Tornado vs. M1 Finance: A Head-to-Head Comparison

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Tornado vs M1 Finance

If you’re interested in moving to an online broker or are new to trading, you may be pleasantly surprised at the number of available platforms. Unfortunately, many platforms are very new, which can make potential users a little wary. Both Tornado and M1 Finance have been around since 2015, so they both have an established reputation and track record. But, how do they compare? Here we’ll look at a Tornado vs M1 Finance comparison.

Tornado Overview

Tornado

Originally called Nvstr, Tornado was founded with the aim to help everyone become a more confident investor through personalized content, community insights, and investing education. This platform provides access to stocks and exchange-traded funds (ETFs) traded on U.S stock exchanges.

However, where Tornado really stands apart from many other online brokerage companies is that it has a unique take on investment guidance. Some online brokers offer a robo advisor, but this usually allows minimal user control. Alternatively, other platforms offer no guidance, so you need to make all your investment decisions by yourself. Tornado is a kind of hybrid between the two, which can be more appealing to new or casual investors. You can manage your portfolio solo or engage with the community to help inform your decisions on which stocks to buy or sell to maintain a balanced portfolio.

Tornado also offers a Learn and Earn program which serves up educational content aligned with your skill level. You can earn up to $50 to invest when you complete a series of investing lessons, a simple way to encourage members to continue their financial education.

Tornado is available on its main website, but there’s also an iOS and Android app. You can use either platform to research investment options, assess stocks, look at what famous investors are trading, and even simulate trades.

M1 Finance Overview

M1 Finance

M1 Finance also has a blend of automated investing together with portfolio customization. The platform works on the basis of “pies”, which are pre-built portfolios that control the allocation of money within your portfolio. You can choose from a selection of expertly-created pies or create your own. This is geared towards the more experienced investor who wants to automate strategies without compromising personal preferences, diversity goals, and risk appetite.

Free Portfolio Management
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M1 Finance makes it easy to manage your investments. Choose from a wide variety of professionally-created "pies" (portfolio allocations) or create your own. Contribute to your account and M1 Finance automatically invests based on your selections.

Features:
  • Free alternative to robo advisors
  • Automated investing
  • Easily view and manage your portfolio
  • Ideal for long-term investors
  • Commission-free trades

Pricing and Fees

Tornado has a straightforward fee structure and there are few fees associated with account ownership. There is a $7.99 subscription fee per month and this provides 40 free trades each month. After 40 trades in a month, trades cost $4.50 each. The subscription fee can be paid with your debit or credit card, by using your linked checking or savings account, or directly from your Tornado account.

M1 Finance has two tiers of membership. The basic tier means that you can trade for free. There are no trading fees or portfolio management charges. M1 Finance makes its money through lending securities, payment for order flow, and interest. Alternatively, you can opt for an M1 Plus membership. This costs $125 per year for a subscription, but it does provide other perks, which we’ll discuss in more detail below.

Investment Options

Through Tornado, you can access stocks and ETFs.

As we touched on above, the M1 platform is based on “pies” which influence the investment options. There are over 80 pre-built pies that align to various strategies including socially conscious options, passive investing, and mimicking hedge funds. You can also create custom pies, that allow you to choose your own holdings or combine your choices with an existing pie.

The available assets for M1 pies include individual stocks, REITs, ETFs, and socially responsible ESG options.

This is quite innovative in that not only do you have access to more investment options, but there is an extensive ability to tailor your portfolio via custom pies. You can search for individual stocks, ETFs, and REITs to add them to an existing or new portfolio.

Account Types

Tornado only offers individual taxable accounts with no account tiers or levels. Currently, the platform does not offer joint or retirement accounts. This does simplify the platform for new users, but it does limit the customization possibilities.

On the other hand, as we touched on above, M1 Finance has two account tiers; Basic and Plus. You can use either account for trading, but there are also additional membership perks that vary according to which account type you hold. For example, M1 Plus account holders can access a second trading window each afternoon, whereas with a Basic account all your trades are made once per day each morning.

M1 Plus clients can also enjoy 1% interest and 1% cashback on the M1 Spend account. This is essentially a checking account that can integrate with your investment account. You can use the account for direct debits, money transfers, and other day-to-day banking tasks. You’ll even get an account debit card. Plus customers can also access a Rewards Card that has no annual fee and offers up to 10% cashback when you spend with brands tied to investments through the platform.

Either type of account also allows you to access M1 Borrow. This is a portfolio line of credit with a very reasonable interest rate, but Plus customers have access to a lower rate. Your investment portfolio acts as collateral for this credit, but you can use the funds for any purpose. However, to access this feature, you must have a taxable account. IRA accounts do not qualify for M1 Borrow.

Finally, Plus customers can also access Smart Transfers. This allows you to set strategy rules to help you allocate excess cash towards spending, investing with one of your brokerage accounts, or maxing out annual IRA contributions. You can create rules to automatically transfer funds accordingly.

Community and Social Features

This is one area where Tornado really does distinguish itself from M1 Finance and other online brokerages. The platform has social networking features that allow you to connect with other users. You can see what others are investing in and even look at how their portfolio is diversified. Although you won’t see specific dollar amounts, you can see the performance of each asset. User portfolios are ranked, with specific percentage range rankings for the top 50% of users. This helps you to only connect and look at successful traders.

