16 August 2022

Clay Finck chats with the founder and CEO of M1 Finance, Brian Barnes. They talk about what led Brian to start M1 Finance and what sets them apart from industry titans like Vanguard and Fidelity, how M1 Finance is providing features to retail investors that are traditionally only provided to the ultra-wealthy, how cryptocurrencies play into M1 Finance’s vision, how Brian envisions the fintech landscape evolving over time, Brian’s biggest lessons in starting and scaling a company to 300 employees, and so much more!

Brian Barnes is the CEO and Founder of M1, a personal finance platform that offers the best of digital investing, borrowing, and banking. Over half a million people use M1 and they manage over $6 billion.



  • What led Brian to start M1 Finance and what sets them apart from industry titans like Vanguard and Fidelity.
  • How M1 Finance is providing features to retail investors that are traditionally only provided to the ultra-wealthy.
  • How M1 Finance’s borrowing feature works.
  • Brian’s thoughts around trading and speculating versus long-term investing.
  • How cryptocurrencies play into M1 Finance’s vision.
  • How Brian envisions the fintech industry evolving over time.
  • Why Brian purchased a 119 year old bank.
  • How M1 Finance adapted to remote work.
  • Brian’s biggest lessons in starting and building a company.
  • And much, much more!




Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Brian Barnes (00:03):

I was super fortunate for the early team, many of which are still with the company, they bring on additional great people. Those great people bring on additional great people, and so it really is the spreading network effects of the individuals that you bring on at the company, that the company is nothing more than the individuals at it, working on a shared problem.

Clay Finck (00:24):

On today’s episode, I’m joined by M1 Finance founder and CEO, Brian Barnes. M1 Finance is a personal finance platform that offers the best of digital investing, borrowing, and banking. After starting just seven years ago in 2015, over half a million people use M1 and they manage over $6 billion. During this episode, Brian and I chat about what led him to starting M1 Finance and what sets them apart from industry titans like Vanguard and Fidelity, how M1 Finance is providing features to retail investors that are traditionally only provided to the ultra wealthy, how you can borrow against your investment account on M1, how cryptocurrencies play into their vision, how Brian envisions the FinTech landscape evolving over time, Brian’s biggest lessons in starting and scaling a company to 300 employees and so much more.

Clay Finck (01:18):

I’m personally a user of M1 and a big fan of their platform. Even if you’re not interested in switching investment platforms, I can promise you this will be a very interesting conversation as we chat about the future of FinTech, as well as what it takes to start and grow a successful business. With that, I really hope you enjoy today’s conversation as much as I did with Brian Barnes.

Intro (01:40):

You’re listening to Millennial Investing by The Investor’s Podcast Network, where your hosts, Robert Leonard and Clay Finck interview successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

Clay Finck (02:00):

Welcome to the Millennial Investing Podcast. I’m your host, Clay Finck, and today I’m joined by Brian Barnes. Brian, welcome to the podcast.

Brian Barnes (02:08):

Thanks for having me.

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Clay Finck (02:10):

It’s such an honor having you on the show. You’re the CEO of M1 Finance. I personally use your platform, so it feels somewhat surreal to be chatting with you today. To get us kicked off, I’m looking at the options for where people can invest. Obviously, companies like Vanguard and Fidelity come to mind and are very popular. I used to be a Vanguard customer myself. When looking at these companies, these are just massive companies.

Clay Finck (02:34):

Vanguard for example, has $7.2 trillion in assets under management. Now, looking at your background, you graduated from Stanford in 2012, ended up starting M1 Finance in 2015. So I’m super curious, what led you to want to take on these titans in the investment industry?

Brian Barnes (02:53):

When you phrase it like that, or was that probably a silly move? Even if you look at those companies, those companies started at some point. And so Vanguard, Fidelity, Schwab all started in sort of like the 60s, 70s era, and they looked at the old incumbent institutions at the time, sort of the Morgan Stanleys, the Merrill Lynch, the JP Morgans of the world and said, “Hey, we can offer a better product, better pricing, and innovate on what’s accessible, and truthfully, either deliver something that’s equivalent at a better price or enhance the overall experience and deliver something that the old incumbents are not doing.”

