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M1 Finance vs. Robinhood

The best platform depends on whether or not you prefer to pick and choose your own securities.

Both platforms offer commission-free trades, but are designed to attract two very different types of investors.

Which one is better?

  • Choose M1 Finance if you’d like to have a robo-advisor manage your portfolio for you.
  • Choose Robinhood if you prefer to buy and sell your own securities, or if you want early access to IPOs.

M1 Finance and Robinhood are two of the best-priced investment platforms on the market. It’s tough to compete with free, and that’s what these platforms provide – trades free from commissions and account management fees.

But outside their rock-bottom pricing, these platforms have little in common. And that’s because they’re designed to serve different types of investors.

For investors who want a robo-advisor for hands-off investing, M1 Finance stands at the ready. Among its perks are entirely customizable portfolios, automatic rebalancing and a healthy lineup of account options, including individual, retirement, joint and trust accounts. But the platform lacks tax-loss harvesting options and doesn’t offer portfolio recommendations.

Investors who want to execute their own trades and perform their own research will want to explore Robinhood. This beginner-friendly platform offers an intuitive user interface, access to the cryptocurrency market and instant deposits of up to $1,000. Plus, Robinhood has pre-IPO investing, a feature that gives Robinhood traders early access to IPO shares.

But investors should be aware of Robinhood service outages and its limited analysis software.

How do M1 Finance and Robinhood compare?

A look at fees, features, pros and cons for these two investment platforms:

M1 FinanceRobinhood
M1 Finance logo
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Robinhood logo
Open an account
OverviewM1 Finance is a robo-advisor that puts you in the driver’s seat with fully customizable portfolios. It strikes a balance between automated investing and personalization, making it a good fit for hands-on, long-term investors.Robinhood is a trading platform for beginners that offers easy-to-navigate software, no account minimums and no commission fees. Research and analytics tools are somewhat limited, but investors can bump up their brokerage account to Robinhood Gold for $5 monthly to receive Morningstar research reports, Nasdaq Level II Market Data and instant access to deposits of $5,000 to $50,000.
Annual fee0%0%
Minimum deposit to open$100$0
Benefits
  • Customizable portfolios. In the absence of prebuilt portfolios, M1 Finance lets its investors customize their holdings.
  • No commissions. No fees or commissions to use its robo-advisor.
  • Fractional shares. Ensures every dollar in your portfolio can be put to use.
  • Automatic rebalancing. Automatically purchases more of the underweighted items in your portfolio each time you deposit funds.
  • Account variety. M1 Finance offers a generous selection of individual, joint, trust and retirement accounts.
  • Beginner-friendly. Well-known for its intuitive platform that caters to new traders.
  • Cryptocurrency access. One of the few trading platforms to offer access to the crypto market.
  • Commission-free trades. Traders pay no commissions.
  • Instant deposits. Deposits of up to $1,000 are approved in seconds.
  • Recurring investments. Sign up to have funds invested in stocks or ETFs daily, weekly, biweekly or monthly.
  • Pre-IPO investing. Buy shares of companies on the cusp of their public market launch at pre-IPO prices.
Drawbacks
  • No tax-loss harvesting. Unlike many of its competitors, including Betterment and Wealthfront, M1 Finance doesn’t offer options to decrease your tax liability.
  • Limited securities. Investors are limited to purchasing stocks and ETFs.
  • No recommended portfolios. Most robo-advisors help you select an appropriate portfolio based on your responses to an investor questionnaire — M1 Finance investors are given no such guidance.
  • Limited research. While robo-advisors typically don’t supply the same research tools as active trading platforms, M1 Finance’s educational support is limited to articles on its website.
  • Limited account options. Only offers individual investment accounts.
  • Limited support. Customer support is limited to email inquiries.
  • Service outages. Robinhood experienced a series of service outages in 2020 and reports suggest its service was unreliable in preceding years as well.
  • Account transfer fee. Investors pay an industry standard $75 for outgoing account transfers.
Tools and research
  • Educational articles. M1 Finance has published some articles on its website covering topics like investment accounts, trading strategies and portfolio management strategies, among others.
  • Newsfeed. Scan investor news from the Financial Post, MarketWatch, Reuters and the New York Times.
  • Daily stock information. Review a daily rundown of significant shifts in the stock market.
  • Analyst ratings. Use analyst ratings to better assess the value of a given security.
  • Candlestick charts. Apply chart indicators to analyze a stock’s performance across a variety of metrics.
  • Robinhood Gold. Upgrade for an added $5 monthly to receive Morningstar and Nasdaq Level II Market Datastock research reports.
Reputation and customer reviews
  • Reviews are: Mixed
  • Customers praise: Automated rebalancing and customizable portfolios
  • Customers complain about: Customer service wait times and account withdrawal delays
  • Reviews are: Mostly negative
  • Customers praise: Intuitive platform and commission-free trades
  • Customers complain about: Service outages
Apple App Store reviews

★★★★★ 4.6/5

★★★★★ 4.8/5

Google Play Store reviews

★★★★★ 4.4/5

★★★★★ 4.3/5

Support
  • Phone. Call 312-600-2883
  • Email. Fill out the request form on its website
  • Email. Fill out an online support ticket request on Robinhood’s website for an email response from the customer service team.
Learn more

Read our review

Read our review

M1 Finance vs. Robinhood on fees and transparency

M1 Finance and Robinhood need to make money to stay in business. And while these two platforms earn money in similar ways, they have different attitudes on transparency.

Robinhood profits from payment for order flow

A commission-free platform means that Robinhood doesn’t profit from trades, right? Well, no — not exactly. At least, not the way you might think. Robinhood profits from a practice called payment for order flow (PFOF):

  1. Brokers route investor orders to middlemen called market makers.
  2. Market makers fill the order at a slightly better price and pocket the difference.
  3. As thanks for investor orders, market makers pay brokerages a fee.

That’s payment for order flow. And it’s been criticized for failing to serve the best interests of the investor. Now, this might not be quite so bad if Robinhood were up front about it. But it hasn’t been.

There is information on how Robinhood makes money on its website, but it’s difficult to find. You need to dig — deep. But it’s there.

Now, full disclosure: Robinhood published an article on PFOF that said it earned an average of $0.0023 per equity share traded in the fourth quarter of 2020. Fractions of a cent may not sound like much, but Robinhood has over 18 million accounts to its name.

M1 Finance profits from membership fees and payment for order flow

Like Robinhood, M1 Finance offers the use of its platform for free. And like Robinhood, it profits from payment for order flow — among other things, like membership fees and lending out investor cash holdings.

But unlike Robinhood, M1 Finance is transarent about it. In fact, it has a dedicated page on its website titled, “How M1 makes money.” On this page, it dives into detail on each of its revenue streams and says it makes about $0.002 per share from PFOF — roughly the same as Robinhood.

Bottom line

M1 Finance and Robinhood cater to two very different investors. Traders looking to buy and sell their own securities may benefit from Robinhood’s commission-free trades, but will need to be wary of service outages. Those ready to have a robo-advisor manage their assets will want to explore M1 Finance’s offerings, but should be prepared to devise their own asset allocation strategy.

Review your platform options with numerous providers to find the account best suited to your investment goals.

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