Another community-based feature of Tornado is thought leaders. There are two forms of thought leaders. The main thought leaders are investing experts and you can see their long-term investments according to public sources. However, you can also connect with Community Thought Leaders. These are experienced Tornado community members, who will respond to specific ETF or stock questions. This provides one-on-one access that is quite valuable and more than worth paying a monthly subscription fee.

Ease of Use

Tornado is a great platform that offers an excellent user experience. The premise of the platform is “ideas”, which you can use to track investment options you’re considering and provide insights. There is an intuitive layout and you can begin exploring new ideas as soon as you complete the account sign-up process. Your ideas will be visible publicly to other users as a default, but you can change this in your settings if you prefer to keep your ideas private. You can also click on the profiles of your connections to see their ideas.

To create a new idea, you just need to enter some basic information and at this point, you can choose to include it in the Optimizer or leave it out. We will discuss the Optimizer function in more detail below.

The M1 Finance platform is accessible on a computer or mobile device. Either layout is straightforward with a simple-to-navigate, clean design. There are tabs to access your holdings and activity, while the buttons to buy and sell or rebalance are easy to find. There are also graphs that provide more detail for your allocations. The app workflow is almost identical, which ensures an excellent user experience, regardless of your device.

Data and Research

In addition to the ideas and thought leaders, Tornado offers a number of data and research tools. There’s a variety of screeners for stocks and ETFs according to various traits, such as low correlation to current stock holdings, high dividend yields, and what investors similar to you are buying. You can also add further filters to the screens to create a custom screener. If you find picks, you can add them to a watch list or buy directly from the screener page.

Tornado also allows you to create a simulated account, which does not do real trading or use real money. There are no fees for this feature, which is ideal for new investors, as you can develop strategies and test your ideas with no financial risk. Simulated accounts work in the same way as regular accounts, so you can still access social networking and stock research tools. You can even run the Optimizer to see guidance on allocations.

While M1 Finance does have pre-built pies that don’t require much research, there is still the option to build your own portfolio. So, you can search for individual stocks and then click on the ticker symbol to buy or use the research tab, which will allow you to get company data and screen the stocks according to various parameters.

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Features:
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  • Details on 4,000 ETFs and 40,000 mutual funds
  • Portfolio management (syncs with your brokerage)
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  • Powerful charting and screening
  • Fully customizable

Managing Your Portfolio

We’ve already mentioned it in this Tornado vs M1 Finance comparison, but one of the stand out features of Tornado is the Optimizer. This is a great feature for managing your portfolio, as you can run it at any time to rebalance your portfolio automatically. The Optimizer can help to build a portfolio based on your ideas to maximize expected returns and adhere to your acceptable levels of risk.

You can set your risk level at account creation or at any time using the settings tab. This will help the Optimizer to determine appropriate suggestions. When you run the program, it will provide a list of recommendations based on the optimal ways to allocate to maintain a balanced portfolio. This will not make trades without approval, but if you want to activate the entire list of suggestions, you can authorize them with one click.

This provides a great alternative to using a robo advisor, as it works with the ideas you create and can optimize or reallocate holdings at any time.

M1 Finance portfolio management is accomplished through the pies functionality. Each of the pies is assembled into categories with investing goals, such as retirement, income, general investing, or stocks and bonds. You can also amend the pies, to create a custom portfolio.

Once you set your pies, M1 will monitor your portfolio and rebalance when you make new fund deposits to maintain your target allocation. This means that it will allocate new funds to parts of the portfolio that are underweight compared to your initial strategy set up. You can also force a portfolio rebalance at any time with a single click.

Tornado Advantages

  • Thought Leaders: You can follow expert investors or get help from community thought leaders, which provides a fantastic resource, particularly for newbies.
  • Learn and Earn: You can earn up $50 to invest when you participate in Tornado’s Learn and Earn program, which serves up educational content aligned with your skill level.
  • One-Click Optimization: The Optimizer generates recommendations according to your setting preferences and ideas. You can then make one click to implement all the suggestions.
  • Investing Community: You can share ideas and tips with other Tornado platform users, which creates a collaborative atmosphere.

M1 Finance Advantages

  • Pre-Built Portfolios: You can select from over 80 pre-built pies or portfolios, which are grouped into categories to align with your investing goals.
  • Little to No Fees: Unless you choose an M1 Plus membership, you can trade for free. However, the Plus membership may be worth the $125 subscription if you want to take advantage of the additional perks.
  • Checking Account: This acts as a regular checking account with debit card and direct debit facilities, so you can align your day to day and investing activities.
  • M1 Borrow: You can borrow using your portfolio as collateral at very reasonable rates with no credit check.

Final Thoughts on Tornado vs. M1 Finance

Both Tornado and M1 Finance have a strong reputation and track record. While they have only been operating since 2015, this makes them some of the most well-established online brokerage platforms in the class. However, both are likely to appeal to different users.

Tornado is quite innovative and is likely to appeal to new or casual investors who want a collaborative atmosphere with social connections and personalized educational content. There is a monthly subscription fee, but this is more than offset by the features including the Optimizer, which can provide you with investment recommendations.

However, M1 Finance provides great potential for pre-built, customizable portfolios with automated features for rebalancing and optimizing. You can even access a checking account, line of credit and debit card facilities. If you choose to stick with the basic membership, you’ll also incur little to no fees for your trades.

We hope this Tornado vs. M1 Finance comparison has helped you to see the unique features of each platform so you can decide which one is the best fit for you.

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