Brian Barnes (03:25):

I just think those firms compounded into the behemoths that they are, but you look at them and they’re really based on the 1970s ideas, and then technology built in the 90s, the early 2000s. And if you have a toolkit of the 2010s, the 2020s, you would just create a financial service firm very differently. You would build it on a fully digital infrastructure. You would enable the customer experience that you have, that people have come to know with every application that is outside of personal finance.

Brian Barnes (03:51):

And so it was one of the things that I thought the possibilities for money management could be drastically enhanced through a better customer experience. It could allow for extreme personalization at scale. So every single person could do exactly with their money, what they want, set up automated rules and the like. You could drive down the costs very significantly. And so M1 was free at the time, Schwab, Fidelity, Vanguard were charging 10 bucks per trade, and really just create a financial service firm using the foundation that exists nowadays.

Brian Barnes (04:19):

And the ideal scenario is we compound into the behemoths and every era has a handful of financial service companies that do become the behemoths. And we think that planting the seed now gives us the ability to compound into something great over long periods of time.

Clay Finck (04:33):

What really stuck out to me and kind of attracted me to your platform was the pies feature. Essentially you can create your own little ETF of pies. Say, you can throw an Apple, Google and whatever companies you want, and then you can set your percentage allocations to those, and then you can just automate your investment process by creating your pies. What do you think are the biggest features you have that kind of attract those customers from other platforms?

Brian Barnes (05:03):

Yeah. So that’s on the investing platform. If you look at the landscape, almost every other brokerage, which is how people buy stocks and ETFs, is built around trading. And we think that there’s a huge difference between trading and investing. It all starts with the same action of you’re buying a stock, but you’re doing it for very different purposes. Trading, you’re trying to apply the price movements in the short-term. Investing, you’re trying to buy ownership in a company and a sector over long periods of time, and get appreciation due to the underlying asset appreciating in value.

Brian Barnes (05:32):

And so we take a little bit of a different perspective of their trading platforms and their investing platforms. If you look at a lot of people who use Fidelity, Schwab, Vanguard, they’re actually investing, but they’re using a trading platform to do it. And so every single action requires them to specify the order type, specify the share count, click a button, get through it, and then they just get a list of transactions and a list of holdings. And really, what they’re trying to do is maintain an investment portfolio.

Brian Barnes (05:59):

M1 just takes it much more explicitly and says, “Just tell us what you want your investment portfolio to look like and do it on a percentage basis.” So say I want 5% of my money in this investment, 10% of my money in that investment, I want 25% of my money in this collection of investments. And then that can become its own sort of pie chart that you’re allocating. And it’s really sort of saying, “This is what I want my portfolio allocation to be. I want my risk allotted in these percentages. I have as much customization as I feel comfortable having.”

Brian Barnes (06:26):

But like you said, that’s sort of a design your own ETF, design your own mutual fund, where it’s, “Maintain this allocation for me, and it doesn’t matter how much money I put into it. M1, take over and just enact this custom plan that I put together.” And so that’s what we do. We have an intuitive way for people to construct the portfolio, and then people allocate against it much like they add money to a savings account. It doesn’t matter if you add $5, $718, $50,000, it all goes to work. And then we’re doing a lot of creative things in the background to direct the money towards where it could be best used in your custom portfolio to efficiently rebalance it.

Brian Barnes (07:02):

And so it really is trying to turn the notion off its head, of trade to build your portfolio, to build your portfolio and invest in that portfolio.

Clay Finck (07:11):

Yeah, that definitely makes sense. And I guess I’ll also mention that you don’t have to just include individual stocks in your pies like I mentioned, the Apple and Google example. You can create your own ETF portfolio, where you have a slice of S&P 500. You have a slice of tech, you have a slice of value in whatever really you want to add to your pie or your own personal ETF allocation. And I’ve heard you mention that in the way these incumbents serve their customers, they’re offering the super ultra wealthy features that aren’t really offered to your traditional retail investors. So I’m curious if you could expand on that and how M1 Finance is filling the gap there?

