M1 Finance Alternatives For Canadians

The goal of investing is to create long term income and grow as much as possible over time, earning you passive income. But how can you do that? Generally, investors are most successful when they diversify their investments across the market and keep the investment costs low. That means it could be a drag to give a random financial advisor 1.5% of your total investable assets.

Luckily, the days of paying an advisor are in the past as technology has advanced, and new robo advisors are available to help investors make smart decisions and the most profit from their investments.

While platforms that offer robo advisors are generally low cost (0.25%-0.35%), some leading platforms cut costs even lower. M1 Finance is the platform with the lowest cost.

Is M1 Finance available in Canada?

No, currently, M1 Finance is NOT available to Canadians. The best alternative to M1 Finance for Canadians is Questrade.

What is M1 Finance

M1 Finance is an investment management platform that was established in 2015 by Brian Barnes in Chicago.

Since M1 came into existence, it has attracted an impressive amount of investors. There are currently 250,000 accounts that hold over $500 million in client assets.

So, why is M1 Finance so successful?

One of the most common advice for amateur investors is: “Don’t put all your eggs in one basket.” The phrase is used to encourage investors to diversify their investments, which helps lower the risk. M1 offers a platform specifically designed to simplify this process.

M1 simplifies the process by combining two things: a robot advisor and an online brokerage. The robot advisor helps you make the best investment strategy to meet your goals. And with the online brokerage, you can invest in individual stocks or EFTs with no trading fees.

Clients can create portfolios tailored to their exact specifications. You can choose from over 80 expert portfolios or build your own. You can also build pies — a circular chart — showing asset mixes in a portfolio.

M1’s target customer has long term goals and previous experience with using a traditional brokerage to invest in stocks and ETFs. M1 offers clients an effective alternative. Perhaps the most significant vantage point of M1 Finance over competitors is its free trades and no-fee ETFs.

What is pie investing?

People who go through traditional brokerage companies probably haven’t done pie investing. With M1 Finance, you’ll be able to choose between a custom-made pie, an expert pie, or a combination of both.

Custom pie

With a custom pie, you can develop your portfolio and decide how big you want each slice to be. The best part is, the pies are 100% customizable. If you’re a huge Apple fan and want to invest a lot in the company, you can give a huge chunk of your pie to it. Let’s say you give 40% of your pie to Apple. To make up the remaining 60% of your pie, you can divide your investments up to different companies, or invest a lot in one or two more companies. You have 100% control where your assets go.

If your portfolio gets unbalanced, M1 will automatically rebalance your selling and buying shares to match your desired percentages. You can access the pie whenever you want and change the allocations.

Expert pie

If you’re not sure what the best moves are for setting up a pie, you can give your trust to a pie set up by an expert based on your risk tolerance. This kind of pie is professionally curated and will have more traditional types of allocations, like general investment portfolios. You can choose a short-term, medium-term, or long-term investment, depending on how long you want your portfolio to run.

You can set up for a short term to try it out, then decide to build your pie later down the road. All in all, there’s a lot of flexibility.

With the expert pie, you can choose from the following investment categories:

• General investing.
• Responsible investing.
• Income earnings.
• Plan for retirement.
• Hedge fund followers.
• Industries and sectors.

Benefits of investing with M1 Finance

M1 Finance offers benefits beyond no fees and being able to create a pie investment chart. For instance, M1 has an intuitive app that allows investors to make new contributions and transfers. Every time you have a balance of $10 or more, M1 will invest in new funds.

Let’s take a look at more of M1’s key features.

M1 Spend

M1 Spend is a digital checking account that integrates with your investments and portfolio line of credit in the M1 Finance app. You don’t need to pay for transactions on this card and will be reimbursed once per month for ATM fees.

M1 Spend allows investors to pay bills, receive paychecks, transfer money, and pay with a debit card.

While M1 Spend is free, you can opt to use M1 Plus, which is a premium service. With M1 Plus, investors will get 1% APY, 1% cashback on all purchases made with the M1 debit card, lower APR for loans using M1 Borrow, a second trading window, early access to M1 Spend, and more!

Of course, these perks don’t come free. M1 Plus costs $125/year. The first year is discounted at $50, so you can try it out without losing too much.

M1 Borrow

When you sign up for M1, whether it’s free or M1 Plus, you’ll automatically be given a line of credit called M1 Borrow. It’s a preferred loan option because it’s low on interest (3.50%), flexible on terms, and easy to access. You can use it for anything like a mortgage, personal loan, auto loan, student loan, credit card debt loan, or a HELOC loan.

To qualify, investors must have a taxable M1 brokerage account with a balance of $10,000 or more. What if your credit score sucks? Luckily, M1 doesn’t do credit checks. Instead, they look at your M1 portfolio as collateral.

You can get a loan of up to 35% of your account’s equity balance. And, you won’t receive a payment schedule. Simply pay back as you see fit with your schedule.

All in all, M1 borrow is a very laid-back way of getting a loan. You may want to consider this loan just for the low interest and easy pay-back. However, M1 may set restrictions on your loan based on the risk of securities held or portfolio concentration.

When getting a loan with M1, it’s always important to be aware of potential risks: interest rate rises, your portfolio value declines — loan terms change, or losses are higher due to leverage.

M1 Finance pros and cons

Pros

• No fees or commissions.
• Suitable for every experience level.
• Automated portfolio rebalancing.
• Allows investing in fractional shares.
• Easy to diversify shares.
• Referral program.

Cons

• No tax-loss harvesting.
• Can’t invest in mutual funds.
• Can only trade once per day.

Who should use M1 Finance?

M1 is best suited for investors who don’t need the hand-holding of a traditional brokerage and like to do things themselves (with some help from the robo advisor). As M1 doesn’t charge any fees, it’s also a good option for people who’re looking to get the most from their investments, without giving some away.

Although you can set up your investments to be short-term, long term investors can thrive with M1 as all rebalancing is done for you. It’s hassle-free and easy to use.

The bottom line is that M1 Finance gives investors the right balance between automated investment and controlled customizable portfolios.

M1 Finance is not currently available in Canada.

We suggest Questrade as the best alternative to the platform.