M1 Finance App

Free
4.25

Pricing & Fees

5.0/5

Investment Tools & Features

5.0/5

Trading Window

1.8/5

Ease of Use

4.5/5

User Interface

5.0/5

Pros

  • Trade fractional shares
  • No trading fees or asset management fees
  • Flexible portfolio building in addition to Expert Portfolios
  • Intuitive dashboard with your investment performance and bank account information
  • Complete transparency about how M1 Finance makes money

Cons

  • Only 1 (or 2) daily trade windows
  • Small, inactive accounts charged fees
  • No financial advisors, even for a premium upsell service

M1 Finance is an internet-based, all-in-one financial management platform. Users have the ability to invest, save, spend and borrow money for their financial needs.

Users on the platform come focused on their long-term goals, minimizing or eliminating costs and building a diversified portfolio of investments in their various accounts.

This allows users to save up for a down payment on a home, pay off a car loan, build up an emergency fund, save money for retirement and accomplish most any other money goal you can set.

Many have likely used a mix of short- and long-term investments to accomplish these goals, mostly with instruments like stocks, ETFs and cash, all of which the M1 Finance platform can handle.

When choosing M1 Finance as your financial platform, you have control over the investments in your portfolio by creating a custom investment portfolio.

By opening an investment account with a minimum of $100 (or $500 for an individual retirement account), you can start building your own portfolio or choosing from 80+ pre-built expert portfolios called “pies.”

Once you choose the investments right for you and your goals, you can enable automated transfers and employ Dynamic Rebalancing to avoid ever needing to place manual trades again.

Set up your auto-invest preferences to sweep idle cash when your cash balance exceeds $25 with these other tools and sit back.

Users are able to increase the amount they can invest on the platform through joint brokerage accounts and custodial accounts. These accounts from the free stock app offer significant financial flexibility by investing alongside a significant other or your child.

This article will talk about the joint and custodial accounts available on M1 Finance, how to set them up, what they can do and how they work.

Types of Brokerage Accounts on M1 Finance


M1 Finance offers several types of investment accounts on the platform. Each comes with unique advantages and disadvantages:

→ Brokerage Accounts

  • Individual brokerage accounts
  • Joint brokerage accounts

→ Retirement Accounts

  • Individual retirement accounts
    • Traditional IRA
    • Roth IRA
    • Simplified Employee Pension (SEP) IRA
    • Custodial IRA

→ Custodial Accounts

  • Custodial account for minors

→ Trust Accounts

  • Trust accounts for beneficiaries

What is a Joint Brokerage Account?


couple reviewing investments

The most basic type of investment account is an individual brokerage account. This is an account held under one person’s name alone.

You can invest in taxable assets through the account, meaning you pay taxes on any gains you make or can use your losses to offset other gains or otherwise lower your taxable income by up to $3,000 per year.

Joint brokerage accounts gives two or more people equal ownership over the account and the assets held within it.

Joint account holders can make trades for themselves or on behalf of the other person with all profits and losses being shared equally between them.

These accounts commonly get used between married couples, parents with children 18 and older, or for adults who care for their elderly parents.

Other arrangements exist, but these are the most common instances of when you might wish to use a joint brokerage account to manage your investment dollars.

Joint brokerage accounts allow multiple people to have control over the account, including making trades, initiating deposits and withdrawals and partaking in other related investment account actions and decisions.

Joint brokerage accounts can serve as an effective way to pool money together for a common purpose, such as saving for a home, setting aside extra money outside of retirement accounts or another shared money goal.

Typically, these accounts work well when both (or all) individuals involved contribute to the account on a pre-set schedule. This ensures all parties are working toward their common goals.

Often, couples set up joint brokerage accounts to simplify their finances. Managing one joint account can save time and effort as compared to managing separate individual investment accounts.

This all gives you more financial firepower in one investment account. Because you have the assets which otherwise would sit in two individual accounts, invested in your joint brokerage account.

Make no mistake, however, having a joint brokerage account can also carry some disadvantages.

These joint brokerage account disadvantages (or cons) include:

  • Sharing control over all investment decisions
  • Liability for joint transactions
  • Difficulty of divesting assets in a timely manner if the other party doesn’t agree
  • Withdrawing money from the account without your knowing or permission

Before opening an account together, understand the pros and cons of a joint brokerage account.

Maintaining two individual brokerage accounts can be cumbersome and time-consuming, as you’re constantly logging into both sites and making sure that all your holdings are updated correctly on each platform.

A joint account removes the hassle out of this process by combining everything down to a single account.

Depending on your investment platform, this might also act as a way to reduce fees and expenses associated with investing. M1 Finance doesn’t charge trading commissions nor annual maintenance or account fees.

The M1 Finance app is safe and able to manage your money in alignment with your individual (or shared) wishes.

What is a Custodial Brokerage Account?


investing younger

A custodial account is a type of brokerage account that is held in the name of someone under 18-21 years old, depending on the state of residence.

The account assets belong to the minor and a custodian manages the account on their behalf. The assets within the account should align with the best interests of the minor.

The custodian holds legal responsibility for managing the account and all securities transactions on behalf of the minor child until he or she reaches age 18, 21 or even 25, all depending on the state of residence.