Brian Barnes (07:53):

Yeah. So we talk about ourselves as wanting to create the digital private bank experience. And if you think of a bank, Wells Fargo, JP Morgan, Bank of America, they have typical banking services that they offer to everyone, checking account, savings account. They’ll probably have a brokerage arm, but then they’ll have a private bank. And the private bank is, “Hey, if you’re wealthy, you’ll get exclusive access to more investment options, better rates on everything, and it’ll also be coupled with white glove service,” and so you are paying for a component of that.

Brian Barnes (08:23):

M1’s ethos is, if we digitize that experience, we don’t have to pay for the white glove service. And so you do give that up, but you also don’t have to pay 1% of your net worth every year, but we can bring all those features, those functionalities, the service, the rate down to people who have six figures, five figures, as opposed to needing eight, nine, or 10 to deal with the private bank.

Brian Barnes (08:43):

And so when you look at that, even the investment portfolio that we just talked about, you need a very large sum of money before the private bank will give you what’s called an SMA, which is a separately managed account. Otherwise, they say, “You’re not worth our time or energy.” You get thrown into portfolio six out of 10 from a thing, and you have no choice in the matter. You can’t have your investment perspective. You don’t get any… You can’t say like, “Hey, I’m a unique participant, or I already have exposure via my job to this sector. So I want less of it.” You need very large sums of money to have an SMA.

Brian Barnes (09:15):

M1, you could have an SMA with a 100 bucks. And so we brought down that personalized investment portfolio to absolutely anyone. We have a product called M1 Borrow, and if you had a $100 million with Goldman, they would give you a $30 million line of credit and say, “Go nuts, buy a home, buy a car, buy a yacht, gamble it, do whatever you want with it.” I think they would suggest you do smarter things with it, but they would give you the option to, and they would give it to you at very low interest rates.

Brian Barnes (09:41):

And so if you’re wealthy, you can borrow at very low interest rates. That’s not available to most people with a $100,000. And so we have that product where you can borrow against your investment portfolio. You can borrow 40% of your investment portfolio, so $40,000 line of credit. And right now it’s, we target fed funds plus two. And so the fact that fed funds is a point and half, we are charging 3.5% on that. So it’s cheaper than a mortgage, cheaper than an auto loan, cheaper than a credit card. It is the lowest cost of borrowing that you can possibly get and we’re just opening it up to anybody who has liquid investment portfolios.

Brian Barnes (10:14):

And so you can invest for free with an SMA. You can borrow for cheaper, leveraging your portfolio. And so it’s really giving you those synergistic effects of holistic financial management that are typically only available to the upper echelon that they carve out and sort of move away from the typical bank customer.

Clay Finck (10:32):

I’m glad you bring up the Borrow feature. I just find that aspect to the platform really interesting. On the one hand, you have the reckless retail investors that might abuse this feature in that they take out the max amount they can get off of their portfolio. They go and do silly things with it and potentially end up losing the money where on the flip side, we all know that the ultra wealthy leverage their assets and they use their wealth to go out and build more wealth, but they do it in a thoughtful way where there’s risk management and things like that.

Clay Finck (11:05):

I’m curious, maybe just a general example, say I had a $100,000 in the S&P 500 and I wanted to borrow against that. What does that look like for how much I can borrow, when I have to put up more collateral, and maybe some other terms that might apply?

Brian Barnes (11:22):

Yeah, for sure. So hitting on a couple topics that you just hit on, I do view Borrow as a tool and it’s a little bit like borrowing, you can have an axe to cut down a tree, or you can have a chainsaw to cut down a tree. I would take the chainsaw, not strong enough to have the axe, but it opens you up to different possibilities. But when used effectively, man, is it a powerful tool to achieve your objectives. And so we view borrowing in the exact same facet. It’s a tool. It can be used stupidly, and it can be used very judiciously to achieve your financial objectives. And people borrow to get an education. They borrow for a home. People borrow to live the financial life that they want and this just opens up another possibility.

