The Battle of the Brokerages and Why I’m Transferring to M1 Finance

Hi!

The Situation:

I thought this would be a good item to talk about. With a shift in tech industries turning out lots of new ways to invest, there comes a decision in how to choose what investment platform and if some of the newer places have been around long enough to be as stable as the long time goers such as Charles Schwab, Fidelity and Vanguard. Recently, one that has interested me has been M1 Finance. I’ve heard a lot of good rap about it and I haven’t heard a lot of bad rap about it. When all of the controversy was going on around Charles Schwab cutting trading costs and trying to steal market share from robo-advisors like Robinhood, Betterment, and Stash, M1 Finance had this understanding a year or two before and dropped their investing fees to $0 in anticipation of changing tides in the Battle of the Brokerages.

I have been using Fidelity for the entirety of my Roth IRA investing experience. Granted that that is only 4 months, I haven’t been super impressed with the age of the platform and the level of output that I get as an investing helper. The accounts were SUPER EASY to set up. I think I had my account set up within a day or two. And once I figured out and understood the issues with funding my account, I was up and running.

After that, everything was very… excel. There are a few graphs but you have to search for them to find the right ones which are scattered around. As a data person, I am very organized and feel like you can chart out a lot of things very easily. There’s so much that investors want to know before they give their money to a company. I just felt like Fidelity lacked on that. All my stocks were just in a sliding view of basically an excel sheet that slides for most of the items.

The mobile app is nice and very simple. It has the stock price chart and then a bunch of drop downs that give you your different key items such as dividends and ratios and what not. Very simple. If that was all I felt I needed, I would probably stay with Fidelity.

What I think is the three hard parts for me with Fidelity are that M1 Finance does:

  • No ability for fractional shares (I’m sure they’ll add this at some point)
  • Weighting of your portfolio
    I feel like I just have stocks and securities but I have no idea if I buy more of a certain stock, how much does that change what percentage of risk it puts me in. Am I really heavily weighted towards Real Estate, Bonds, Tech Companies? Do I have to buy 10 shares of Apple to be even with my 1 stock of Amazon?I’ve seen someone complain about this before and I just don’t get it. They were upset that if you took Facebook, Amazon, Microsoft and Google and put 25% into each, why don’t you just invest 25% of your portfolio into each of these. And maybe if you are choosing those 4 stocks as your portfolio basis, this may sound dumb, but even in that situation, buying a share of Amazon throw off how you are balanced. I also think that if this is your entire portfolio you should probably not invest in individual stocks because having 100% of your stocks in tech does not protect you from issues in the market.
  • Dividend reinvesting based of under-weighted securities
    This one takes your dividends and then when you have enough in your cash balance (usually about $10) it will invest bits and pieces into the pieces of your portfolio that dropped in value. This method will give you a lower dollar cost average for each stock and ultimately try to get you towards your goals of evening out your profile to the percentages that you set. When you are focused on investing for dividends, this allows you to get paid the same amount of dividends per share as you did before, but you now get to have more dividends for less $$$.

My Experience Transferring to M1 Finance

I started the M1 Finance process on Friday, it is now Wednesday. Their support is definitely growing and lacking a bit. I definitely understand that. They have spent the majority of their growing business on deepening their development of their platform instead of marketing their products as they are. I’m sure at some point, they will put more into marketing, but as I’ve learned about them at this point without having been marketed to, I am glad to know that they are not out to make a quick buck. There are good long term goals in the platform and I’ve really liked what I’ve seen so far.

Account Set Up Experience

When they go to open your accounts, they first start you off with a Taxable account that is required for every person. I wasn’t as interested in this. I am going to see how they deal with my Roth IRA and then I might move everything else over.

They asked for me to send my driver’s license and a utility bill to their email address. That was a bit nerve-racking but I sent it in, got a quick response that they were processing, that it might take 2-3 days to do so and then within the end of the day, I got that account set up and ready to fund.

I actually read into their transfer process first. I emailed the transfer team that does the Roth IRA transfers and they weren’t able to transfer until I had opened a Roth IRA with M1. In order to do that, I had to get my regular account authenticated and I had to wait for that.

From Friday until today, I have gotten my first account opened, authenticated and gotten my second account open and authenticated. I am not just waiting for them to tell me that they are getting all the transfer items done. It is usually a 7-10 day process with a day or two where I won’t see my funds from my other institution. They mention they in the documentation and that was relieving that they understand and let you know so you don’t worry.

I think the Transfer Process will be pretty simple and then I will have all of my items set up. They tell you that while you wait for them to get your balances transferred, you can set up your Pies (how you want to break up your investing securities.) The best way that I’ve come to learn how to do that is to: Create a pie of each type of stock or security that you want, and then create a bigger portfolio holder pie.

For Example:

I created a:

Tech Sector:

Energy Sector:

Consumer Sector: Includes Johnson & Johnson

Real Estate: Includes O: Reality Income Corporation

Bonds:

Automotive: Included Ford

Financial:

Healthcare:

Industrial:

You get the point.

Each item in the different pies has a different % and each pie has a different % in the overall pie. This allows me to weight my portfolio with the idea of 20% bonds and 80% equities.. or however I want but I get the exact control of how it works. Then in each pie of Real Estate or Consumer, I can focus on companies that are more what I want, but not letting any of those take over my entire portfolio with a single purchase or with a single weighting.

You may think this sounds dumb if you are looking for that “low” or worrying about buying it quick on the up and selling it quick on the high. I guess. That kind of investing is for speculators and in the end, speculation doesn’t win out. Just like going to a casino doesn’t. The house always wins.

Dividend investing is all about the long term and gradual growth. Warren Buffet will opt for dividend payments over buying at a discount for a high sell value. He keeps all of his Coca-Cola stock. And they pay him millions and millions each year. I feel like M1 Finance understands this better side of dividend investing and helps its investors in this way while also cutting out the need to create development of their platform for things like day trading.

Update: I just got an email from the Transfer team today. They said that started the review process (yesterday) and that today they are starting the transfer. 7-10 days but I assume it will be a touch faster. The account team also reached out today and sent in my small deposits to verify that I was the right person. They did this for both my regular account and my Roth IRA. Both bank connections were smooth as butter.

I will be back to update when I get my accounts set up to see how it puts my Roth IRA account balance to work and we’ll go from there!

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