Robo-advisor M1 forgoes fees for seclending revenue

M1 Finance will be making its core automated investing platform free in favor of making money on securities lending. Brian Barnes, Founder and CEO of M1, wrote in a recent blog post that the investing account is the final component of personal finance to go free, so it’s best to get on with it and compete on other factors.

For revenues, Barnes pointed to brokerages’ business models: making money via lending securities they hold, interest on cash held in a brokerage account, extending credit through margin to customers, and getting paid for distributing certain funds or to transact on various exchanges.

“These revenue streams are more than enough to support a strong, vibrant company,” wrote Barnes. “We will make more money from transactions and holding the assets than we would from our fee. The number one driver of M1’s success over time will be the number of users and assets managed. If going free puts M1 in more people’s hands and empowers them to manage more of their money on the platform, the move to free is a win-win.”

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