Brian Barnes (12:01):

From how we do it, it’s a little odd. If you went to Schwab or Fidelity, I don’t know, their margin rates are 8%, 9%. And so they’re charging a hefty amount and when you look at the unsecured personal loan market, that might be 10% or 12%, and then a mortgage may be 4% or 5%. The reason that the mortgage is a lot less expensive is there’s something backing it up. There’s an asset behind it. So the bank or whoever does the lending is less at risk of losing money because worse comes to worse, they’d have to foreclose, they’d kick you out of the house, but they’d sell the asset and reclaim their money.

Brian Barnes (12:33):

What’s actually interesting is borrowing against your portfolio, that is more liquid than a house. You don’t have to go through foreclosure. You know what it’s worth every second, Monday through Friday. And so a financial institution like M1, that’s actually a lot less risky than borrowing against a house, and so the corresponding interest rate should be lower. And so we’re taking sort of a first principle approach to it, of if you’re borrowing against liquid assets, that we know what it’s worth, we can afford to drive down the rate relative to any other form of borrowing.

Brian Barnes (13:02):

In terms of the example that you asked about, if you had a $100,000 dollars in the S&P or a diversified portfolio, we’d let you borrow 40% of that. We can actually legally do higher, but we’ve kept it to manage risk. You would be charged 3,5% currently. It is a floating interest rate. And so the fed is in the news now for changing interest rates. So we do fed funds plus 2%. And if you borrowed the entire amount, took it out and did a kitchen remodel, if your portfolio fell such that your equity portion, if you did the… borrowed all 40, you’d have $60,000 of equity in the $100,000 portfolio and that would be 60%.

Brian Barnes (13:38):

If your equity fell to 25% of your portfolio’s value, we would have to issue what’s called a maintenance or a margin call. And we’d say, “Hey, you can either post more, add cash, add additional securities, or sell off your loan.” And the rough math is your portfolio would have to drop by about 40% before that happens. So if you take out less than that, you have a lot more room to run and… So not without risk. And again, it’s the chainsaw of tools. And so it can be used hyper effectively.

Brian Barnes (14:07):

The nice thing about it is it allows you to always have liquidity and always be invested. So you can take your money. You don’t have to have this massive cash slug that you’re earning nothing on just to sort of fit your rainy day fund. You can always throw it into your investments. It’s always better to invest early, invest often, have that investment portfolio there and know that you still have liquidity that you could tap into at a very low interest rate.

Brian Barnes (14:33):

And so it just opens up the flexibility and options that you have with your money that is akin to how the rich would manage their cash flow and money, such that they could leverage one side of their balance sheet for the other.

Clay Finck (14:45):

Another interesting aspect of your platform that kind of threw me for a loop originally, it’s like, okay, what’s going on here? It’s the set trading schedules. So once you place a trade, it’s either being executed in the morning or afternoon session. And once you explained that this is an investment platform, it’s not for trading, a trader’s going to want a trade executed that second. Whereas someone that’s investing in the S&P 500 for 30 years, they just want the trade executed at least that day, that day, or the next day within that trading schedule.

Clay Finck (15:17):

So that makes sense to me. Did you execute the strategy to try and lower costs with batching transactions together, or what led you to differentiating yourself this way?

Brian Barnes (15:28):

Yeah. So in part, it was the investing platform, not trading platform, and a little bit of, if you hold something for two years, five years, you’re not going to remember if you bought it two years ago on Tuesday or Wednesday, or at 10:00 AM or 1:00 PM, and a little bit of prices fluctuate a lot. There’s only Renaissance Technology, the major hedge fund that knows what something’s worth at 10:00 AM versus 2:00 PM. I think everybody else is sort of playing the, “Hey that’s random price movements.” It’s much more important of what does the underlying asset do over long periods of time?

Brian Barnes (15:58):

And so part of it is I think people should pay less attention to what happens minute by minute, hour by hour, and it should be more systematic investing and habitual investing. And then the other part was to reduce cost and a lot of it was based around fractional shares. So M1 was one of the first brokerage firms to support, enable, innovated on fractional shares. And the whole thing there is we are removing the idea of share count, and you can think in terms of percentage of your portfolio or dollars into a security or investment.