Custodial accounts are not joint accounts, but they offer many benefits to parents who want to help teach their kids about investing while still limiting risks associated with market volatility and potential mistakes made by those without any experience trading stocks.

A custodial account differs from a trust, which offers you protection from your own forgetfulness because it forces you to set up guidelines around how money can be spent when given access as an adult.

Trusts can establish rules such as weekly allowance limits and designated funds for specific purposes like saving up for college tuition or buying a house one day.

Custodial accounts allow you to invest money for minors to show them how it’s done, build a diversified portfolio in a wide set of assets such as stocks, bonds and ETFs.

When contributing money to a custodial account, you should know the money transfers irrevocably to the minor. This means the custodian cannot access the money unless the funds will explicitly get used for the benefit of the minor.

This differs from a joint brokerage account, in which both parties can trade or withdraw funds at any time depending on their agreement.

M1 Finance allows you to open custodial accounts when you purchase their premium M1 Plus product. The company routinely runs promotions on this service, giving you the first year free, a $125 value.

Clearly, this promotion is subject to change and comes with the ability for terms to be revised.

What is M1 Plus?


M1 Plus is the premium product offered by M1 Finance. It offers exclusive features and rewards to help you earn more as well as receive perks and discounts you can’t access through the regular M1 Finance account.

Further, it allows you the ability to establish a custodial account for you to use the investment app for kids.

It costs $125/year but comes free for the first year when you sign up with M1 Finance today and deposit at least $1,000 in your investment account.

Among the many available benefits of the subscription, some of the most notable include:

  • offers you the ability to invest for minors in a custodial account (useful for starting to invest as a teenager)
  • upgrades your number of ATM fee reimbursements
  • better margin loan rates (2%)
  • a second trade window (PM) when you have $25,000 or more in equity
  • 1% APY interest on your checking account
  • 1% cash back on qualifying debit card purchases

What is the Difference Between a UGMA and UTMA Account?


Custodial accounts come in two flavors: UGMA and UTMA accounts. You can open both types of custodial accounts on M1 Finance. Let’s discuss these a bit below so you can understand the difference between a UGMA and UTMA account.

  • Uniform Gifts to Minors Act (UGMA) Account

Allows parents, legal guardians, grandparents or other relatives to transfer up to $15,000 per year tax-free into a custodial account for minors.

There are no annual contribution limits, but the IRS only allows up to $15,000 per individual per year tax-free. Couples, such as grandparents, can gift $15,000 each to each grandchild.

For example, two grandparents could gift up to $30,000 per year to each grandchild without tax consequence.

When the account owner (the minor child), turns 18 years old (or reaches the age of majority in your state), the money becomes available to take out of the UTMA account.

UGMA accounts can hold financial instruments like stocks, bonds, ETFs, insurance policies and more.

  • Uniform Transfer to Minors Act (UTMA) Account

UTMA accounts follow all the same rules as a UGMA account, except UTMA accounts allow you to hold everything a UGMA account can and more.

This means any type of property. This includes the financial instruments mentioned above, but also real estate and real property.

Therefore, things like the deed to a home, car or other property, can all be placed in a UTMA account and transfer their ownership to the minor once reaching the age of majority.

Both M1 Finance accounts have SIPC coverage. The company also carries FDIC insurance coverage on their M1 Spend checking account.

Why Should You Open a Custodial Account?


You should open a custodial account because it will give you the most benefits of teaching your children how to manage money as well as set them up for a financially secure future.

Showing them how to invest in an environment you can control will instill confidence in your children to invest money in prudent investments.

You can use the opportunity to explore how to invest through performing stock research and conducting your own due diligence. You can aide your stock research through services like:

Clearly there is no one-size-fits all research method. However,  for your custodial brokerage account, you should consider the following options when determining what type of brokerage account will work best for your individual situation:

  • Fees. One of the most common considerations when choosing an account is whether it charges fees. Custodial accounts can have low or no fees, though it will depend on your brokerage. Some may charge trading commissions while others opt for a monthly fee and act as a free stock trading app for beginners within the account. Some even offer free stocks for signing up in the form of shares or a sign up bonus. Consider your preferred model.
  • Account Minimums. Specifically, before you sign up for an account, it is important to investigate if the company requires account minimums as you might have a low starting balance in your custodial account.
  • Investment Options. And if you’re looking for more direction in how to invest your money, there are custodial accounts with some guardrails and investment choices.

M1 Finance offers access to a custodial account as part of its M1 Plus premium subscription for $125/year. Once opened, you can invest in stocks and ETFs but encounter no other trading commissions or fees.

You will need to maintain at least $20 in your account or M1 Finance will charge fees for a low balance.

However, M1 Finance’s automation and diversified portfolio offering can serve as a great custodial account option. Consider opening your custodial account with M1 Finance today.

About the Site Author and Blog

In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time.  My job routinely required extended work hours, complex assignments, and tight deadlines.  Seeking to maintain my momentum, I wanted to chase something ambitious.

I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity.  I launched the site with encouragement from my wife as a means to lay out our financial independence journey and connect with and help others who share the same goal.

Disclaimer

I have not been compensated by any of the companies listed in this post at the time of this writing.  Any recommendations made by me are my own.  Should you choose to act on them, please see the disclaimer on my About Young and the Invested page.

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