The differences in investing platforms can sometimes be staggering. Then again, some have offerings out there that are so similar it’s hard to see any differences between the two.
Today we are going to be comparing M1 Finance and Personal Capital. These are two investing platforms that have grown massively in popularity in recent years.
Personal Capital is an overall wealth tracking tool as well as a robo-advisor for higher net worth investors.
M1 Finance is a hybrid between a brokerage and a robo offering free investing tools with low account minimums.
By the end, you should have a good idea in which of these investing platforms will be the best fit for you.
Summary: Personal Capital vs M1 Finance
- M1 Finance is completely free with a $100 minimum investment
- Personal Capital has free financial planning tools
- The minimum to invest with Personal Capital is $100,000
- Both have a hybrid approach to investing
- Personal Capital has access to human advisors and financial planners
- M1 Finance is best for lower net worth investors
- Personal Capital is best for higher net worth investors
- Personal Capital offers investment portfolios tailored to your goals
- M1 Finance offers both portfolios as well as individual stocks and ETFs
What Is M1 Finance?
M1 Finance is an investment management platform that was launched in 2015.
Even though it has only been around for about 5 years, they already have over 250,000 accounts that total over $1 billion in assets under administration.
The platform is a bit of a mixed bag with features of a robo-advisor and a broker. M1 Finance has the goal to provide a simple easy to use platform where an investor can manage multiple aspects of their financial life.
This includes investing, low interest borrowing as well as cash back from spending. M1 Finance aims to be a one stop shop for your money.
How Does M1 Finance Work?
Like most investment platforms, you must start by registering for an account with the company. You will have to deposit their account minimum of $100 in order to get started.
M1 Finance follows a simple approach to managing your finances.
First, they will help you build your investment portfolio and ask you if you’d like to schedule recurring deposits. These can either be weekly, biweekly or monthly depending on your unique situation.
You can follow the active investing approach by picking and choosing stocks and ETFs to invest in.
Or, you can follow the passive approach by choosing one of the free expert built portfolios to invest in.
After you have had your account with M1 Finance for some time and your total investment amount reaches $10,000 you will be able to borrow up to 35% of your taxable brokerage account. This borrowing feature is called M1 Borrow.
You may use this money for whatever you desire and it has a relatively low interest rate.
M1 Finance also has a checking account feature called M1 Spend. With a M1 Spend checking account you will be eligible to earn cash back and an attractive interest rate on your balance.
M1 Finance Features
As we mentioned above, M1 Finance offers a checking account so you have access to all of your finances in one easy place.
The account comes with a higher than average APY and generous cash-back on all purchases through the M1 Visa debit card.
In addition, you will also benefit from 4 free ATM Withdraws per month and there is no minimum deposit in order to maintain this feature either.
You can also rest assured knowing that your money is FDIC insured just like many other banks out there.
M1 Finance also gives you the opportunity to take out loans via M1 Borrow. You can use your M1 Finance account balance to act as collateral for your loan.
You can use your loan proceeds however you’d like. M1 Borrow has a relatively low interest rate since it is a secured loan.
The only caveat here is that you must have, and maintain, $10,000 in your taxable brokerage account in order to make use of this feature. The ability to have liquid capital without having to sell securities is a very nice upside M1 offers.
M1 Finance calls its portfolios “pies." You can have as many pies as you would like in your account and up to 100 companies or ETFs in any individual pies.
M1 Finance pies can be custom built using stocks and ETFs. Beginner investors may want to try out M1’s expert pies. These are prebuilt portfolios that offer an overall strategy for the investor ranging from income portfolios to growth portfolios.
While pies are something that investors utilize to gain flexibility and control over their investments, M1 also offers features for the more hands-off individual.
M1 Finance will automate your portfolio using a mix of its features. As you set up your pie and recurring deposits, M1 Finance will make sure each deposit is allocated to your pie based on your target allocations. This feature is called automated rebalancing.
Dividend Reinvestment Plan (DRIP)
This feature is not specific to M1 Finance as other companies do offer it. However, it is a great service that many of its users take advantage of.
As the name implies, DRIP allows you to reinvest your dividends and through M1 Finance automatically.
If your portfolio earns dividends then this money goes into holding until it reaches $10. After that, it is invested again based upon your preferences and spread throughout your portfolio.
Here's more info on how dividends work with M1 Finance.
M1 Finance Fees
Even though M1 includes automation like robo-advisors that charge fees, there is no asset management fee involved.