Brian Barnes (16:25):

And so it doesn’t matter if something trades at $842 a share and you want to buy $28 of it. We abstract all of that away, and you can just deploy dollars and money into it, and it goes into the investments in exact proportion to what you want. And batching was a way that we could aggregate people’s orders, go and place it on the exchange because we have to interact with the exchanges and whole shares, bring it back into the account and sort of divvy it up after the fact. And it allows us to sort of say, “We can give you any dollar amount down to the penny of any security.”

Brian Barnes (16:55):

And so the batching allowed us to do that. And so we trade in the morning and the afternoon, and enact anything that people can of queue up. “Hey, I want to deposit,” “Hey, I want to rebalance,” “Hey, I want to change my portfolio and I want to add this security.” That all gets queued up and then we’re going to execute it one of two times per day.

Clay Finck (17:13):

Now, your platform is built for that long-term investor but many newer investors can get caught up in these high cycles of high growth, high flyers that seem to never quit going up. I’m curious what your thoughts are on how newer investors can keep themselves from getting burned in these types of scenarios?

Brian Barnes (17:36):

That thing is you get burned once and you’re less likely to get burned again. So there’s actually probably a small benefit of touching the hot stove once but the biggest thing in investing is zooming out, taking a longer-term time horizon and of doing the fundamentals, maintain a diversified portfolio. Sort of the, don’t put all your eggs in one basket and systematically investing over long periods of time.

Brian Barnes (17:58):

Most people don’t have a huge slug of money that they’re investing once. They have incremental capital that comes with their paycheck every two weeks, every month, whatever it may be. And they want to save off a portion, either for retirement, a home, a car, a big purchase, whatever it may be that they’re in, or even just paying an amount, saving for the long-term so I have a nest egg, so I can have more financial freedom and flexibility.

Brian Barnes (18:19):

And so for us, it’s really about every two weeks habitually saying, “I’m going to invest $500 and it’s just going to go to work in this diversified portfolio.” And the way that M1 works is you’re setting a percentage allocation. So you might want 5% in that super high growth tech startup. If that gets to 10% of your portfolio, it gets less money as you contribute. And so it’s this sort of forcing function and if it drops down to 2%, as more money comes in, it gets directed towards that slice of your pie and adds more incremental capital.

Brian Barnes (18:52):

And so it’s a forcing function of, as things become relatively less expensive, you deploy more money into it. And as things become more expensive, you deploy less money into it. And a little bit of, as things run up in value and get more expensive, you can rebalance, you can bring your risk proportion back into the sort of target allocation that you’re looking for. And it really gets into this notion of most people think like, hey, if something has gone up, it should continue to go up. And we’re trying to more say that you’re buying the same thing. You’re buying a share of the security, you’re buying ownership. If it is less expensive, it is actually less risky. If it is more expensive, it is riskier.

Brian Barnes (19:30):

And so if you’re buying the exact same thing, you would obviously want to pay less for it. And so this is an automated fashion of, as things become relatively less expensive, you buy more. As things become relatively more expensive, you buy less of it.

Clay Finck (19:42):

Yeah. I really like that. You’re automating a way your emotions and that when things go down, you’re allocating more towards that. When things go up, you’re automatically adding less to that investment. Another popular topic is inflation. Not only are things getting more expensive at the grocery store and at the gas stations, but stock portfolios and just the prices of many assets are down as well. Do you have a lot of people reaching out, asking about inflation hedges? And if so, what do you tell them?

Brian Barnes (20:14):

We do. It’s the topic du jour. Every headline right now is inflation prices. What’s going to happen? What’s the fed going to do to respond? And so it’s definitely taken over a hold in sort of the market commentary. I do think it’s been interesting of traditional inflation hedges like gold haven’t sort of born out, at least in the short-term. And so I think the unfortunate thing in investing is there’s no such thing as a sure thing, and so it doesn’t matter if it worked in the 1970s. It may not work in 2022. The world’s changed, people’s perspective change.

