M1 Finance vs. Vanguard


#1

I’ve got 99% of my investments in Betterment currently, but am looking to move to something a bit cheaper (after FeeX scores my Betterment account at a B-).

Everyone seems to be gung-ho about Vanguard, and they do seem like a great trailblazing company with good customer service and low fees, which I like. I also plan on investing most, if not all, of my money in Vanguard index funds anyways.

I recently started up an M1 Finance account just to try it out, and I really like it. There’s no trading fees (do you have to pay trading fees if you use Vanguard to buy Vanguard index funds?), they automatically rebalance, they do fractional shares, and it’s free.

Which one would you pick if you were a neophyte investor? I’m not planning on doing anything crazy - just sticking to basic index funds anyways. But M1 Finance seems like the way to go due to the fractional shares/automatic rebalancing - what am I missing here?


#2

Vanguard is usually the clear winner for simple, low fee index investing. There aren’t trading fees for index funds (assuming you do mean the funds and not ETF’s). They do have high minimums though. And you can buy fractional shares, although you do have to rebalance yourself unless you’re in a target date fund.

I thought M1 finance was mostly for buying stocks?


#3

FYI it does look like you still have to pay fees when you sell. And with “auto rebalancing” I wonder how often they’re selling?


#4

Ahhhh, good catch! It doesn’t look like it’s a fee that would eat away at potential returns over time, but it’s still a fee so it’s not totally free.


#5

If you want to buy Vanguard ETFs, there are no fees if you go through Vanguard. If you want to buy other ETFs or stocks, there are fees. So depending on what you’re looking to buy, one may make more sense than the other.

https://investor.vanguard.com/investing/trading-fees-commissions


#6

I’d say just cut out the middle man and go straight to Vanguard. You’ll pay significantly less in fees in the long run, and rebalancing is honestly really simple. And as pointed out above, if you’re in a target date fund, it’s done for you.


#7

Vanguard actually has a terrible reputation for customer service. They do have cheap funds though. :slight_smile:

You can buy Vanguard (or any other) ETF’s at M1.

I would use M1 over Vanguard Brokerage Services - Nobody says good things about Vanguard Brokerage Services. And now you don’t have a choice, you used to be able to use the old style mutual fund accounts - all new Vanguard clients are forced to use their Brokerage.

if you’re going to use a lot of ETF’s, M1 literally has a rebalance button and they will toss the new money at funds which are underallocated so that you don’t have to calculate it yourself.

You could use VTI for US and VXUS for international. If you don’t want emerging markets, you could use VTI and VEA.

I don’t see a problem with M1. I’ve considered using it myself to slice and dice.


#8

I’ve always had good service the few times I’ve had to call them. Of course, that’s my anecdote vs your data. :slight_smile:

One advantage Vanguard has is that it is owned by the people who have accounts, meaning their interests align with yours. This may or may not be the case with other firms.


#9

I haven’t personally had any problems with Vanguard on the phone either, but there are plenty of documented incidents of people with substantial cash having issues which I place a lot more weight on.

The advantage you mention is exactly why I predominantly invest in Vanguard funds and ETF’s - which brokerage firm you hold your assets at at are irrelevant in regards to which funds that you use.

Vanguard is so focused on controlling costs that they are unwilling to invest in IT infrastructure which would prevent a lot of problems.

https://www.bogleheads.org/forum/viewtopic.php?t=210429

"I have just under $10M invested with Vanguard. This week was the first time I have ever had to actually call my flagship rep for help. I came away very dissatisfied and surprised with the lack of professionalism. I needed to send in a paper stock certificate to deposit into my account, but my rep was not available and the person I talked to did not know the process. He said someone would call me back within 24 hours, but hopefully same day. A week later, never a returned call. At the same time, I was helping my daughter set up a Roth IRA using the online process, and after 3 days, the account was still not active. So I called about that too and again, no real help, just advice to give it about a week to set up. I wrote a short note saying I was worried about the lack of response and service on these 2 issues, and he basically replied that due to tax season, he is very busy. "

https://www.bogleheads.org/forum/viewtopic.php?t=227732

"When i converted regular fund to admiral fund, the money gone missing, rep has no idea on that i had money, all records at vanguard are gone, reps tell me that they will call back, but no one calls back, Wait times are like 40 minutes and the conversation goes for another 1 hour, in total i spent 35+ hours on phone… it took a month plus to resolve this to get the money back. same for me: “No help from Vanguard. Adding insult to injury, the rep seemed to imply that I was making the whole thing up and made no offer to investigate it.”

https://www.bogleheads.org/forum/viewtopic.php?f=1&t=132543&p=3520332#p3520332

"Arrgh.

For the 3rd time in less than 5 months, money is missing from my Vanguard brokerage again."

https://www.bogleheads.org/forum/viewtopic.php?t=212011

" Their 401k dept is totally incompetent. If you have a pre-tax and after-tax component, it’s literally a minefield in moving money. One misstep and your might find your monies mixed, and totally screwed, because I would reckon that Vanguard “can’t fix it”.

I consider those to be serious issues, far more important than whether I get a competent person on the phone when making recommendations to others.

Furthermore, if you hold Vanguard assets elsewhere, you are reducing Vanguard’s costs as they do not have to spend any $$$ to service your account.


#10

I think M1 is fantastic, and I would choose them for flexibility. Especially if you’re already comfortable with a robo service; dump betterment and move to M1 to save yourself some money.

I’ve been using them for 6 months or so. If you have any specific questions, I’ll try to answer.

If you feel like kicking a couple bucks my way, you can use this link: M1 Finance


#11

I believe the real question here is what are you looking for?

M1 seems more agile and hungry for business which likely mean more features and better customer service.

Vanguard prides itself on low fees and trading/selling Vanguard ETFs/Index Funds/ Mutual Funds is commission free.

From my perspective its everything being free with some subpar customer service (Vanguard) or most things being free with better customer service.

If push comes to shove and you can’t decide you can always open accounts with both and see who you prefer after a couple of months.