Whenever a brokerage is free, it begs that question. M1 Finance, like other free brokerages, makes money in several different ways:
Interest on cash: They lend out uninvested cash and earn interest on it
Interest on lending securities: M1 Finance lends out securities owned on the platform and earn interest on those securities
M1 Borrow: This is M1 Finance’s margin feature, and borrowers pay monthly interest of 2% to 3.5%
Cash and interchange on M1 Spend accounts: M1 Finance earns interest on uninvested cash in your M1 checking account, and they receive a small percentage of the transaction fee when you use your M1 Spend debit card
M1 Plus membership fee: A $125/year subscription fee for premium services
Payment for order flow: A somewhat controversial, yet widely used, practice that involves earning commission from directing orders to third-party services for execution.
M1 Finance is transparent about how they make money, and it’s similar to how Robinhood makes money if you want to learn more.