Brian Barnes (20:44):

I do think if you zoom out, assets that produce things have hundreds of years of history of appreciating in value. And when you’re buying stock ownership in a company, every single person at that company is working to make that company more valuable day in and day out. And so it’s not easy to do. It’s a complicated, hard world, but the reason to buy productive assets is the actual underlying value of that productive assets can increase in value due to the intrinsic worth or the cash flows that they generate, or the substance that they build increasing over long periods of time.

Brian Barnes (21:17):

And so for me, my advice is the best inflation head just to buy productive assets. It may not work three months from now. It may not work six months from now, 10 years. I have to be cautious of any guarantee, but my guess is you’re going to be significantly better off. And so that is the ethos that we take of, man, is it hard to predict what’s going to happen in three months.

Brian Barnes (21:36):

I can predict with very high degree of confidence that the stock market productive assets will be worth more in 10 years, and I think it’ll be worth significantly more than cash in a savings account or cash tied to an inflation adjusted number. It will outpace inflation over long periods of time because that’s sort of the nature of markets in the economy and productive assets and people working hard to generate things that appreciate value over just cash and what inflation does.

Clay Finck (22:04):

I mentioned people reaching out to you about inflation and I’m sure the same thing goes with cryptocurrencies, and you mentioned productive assets. Most cryptocurrencies that I know of are not productive assets. So I’m curious what your view is on this asset class and how it plays into M1 Finance’s vision?

Brian Barnes (22:24):

Yeah. So there are companies that generate things. There are also stores of value and so cash doesn’t produce anything. You still need cash to pay at the grocery store. So cash is not without its value. It is extremely valuable, but it’s extremely valuable day to day, month to month. I would not advocate people hold cash for 20 years. I think inflation, I think, is more guaranteed to decrease cash than putting it in productive assets would to not match the inflation rate.

Brian Barnes (22:50):

I think cryptocurrency, it’s a huge asset class now. There are ones that have utility in different protocols and the like, and then there are ones that are solely for the store value and they are trying to do the digital goal. And so people buy gold, people have the preference. They can choose whether to, they can choose not to. Gold’s going to do what gold’s going to do, and it’s going to be a meaningful asset class in the global economy, regardless of how anyone specifically feels about whether people should buy gold or not.

Brian Barnes (23:18):

For crypto, in… I think it’s what? 12, 13 years old, it’s gone from a $0 asset class to a $3 trillion asset class, back to a $1 trillion asset class. So I think it’s volatile. That’s a lot of movement in a short amount of time, but a trillion dollar asset class is absolutely nothing to scoff at. And so we are launching a crypto product. It’s in the exact same vein as our investing product of it is not trading crypto. It is not buy and sell 15 times a day. It is maintaining a portfolio of crypto assets.

Brian Barnes (23:48):

And so we announce that, we have a beta list signed up in the coming weeks. We’ll start giving it out to people, but it’ll be in the exact same mechanism of if you want to own crypto as an asset class, that is the choice that any individual should be able to make. You should deploy your dollars in what you know, what you understand, what you feel confident in, and you sort of systematically do it over long periods of time. And we are opening up that affordance to all of our user base shortly.

Clay Finck (24:14):

That’s pretty exciting, you’re getting into crypto. I’m just thinking about all the areas you’re touching as a platform. We’re going to be diving into FinTech, but I think about what you have. You have your invest feature, you have your borrow feature, you have a checking account, you have credit and debit cards, now crypto among other things as well. I’m curious what you’re maybe most excited about with what’s to come for your platform in the future?

Brian Barnes (24:44):

Yeah. So you mentioned the checking account, the debit card, the credit card. We bucket that under M1 Spend as our category. And when I started M1, a lot of it was people view their checking account differently than their savings account differently, than their brokerage account. And they might have it with nine different companies and they move in and then they have their loan with another company. And at the end of the day, it’s your money, it’s your finances. And you need to manage your money, your finances, and there’s actually benefit for the customer for bringing it all on one platform, of just simplification. You don’t have a finance folder on your phone with 15 different apps and you have to move your money and wait for the delays, and all that stuff.

