Fidelity vs. M1 Finance - SmartAsset

Fidelity and M1 Finance are two very different services that both offer online brokerage opportunities. With Fidelity, investors get a traditional, full-service trading platform. This is an online brokerage that allows you to execute your own trades, and which supports most mainstream financial assets. With M1 Finance, investors get a relatively unique product. This is an online brokerage that offers algorithmically managed portfolios, but which allows you to add individual assets to those portfolios at will. One of the best ways to automate the management of your portfolio, however, might be by working with a financial advisor.

Overview of Fidelity vs. M1Finance

Fidelity is a well-known brand when it comes to personal finance and investing. With its online brokerage, Fidelity offers a standard, but comprehensive, full-service trading platform. You can buy and sell assets, conduct market research and get advice from Fidelity’s range of personal financial advisors.

It’s free to trade most mainstream assets, although the fees for investment advice can get relatively steep depending on what you’re looking for. With its personal management combined with particularly strong access to advisor services, Fidelity is an excellent choice for new investors who would like to manage their own assets.

M1 Finance is an outlier in the online trading world. This is an online brokerage that offers a hybrid model between robo-advisors and individual trading. With M1 Finance, you don’t actively trade your own assets. Instead, you either create your own portfolio or select one of the firm’s automatically managed portfolios.

You can then increase or decrease an individual asset’s proportion in this portfolio directly from your mobile device. With its portfolio-based approach to investing, combined with the ability to add specific assets, M1 is a potentially good choice for passive investors who would still like a degree of control over their investments.

Fidelity vs. M1Finance: Fees

Like most online brokerages, Fidelity now uses a no-fee trading model. The firm has no account minimums and does not charge a fee or commission to trade most assets. The only two exceptions to this are options contracts and some mutual funds. It costs $0.65 per option to trade options contracts with Fidelity. With mutual funds, Fidelity offers 10,000+ funds and charges $49.95 to trade any fund, not on their free list.

Fidelity also charges users to access its financial advising services. The fees for financial advice range based on your specific needs, but they begin at $32.95 per broker-assisted trade.

M1 Finance is unusual as a portfolio-based product in that it does not charge any commissions or trading fees. The only fees that M1 Finance charges are miscellaneous costs, such as a $5 fee for paper account statements, and the $125 annual charge for its premium service M1 Plus.

Fidelity vs. M1Finance: Services and Features

Fidelity offers a full-service online trading platform. Users can build and manage their own portfolios, including tax-advantaged products such as IRA retirement accounts. This is an individually managed platform, meaning that you make your own investments and trades based on your own judgment.

Fidelity’s service supports mainstream financial assets, including stocks, bonds, ETFs, mutual funds and options contracts. The most significant exception is that you cannot trade futures contracts or foreign currencies. You can also access some minor algorithmically-balanced portfolios that Fidelity has begun to construct, although they are generally not as good as simply buying a mutual fund or an ETF. Fidelity also has a crypto ETF available to retail investors.

Where Fidelity particularly stands out is in its educational and advising services. This brokerage offers a strong range of educational and research-based resources for investors. You can access financial advisors through Fidelity’s online system, and can also seek financial advice through the company’s range of retail locations.

M1 Finance offers an unusual if not unique, product. As an online brokerage, M1 Finance is built around portfolios that it calls “Pies.” Each pie is a portfolio template that represents its mix of assets. In this way, M1 Finance builds individual investment portfolios with the same approach as managed funds, which are structured around their balance and mix of assets.

Investors with M1 Finance can choose between building their own portfolios or selecting pre-built and managed portfolios. You can also select or build multiple portfolios, investing different amounts of money in each one. In this regard, M1 Finance is similar to other robo-advisories, although it offers both portfolios that are algorithmically managed and professionally managed.

However, unlike standard robo-advisors, with M1 Finance you can adjust the asset mix at will. You can add or remove individual stocks and ETFs to your portfolio by adjusting their proportion in your account. You cannot directly buy or sell assets with M1 Finance.

Instead, for example, if you were interested in XYZ Corp. shares, you would change the balance of your portfolio to include 5% XYZ Corp. Stock. The system would then buy and sell assets in order to reach that asset balance. M1 Finance only supports stocks and ETFs.

Fidelity vs. M1 Finance: Online and Mobile Experience

Fidelity is a traditional firm with a well-designed product. Like all full-services brokerages, Fidelity works best through its website, and this is clearly what the platform was designed around. The broker’s site is clean and presents its information well, without drowning the user in unnecessary details or complexity.

The Fidelity app is also well-received and has a clean design, but it suffers from the limitations of its form. Users on a smartphone will have less information available or at least will have to jump through several more hoops to access the same information, just because of the app’s smaller screen. The app is well-designed, but a full-service brokerage simply works better on a larger screen.

M1 Finance has an outstanding website and app. Although the firm has a non-traditional approach to investing, users can quickly learn how the product works and how to use it. Creating a portfolio is easy, as is playing with the asset balances in any given portfolio. This is a service that works very well on an app, given its streamlined process for adjusting your portfolio.

Who Should Use Fidelity and M1 Finance

Fidelity is an excellent full-service trading platform for anyone who wants to individually manage their own portfolio. In particular, its strong educational and advisor resources make this an excellent choice for individual investors who are still relatively new to the world of investing. You can build your portfolio while learning about this industry as you go.

M1 Finance is something of a niche product. Investors who would like to manage their own accounts will generally be better off with a full-service trading platform that lets them build their own portfolios directly. Meanwhile, those who would like a hands-off, passive approach to investing will generally do better with an index fund or a fully managed portfolio.

However, many investors may fall in the middle. M1 Finance can be a great option for investors who want to take an overall passive approach to investing but would like the option for individual management from time to time.

Bottom Line

Fidelity and M1 Finance are both online investment platforms, but that’s where the similarities end. With Fidelity, you can trade your own assets and can invest in most mainstream financial products. With M1 Finance you generally build a passive portfolio but can adjust the mix of assets at will.

Tips for Investing

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M1 Finance is a hybrid, offering portfolios managed by both robo-advisors and professional advisors. Find out which one you might prefer between using a robo-advisor or working with a professional.