M1 Finance vs Betterment - Which is Better for You?
Both Betterment and M1 Finance have good passive investing options, however we think one of them is better due to their lower fees and unique features.
To not bury the lead — While Betterment has a good platform they also have high fees. M1 Finance charges no fees and nothing for investing with them and using their “Expert Funds” which are adjusted just like Betterment’s basic funds are, but with significantly less expenses/fees.
Due to the extra fees Betterment charges we generally would say M1 Finance is the better choice for most people — don’t get us wrong though, betterment’s fees aren’t horrendous and if you like using them and are already with them it may not be worth your effort to change to m1 finance, however ultimately the way we see it is M1 Finance is just a better betterment with less fees and more control and options when it comes to your invested assets.
Which Platform has lower fees?
M1 Finance definitely wins in this regard, Betterment has a flat-rate 0.25% -> 0.40% management fee for ALL assets you have with them. This may not seem like an issue, however as your portfolio grows you could be paying hundreds of dollars per year, even thousands if you’re quite wealthy. That’s unaccceptable over the long-term, at least to us. If you invested $500 per month into Betterment for 40 years you’ll pay around $20,000 in fees.
Meanwhile, M1 finance has no management fees if you build your own portfolio, or mirror ones of those you like. If you want a fully-managed (allocations adjusted throughout years) portfolio like you’d get with Betterment, you’ll pay about 1/4th the amount in fees, as M1 doesn’t offer any fees even for their managed target-date portfolios. The only fees you’ll pay will be for the ETF’s you may buy within your portfolio, or that may be in M1’s portfolios if you choose to follow them.
Due to M1 Finance having around 1/4th the amount of fees, 1/6th of the fees if you used Betterment Pro, it’s clear that M1 Finance is the better option when it comes to fees.
Betterment also has fees for small accounts and accounts which don’t deposit enough money every single month, and other nonsense that M1 Finance doesn’t demand of you or penalize you over. To me such fees are ridiculous. There’s other ways for them to make money, such as earning interest on your cash holdings, yet Betterment still charge ridiculous fees and lay more and more on top if you have a small account. Unacceptable.
Which Management Service Performs Better?
While we’d like to answer this question, currently any answer we could provide would be misleading at best, and potentially harmful at worst. The reason being, both of these companies/brokerages have only been around a handful of years and don’t have a long track record to compare and contrast against.
With that being said, both services hold similar funds and stocks — generally a collection of Vanguard-funds that are adjusted every now and then, so ultimately the performance of these management services should be nearly identical in the long-run.
Which Platform has Better Customer Service?
In our experience M1 Finance’s customer service is much better — to be specific we’ve had slightly responses from them that are more concise than Betterment’s answers, and quite frankly they’re a bit easier to get in contact with — not only do they have a FAQ and chat feature, but you can also email them or call them. In our experience you can get a near-instant reply/help by calling and usually within a few hours to a day if you email them.
This isn’t to say Betterment has bad customer service, it’s not very good in our experience compared to M1’s, however compared to Robinhood’s or other primarily mobile-app companies Betterment has pretty good customer service.
It’s a bit harder to find Betterment’s contact details on their website but when you find it you can email or call them and at least in our experience we received help in the case of email in 1-3days and calls, during times that were open, were relatively quick and painless, albeit a bit more bureaucratic/professional-like than M1 Finance which seemed more relaxed and non-scripted.
Which Platform has The Better Sign-up Bonus?
While both Betterment and M1 Finance offer sign-up bonus programs currently we can only provide you a link to one of them — don’t worry though, we’ll tell you how to get the other ones sign-up bonus if you do want it. This is because we have chosen to not work with Betterment any longer, as we don’t like to work with companies we don’t personally prefer, and thus we’ve terminated our relationship with Betterment.
With that being said, Betterment’s signup bonus is generally just some funds manaaged for free after opening an account with a small sum of funds — however it appears that this offer (their only sign-up bonus) may have been canceled. I’d encourage you to search or ask on reddit if you’re going to go with betterment, however at this stage I don’t believe there is a referral program for betterment anymore.
As for M1 Finance, they offer a $30 sign-up bonus for all new users, and sometimes offer a sign-up bonus up to $2500 depending on your initial deposit into your account with them — you can read all about M1 Finance’s current signup bonuses on this page of our website, or you can blindly sign-up through this link and just get their $30 basic sign-up bonus offer.
So is there ANY reason to use Betterment over M1 Finance?
While I’ve been negative and beating down on Betterment in this article, there are some benefits to using Betterment. The problem is, at least in my opinion, the couple benefits do not at all make-up for the extra fees Betterment has.
So what are Betterment’s benefits?
Betterment allows for automatic tax-loss harvesting, which can benefit people in high tax brackets who have large investment portfolios, however in truth all this would do is off-set capital gains in the long-run and it wouldn’t at all make-up for the higher management fees. The other benefit of Betterment is that they give financial advice if you pay for their premium package, however that’s not worth it in our opinion due to the excessively high fees they charge for the service.
At least for me, and most people, I think those benefits don’t outweigh the extra fees betterment charges. Because of that I only use M1 Finance for my long-term investing and retirement. For financial advice we prefer to learn about finance through youtube or get it from elsewhere other than Betterment (or any brokerage) as we don’t think it’s worth spending thousands of dollars in fees for a financial advisor to be the brains for you — we’d rather understand and educate ourselves and invest the savings we get from opting to be a self-directed investor.