Brian Barnes (25:18):

And then the financial firm can actually do interesting things when everything’s on one platform, and we talked about it with that invest-borrow dichotomy of, if you invest with us, we can let you borrow for cheaper. And so if you use your checking account and credit card and debit card through us, we’ll have more information. And so we can better underwrite you for other forms of borrowing. And so we can likely give you a lower interest rate on other loans that we do in the future.

Brian Barnes (25:40):

And so for us, we view ourselves much more as holistic, financial management, wealth management, wealth building. In the legal mind, there’s a difference between a checking account or a brokerage account. In the customer’s mind, it’s like, “I need to be able to spend my money. I need to be able to invest my money. I need to be able to borrow money and I need to go to a regulated entity to do that because that’s the way that we’ve set things up.” And so for us, we’re trying to say, “Hey, it’s a platform. You can do all of your money management and we’re trying to bucket everything together and really create an ecosystem or platform so that we can offer things that you can’t put together with point solutions out there.”

Brian Barnes (26:10):

In terms of what I’m excited about, we built a lot of innovative things in each one of those verticals, invest, borrow, spend. We have a lot of automated functionality and so you can set up rules of, “I never want more than this amount of cash. If I do, spill it over, first pay off my borrow balance. Once that’s paid off, go into my IRA. Once that gets maxed up, go to my investment account.” And so it really lets you set up a personalized automated plan.

Brian Barnes (26:33):

I think what I’m excited about is going deeper in each one of those verticals. And so in invest, going deeper, adding asset classes of crypto. We would love to add asset classes of alternative investments, whether it’s private equity, venture capital, real estate, other forms of investments that people may have. Borrow, we have that portfolio line of credit. We would ideally like to offer any form of borrowing that someone can do. And so line up, here’s your lowest cost against your liquid assets. Here’s your next highest cost against your hard assets, and here’s your cost on an unsecured basis, and a little bit of a dollar is a dollar, borrow how you need and we’ll sort of optimize it in the background to give you the lowest cost and most flexible terms.

Brian Barnes (27:09):

And then spend stuff, there’s a lot we can do on. We provide the checking account, the debit card, the credit card, but really advanced analytics and functionality on to inform if you want to save money, where can you pair back? How much should you be saving? Are you making the income relative to your age and education level and job title? And so when you digitize everything, you can provide a lot of analytics and suggestions and things like that. So vast personalization at scale and going deeper in each one of the verticals is what I’m excited about.

Clay Finck (27:40):

You’re touching on the data aspect and when I think about the FinTech industry in general, I think of Square and Cash App, and what they have going on there. And I think of many of the things they’re doing is something you’re doing as well, where you’re offering a number of services within your company and then improving the customer experience because they’re entrenched in your platform with all these different areas, and combining all that data together into one.

Clay Finck (28:09):

Maybe you could talk about the FinTech industry in general and what you see changing overall within the industry as well?

Brian Barnes (28:18):

We look up to Square and Cash App, I guess is now the… but what they’ve done is fantastic. And I think they’re a great example of 10 years ago, you would have fantastic consumer applications outside of finance, and then the finance apps felt like they were designed in the 1995. Square and Cash App, it’s as good as any consumer application. And so it’s sort of saying, there is no reason why these experiences need to be subpar relative to what you can experience outside of finance. And so I think that they’ve done a fantastic job in that and that they’re similarly doing ecosystem of, “Hey, you can do a lot of different things on the platform.”

Brian Barnes (28:52):

I think on financial services or FinTech, it is the [inaudible 00:28:56] of the two words, financial services and technology. And it’s really saying too much of finance is still driven by people in suits going to fancy offices with big mahogany wood chairs and tables, and things like that. And that is very expensive to replicate and scale. And when you do that, you can’t cost effectively serve people under a certain amount of money.

