What is M1 Finance?
M1 Finance is an American financial services company that refers to itself as “The Finance Super App”, and it is not an empty boast.
M1 Finance is an amalgamation between a Robo-Advisor and a traditional financial advisor, delivered with a commission-free online brokerage service with no minimum balances or fees. You can invest in several financial products like stocks and ETFs.
It achieves this using the latest technology, making investing simple and cost-effective for investors who do not have a lot of money to get started.
This allows you to monitor your investments quickly, leaving you more time to get on with the rest of your life.
This review provides more information about this investment platform.
Is M1 Finance Safe?
Every precaution to safeguard your money and ensure protection against the theft of your personally identifiable information or financial assets stored on the platform is in place.
You are covered against any losses suffered in the event M1 Finance or its custodian fails to safeguard your funds or enter bankruptcy. But it does not cover you against investment losses.
SIDC Protection
M1 Finance is insured through the Securities Investor Protection Corporation (SIDC), an insurance service that has been covering investors for more than 50 years.
M1 Finance is a member of SIPC, which oversees brokerages to ensure that customers whose brokerages go out of business are compensated. SIPC focuses on restoring the availability of customers’ assets, not on the recovery of investment losses.
This provides you up to $500,000 of cover in the event M1 Finance goes into bankruptcy, including up to $250,000 in cash.
Of course, that means any funds above $500,000 are not insured, so you may want to keep your balance to $500,000 and invest any additional funds elsewhere for total safety.
SIPC does not offer compensation for fraud on your account, money lost due to an investment gone bad, or anything other than the services M1 Finance offers.
FIDC Protection
M1 Finance is also insured through the Federal Deposit Insurance Corporation (FIDC). This covers your deposits on the M1 Spend platform (a bank account). The FDIC also performs the following tasks:
- reviews M1 finances assets and sets insurance limits (by reviewing bank assets, deposits, and loan activities)
- if a M1 Finance failed to meet its obligations or is otherwise compromised in some fashion, FIDC will pay investors their money up to $250,000 if they follow certain rules for depositing funds
- manages receiverships (if M1 Finance were to become insolvent).
In other words, the FDIC ensures that your money is safe even if M1 Finance were to shut down. So far, there are no known safety issues with this app, and it has been operating for years without any reported financial insolvency concerns.
FINRA Regulation
As a broker, the Financial Industry Regulatory Authority (FINRA) regulate M1 Finance, thisis a non-profit organization that works to protect investors by supervising stockbrokers, enforcing the rules governing them and educating people about investing.
FINRA is a self-regulatory organization (SRO) for securities brokerages in the United States, created after the great depression of the 1930s. it operates under the supervision of the Securities and Exchange Commission (SEC). FINRA regulates brokerages by:
- holding them accountable for compliance with federal securities laws and regulations
- handling investors complaints against brokerages
- conducting investigations into violations of the law, involving disciplinary actions when appropriate
- educating the investing public
You can use FINRA’s BrokerCheck service to investigate any brokerage. This allows you to see if a broker is licensed, and if there are any public customer disputes.
M1 Finance’s BrokerCheck listing shows no open complaints, investigations, or violations.
What About Cybersecurity?
Ensuring your personal information is safe is one of the biggest concerns individuals should have with any online platform.
Cyberattacks seeking personal information are becoming more common and more frequent, and platforms like this are an ideal target.
Your data with M1 Finance is kept safe by using Plaid to connect with your bank to transfer funds. Plaid is renowned for exceeding industry standards and best practices to keep accounts safe and secure
The app also encrypts all data transmitted to their servers at a level considered the industry standard for financial institutions, using AES-256 encryption.
Multi-factor authentication (MFA) adds an additional layer of protection to your account. This includes the use of two out of three items, such as a password; an ATM card or mobile phone PIN number; or a fingerprint scan.
This added layer of protection helps to ensure that a third party cannot access your account even if they have your password or other security details.
M1 Finance also uses a monitoring system to detect unusual activity on your account, such as logins from a different IP address than you normally use.
This could indicate that someone has stolen your login details and the app will automatically lock down your account for you to review whether it was in error or not.
M1 Finance is a safe investment platform with sound protections in place. To get started with M1 Finance, click here.
