth IRA, and Rollover IRA|
|Investment Type||Mutual funds drawn from seven asset classes|
In the battle between M1 Finance vs. Fidelity, M1 Finance is the clear winner when it comes to fees. The fact there are no fees whatsoever charged by M1 is an instant edge. While the $3 per month or 0.35% over $50,000 may sound small, these are the fees that can eat away at your profitability over time.
Fidelity offers many of the same account types as M1, but the latter has the edge again, particularly with the presence of the SEP IRA.
Like M1 Finance, Fidelity’s fractional shares helps investors without a great deal of funds trade in very successful stocks. Not all robo-advisors offer fractional shares, so investors need to pay attention if this is a feature that interests them when looking at firms.
One area that stands out is that Fidelity offers access to mutual funds. Currently, M1 doesn’t offer mutual funds as an investment option, which is a downside for some investors. Unfortunately, neither platform offers the coveted tax-loss harvesting feature.
At Modest Money, we love the presence of a team of human investors forever watching over your portfolio and ensuring that it remains balanced. However, both Fidelity Go and M1 Finance offer portfolios that can be left on autopilot without any problems.
Fidelity’s fees are based on the value of your portfolio. Beginners will never pay any fees, but if your portfolio grows above $10,000, you’ll be bumped up to the next tier, which means paying $3 per month. There is a management fee of 0.35% on portfolios valued over $50,000.
There are no expense ratios when making ETF trades, but Fidelity recoups its money via the management fees. The fact M1 charges no fees makes Fidelity a less attractive investment option.
Is Fidelity Worth it?
Fidelity reviews on Reddit are generally lukewarm but positive in regards to the robo-advisor. The $0 commissions are consistently praised, and its customer service department is known for its responsive, warm, and helpful demeanor.
Fidelity’s returns are in-line with most major firms and are a decent option for many investors. The great disadvantage is growing managerial expenses as the portfolio accrues wealth. In other words, Fidelity is not a good choice for those planning on investing large amounts of money.
- No management fees on less than $10,000
- No expense ratios charged
- Human portfolio monitoring
- $10 minimum account balance
- No tax-loss harvesting
- No REIT investment options
M1 Finance vs Fidelity: Comparison
|Customizable portfolios||$0||$0 (Under $10,000); $3 per month (Between $10,001 and $49,999); 0.35% per year over $50,000|
|Avg. ETF Expense Ratio||$0 (Charged by certain providers)||None|
|Account Types||Individual and joint brokerage accounts, Roth IRA, SEP IRA, and Traditional IRA, Trust accounts, and Custodial accounts||Individual and joint taxable accounts, Roth IRA, Traditional IRA, and Rollover IRA|
|Financial Advisor Fee||No financial advisors available||None|
|Best For||Beginners||Smaller Investors|
M1 Finance vs. Fidelity: Which One is Right for You?
At face value, there seems to be little between these platforms. Both platforms offer similar levels of performance, but we must give the edge to M1 investing.
The M1 pie investing system is revolutionary and makes it easy to visualize your portfolio. With no limits on how many pies you can create or how many investments can form part of each pie, M1 is a cut above the competition.
While Fidelity does offer a human investment team, this is nothing more than a peace of mind addition. M1 performs just fine without the presence of a human operator, as its robo-advisor is so advanced.
Fees are where M1 beats out Fidelity. You’ll never pay any fees of any kind when investing with M1 Finance. The fact that Fidelity penalizes wealthier investors in the same way as a major broker is proof that Fidelity has yet to adjust to the needs of the modern investor.
Overall, M1 Finance simply offers a superior product. There’s very little Fidelity offers that would give an investor reason to choose it over M1.
If you want to create an account with M1 Finance and start investing for free, do it through Modest Money. This new approach to investing is a game changer and empowers ordinary people to get into the market regardless of their prior knowledge and experience.