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M1 Finance vs Betterment | Best Robo Advisor For 2022? - YouTube
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so in this video today we are going to
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be comparing the two Robo investing
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platforms out there known as betterment
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and m1 finance and at the end of this
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video if you guys do decide that you
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want to sign up for an account with
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either betterment or m1 finance I am
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affiliated with both of them which means
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if you do decide to use my links in the
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description at no additional cost to you
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I earn a small Commission in the process
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it is certainly not required but it is
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very much appreciated as it's a way to
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give back to me for putting a video like
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this together and the one other thing I
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want to mention m1 finance is my number
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one pick here for beginners in terms of
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a free investing platform but it is a
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little bit confusing to get started with
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it so I ended up putting together a
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completely free 30-minute video tutorial
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teaching you how to use the m1 finance
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investing app that is also linked up
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down in the description below if you do
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decide that you want to pursue that and
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learn more about this platform but that
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being said right off the bat one of the
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biggest differences between betterment
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and m1 finance is the fact that
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betterment does charge a small fee for
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the service while m1 finance is 100%
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free now m1 finance does make money
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they're not you know a charity and
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there's a couple ways they're making
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money on the back end for example they
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have their m1 finance checking account
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and debit card that has an annual fee
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they also make money from the cash held
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within brokerage accounts as far as
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interest goes and they also make money
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from directing order flow so those
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things are kind of confusing not
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something we're going to get into in
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this video but just understand they are
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making money but just in some slightly
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different ways betterment the primary
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way they're making money is charging a
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small annual asset management fee to
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customers which is 0.25% for most people
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for the betterment digital account or if
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you are a higher net worth investor and
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you have over $100,000 with them they
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offer betterment premium which gives you
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access to a team of financial advisers
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basically at any point in time you can
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reach out to them and that has an annual
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asset management fee of 0.4% now when
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you compare that to a traditional
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financial advice
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who usually charges a 1% fee Betterman
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is still very inexpensive for that type
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of money management another key
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difference here is the minimum amount of
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money to get started
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so with betterment it is a zero dollar
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minimum you could literally open up an
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account with twenty bucks if you wanted
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to whereas with m1 finance they have a
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one hundred dollar minimum for your
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traditional brokerage account and a five
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hundred dollar minimum for their
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retirement account you can do retirement
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accounts with both betterment and m1
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finance you may find a greater selection
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of account types with betterment for
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example like trust accounts I think that
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betterment offers those you don't find
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those with m1 finance another key
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difference here is that with betterment
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they are building you a custom portfolio
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based on your investing needs so when
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you go on the betterment website and you
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start investing you're gonna fill out a
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questionnaire where you talk about where
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you are at in your life how much money
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do you have what are your investing
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goals and based on all of that
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betterment is going to build a custom
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tailored portfolio for you consisting of
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stocks and bonds and ETFs exchange
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traded funds there's no individual
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stocks with betterment it's only going
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to be passive ETF investing and they're
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gonna build that portfolio for you with
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m1 finance you can follow a
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do-it-yourself approach or a portfolio
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based approach they give both of those
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options there if you want to pick your
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stocks and you want to pick the ETF's
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you're investing in you can do that
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through the platform and build your own
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portfolio from scratch or if you want to
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let them do all that hard work for you
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they offer over 30 different expert
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built portfolios which again are going
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to be completely free that means m1
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finance is not charging you for that the
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only difference being those are more one
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size fits all portfolios and they're not
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going to be built specifically for your
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investing and needs another big
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difference here is that beggarman offers
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a feature called tax loss harvesting now
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that in and of itself is a pretty
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confusing subject not going to go crazy
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into detail but essentially what they're
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able to do is they're able to sell an
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investment and buy almost
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identical type of investment to
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recognize like an artificial tax-loss to
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cut down on your tax bill at the end of
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the year by recognizing a capital loss
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and that is actually a way that
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betterment has been able to justify that
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fee that they're charging customers
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because they're actually saving you
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money on taxes through this feature
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called tax loss harvesting and that's
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not something that is offered by m-1
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finance so that becomes more important
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as you're investing more and more money
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so if you are somebody who's looking to
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put let's say ten thousand or twenty
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grand into an account like this you
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really want to read up on this tax loss
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harvesting feature and kind of begin to
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understand how much money is that really
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saving you and is that making betterment
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a more cost-effective choice another
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difference here is that again you can
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buy individual stocks on m1 finance you
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will not find that with betterment you
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will only find ETFs so betterment is a
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100 percent passive approach you don't
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do anything you don't tell them you know
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what you want to invest in you don't
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pick ETFs you literally just fill out
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this questionnaire and then you give
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them your initial deposit and then you
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continue to deposit money on a regular
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basis and other than that you don't do
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anything they're going to reallocate and
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rebalance that portfolio for you and
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handle everything else with m1 finance
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you can follow a passive or active
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approach if you want to passively invest
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in some of their expert pies or
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portfolios you can do so or if you want
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to be more active with your selection
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and pick your stocks and your ETFs you
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can do that with the custom pies option
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with this brokerage another difference
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here is that betterment offers a option
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for your cash reserve so betterment has
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something called Bederman everyday cash
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reserve and that is specifically meant
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for the cash that you're not looking to
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invest now the APY of this account
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changes with the market rate I believe
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as of making this video it's 2.0 4% APY
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which is actually significantly higher
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than some of the competitors like Ally
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Bank for example so it's actually a very
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good online savings account and the good
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news is you don't need to use that
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betterment for your investments in order
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to put your savings with them so you can
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keep your
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cash with betterment in this online
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savings account without being an
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investor with them if you want to do
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that unfortunately at this time m1
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finance does not have any type of
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product for your cash savings so that is
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one area where betterment is stronger
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but again you could have your cash with
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betterment and your investments with m1
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finance if you want it to do that so
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overall this is what I would say about
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betterment and m1 finance if you're
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looking for a 100% hands-off approach
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where you literally don't have to do
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anything you don't have to look at
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portfolios you don't have to rebalance
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or worry about anything like that
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that is exactly what betterment is for
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its 100% hands-off they do all of the
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guidance and it's completely beginner
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friendly it is the simplest platform out
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there in my opinion to begin investing
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with now on the other hand if you know a
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little bit more than the average Joe or
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you want to you know learn a little bit
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and again my free training on m1
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financed shows you basically everything
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you need to know to get started then
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this is going to be a good platform for
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somebody who wants to be a little bit
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more involved where they're okay with
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selecting a portfolio to invest in or
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they want to follow that do-it-yourself
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approach and pick the stocks and ETFs to
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invest in it's also good for people who
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are looking for individual stock
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exposure but it's not good for trading
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stocks so if you're looking to trade in
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and out of stocks on a weekly or daily
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basis it is not a platform for active
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traders it is a better platform for
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people who are long-term investors so
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overall betterment is more beginner
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friendly 100% hands-off approach and m1
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Finance is good for a more intermediate
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beginner to intermediate investor who
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wants to be a little bit more hands-on
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but anyways guys that's gonna wrap up
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this video
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that's the differences between
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betterment and m1 Finance if you guys
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are looking to sign up for either one of
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them all those resources are down in the
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description below I certainly do
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appreciate your use of those links and I
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also have that free 30-minute video
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training walking you through
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step-by-step how to use m1 finance but
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thanks so much for watching this video I
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hope you enjoyed it and I will see you
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in the next one
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