The race to zero has been won. M1 Finance, an automated advice platform, or robo advisor, said Wednesday it eliminated fees for all of its investors. Anyone can open an account and gain access to investment management at no charge.
“We are now free,” said Brian Barnes, the founder and CEO of M1 Finance. “We were thinking into the future and came to the conclusion that investment platforms and brokerage are going to sort of mirror personal finance platforms.”
The robo advisor previously had three price tiers: there were no fees for accounts with less than $1,000, a 0.25 percent fee for accounts between $1,000 and $100,000 and a 0.1 percent fee for accounts with more than $100,000.
Barnes said he sees others in the industry making the same move in five or 10 years and that the economics already supported the decision. The majority of M1 Finance’s revenue already comes from lending money and securities like a bank, and eliminating fees will only drive more investors to the platform with assets to loan. The company also gets paid to participate on certain exchanges.
Going into Wednesday, M1 Finance had about 25,000 accounts. Assets under management are approaching $100 million and Barnes expects the company will pass that milestone early next year.
The company also plans to launch additional features on its platform in 2018, including security-backed lending to account holders. The product itself is where M1 Finance will need to compete to attract future investors, assuming all other automated advice platforms, discount brokerages and other companies in the space someday eliminate fees.
Other robo advisors continue to supplement their investment management with financial planning and other features. Betterment users were recently enabled to donate shares from their portfolios directly to charitable organizations.
Barnes said time and resources are the only things keeping M1 Finance from rolling out more features faster.
“I have a core belief that, at some point, digital solutions will be able to do what is only available to private wealth clients, but for less,” Barnes said. “I think it’s only a matter of time before we get there.”