They also do not charge a commission on trades like other investing platforms.
However, if you would like access to some extra features you may subscribe to M1 Plus, their next tier of service. This gives you another daily trading window, and lower interest on the margin loans to name a couple of things. M1 Plus comes at an annual fee of $125 per year.
Here's our article on how M1 Finance is making money.
M1 Finance Pros
- Completely free platform
- Low $100 minimum balance
- Multiple types of automation
- All in one platform with investing, borrowing and banking services
M1 Finance Cons
- No mutual funds or individual bonds
- 1 trading window on basic
- Poor tax-loss harvesting
What Is Personal Capital?
Personal Capital is actually more of a financial planning tool than it is an investment platform. Though of course, it does have investment support or else it would not be in this comparison review.
Personal Capital offers free financial planning tools regardless if you invest or not. This is one of our favorite parts about PC.
The company aspires to be an all-inclusive system that members can use to manage all of their finances in one place. Each of your individual investment accounts links, safely and securely, with Personal Capital for tracking.
Similar to M1 Finance, Personal Capital is a bit of a hybrid between a robo-advisor and broker.
How Does Personal Capital Work?
In order to use Personal Capital’s free services, you do not need to make a minimum deposit. Simply registering for an account is the only prerequisite.
Their financial planning features are very similar to other services like Mint that aim to make be an easy place to view all of your accounts in one place.
However these financial planning features are all you are going to have access to unless you plan on maintaining a balance of $100,000 with Personal Capital.
If you do, then you will be in Personal Wealth, their next level of service. Personal Wealth will give you access to investment management and financial planning by human advisors.
Personal Captial Features
Free Financial Planning Tools
Personal Capital’s financial planning tools are actually quite competitive with other products like Mint as we referenced earlier.
They allow you to add in just about any type of account you can think of to give you a great bird’s eye view of your finances.
Budgeting is also something they cover within these features. Users will be able to monitor their spending habits and the tool will highlight large areas of expenditures.
If you wish to have that process automated for you, then you can take advantage of the Cash Flow Analyzer. Basically, it takes the thinking out of budgeting and tracks all of your spendings and gives you suggestions based on the results.
You will have access to a financial helper, but take note that the free level of service this person is not for investment advice and will only assist with basic features.
Personal Capital Savings Account
Like many other investment platforms, Personal Capital offers its users access to a savings account conveniently located in their investment platform.
This account does not have a minimum balance and you will have unlimited withdrawals as well as an attractive interest rate.
The investment services offered by Personal Capital are strictly for higher net worth individuals. This is apparent from the $100,000 minimum deposit barrier.
Though after crossing that barrier, users will have access to human-assisted investing with a splash of automation.
They have a good system for tax-loss harvesting and enlist a feature called Tactical Weighing in order to give you a good balance of assets in your portfolio.
Socially responsible investing is making a surge in popularity lately and through Personal Capital, you will be able to tailor your investments in the same way. You can align your investments with companies that adhere to certain social responsibility and ethics.
Personal Capital Fees
There are absolutely no fees associated with the free Financial Planning features of Personal Capital.
Wealth Management does carry a fee. The annual fee begins at 0.89% annually for Personal Capital Wealth.
Though, after a million invested, your fees will decrease to 0.49%. Even this is still higher than many of the fees competing robo-advisors charge.
Personal Capital Pros
- Free financial planning tools with no minimum
- Access to human advisors and financial planners
- Great customer support
- Tax-loss harvesting
- More traditional financial advisor approach
Personal Capital Cons
- High management fees
- Minimum of $100,000 to invest
- Similar platforms available for cheaper prices
The Verdict: Personal Capital vs M1 Finance
At their core, these services are very similar to one another. However, there are some glaring differences once we start to take a closer look.
Personal Capital is definitely directed at high net worth individuals while M1 Finance is dedicated to being an everyday person investment platform.
As far as investing goes, the minimum investment with M1 Finance is $100 or $500 for retirement accounts. The free tools on Personal Capital have no minimum, but in order to invest with them you need a minimum of $100,000.
If you want a platform for free financial planning tools then Personal Capital may be the better platform for you. Or, you could use these free tools alongside a brokerage account like M1!
The majority of beginner investors will likely benefit more from M1 Finance. They support a wider range of investors and lower-income individuals just looking to start their investing journey. Personal Capital is aimed at the higher net worth investors, not your average joe.