Brian Barnes (29:20):

An individual sitting you down at the table to educate that individual so that they can act on behalf of the firm to speak with the people and adapt, that is a very expensive proposition. You have a salary associated with that. So you really do have to have a cutoff and you say, “We can’t do this unless you have a million bucks, 3 million bucks.” It’s just not available to people that have smaller sums of money.

Brian Barnes (29:41):

And truthfully, the people who have the shopping mall advisor who sits you down, they’re not the creme de la creme of people with finances in terms of advising you. And so the benefit to software is you can perfect it once. And then it’s in essence, free to distribute. And so you can say, what does that well educated person in a suit that makes a lot of money, what do they offer that person? How can you productize that? And once you productize it, one, it’s expensive to do. It’s a lot more expensive than that one individual, but then you can open it up to hundreds of thousands, millions, tens of millions of people, and you’re going to have server bills, but it doesn’t cost much more than that.

Brian Barnes (30:18):

And so you can really bring down the cost dramatically, pass those savings on to the customer, not charge as much, as well as open it up to more people. And so I think that’s the nature of FinTech, is you’re providing financial services. You’re not reinventing… I guess crypto may be saying that they’re reinventing money, but investing is investing, borrowing is borrowing, spending is spending. You’re just enabling it in a much better fashion, utilizing technology to do it.

Brian Barnes (30:41):

I do think there are two different veins of how FinTech companies operate. One is to do it for trying to say, “Hey, we want to offer seamless money management to 90% of the US population.” I think there’s another that says, “Hey, how do we bring the tools that are available to the ultra wealthy sort of down one wealth level.” And I think both of those need to happen for, and it really just means every single person is getting better tools, better pricing, more optionality, more functionality, and just improving the overall experience people have with their finances.

Clay Finck (31:18):

Another headline that kind of caught my attention was you actually purchased a bank that has been around for 119 years. What led you to making this acquisition yourself?

Brian Barnes (31:30):

I, through M1 and other vehicles want to create the next generation financial services. And it’s sort the 2020 version of Schwab, that Schwab talked about 1970s, better product, better pricing, compounded into behemoth. We think that we can offer better product, better pricing and compounded into a large financial institution as well. Just the way that regulated entities work to offer stocks, ETFs, borrow against your investment portfolio, you have to be a broker dealer, and to offer banking products, which is payments, deposit accounts, loan products, it’s bank.

Brian Barnes (32:01):

There is a way to sort of ride on the top of other partner banks but you’re always subject to their rules, their regulation, their technology, and it becomes a little difficult to move quickly, scale fast and the like. So I purchased this teeny tiny little bank up in Northern Minnesota. I went and visited in January, as negative 30 degrees, and it was maintained the operation as it exists up in Northern Minnesota. It has two branches and banks the small community up there. We’re investing behind it. We’re giving them new logos and new branding and more technology.

Brian Barnes (32:31):

They’re the one bank in town with an iPad now to fill out your mortgage. And so doing things there but a lot of it was to build digital infrastructure to support the underpinnings of banking, that at the end of the day, you’re only as good as the infrastructure allows for. And most of financial services, you’re going to hit some pretty archaic databases, mainframes and the like, and it just slows everything down.

Brian Barnes (32:53):

And so a lot of the purchase of the bank was enabled to support M1 launching more banking products. And I did it as an individual due to some regulatory reasons, but building all the technology there, such that M1 and other FinTechs can utilize the infrastructure, utilize the new technology to support banking products, and really enhance the M1 experience as well as just enhance the tools and options that are available to other companies that want to launch banking related products.

Clay Finck (33:20):

I believe M1 has a few 100 employees. You guys have scaled up pretty rapidly. I’m curious, you’re based out of the Chicago area and I believe you guys have an office there. How have you adjusted to post-pandemic life of people wanting to work remote? At the same time, wanting to make sure employees are productive and you’re hitting your targets? And I guess just how did you approach that post-pandemic life of remote work and having an office as well?

Brian Barnes (33:51):

Yeah, so pre-pandemic, M1 was 40 people, and we scaled to about 300. So most of our hiring, most of our onboarding, most of the people that we brought into the firm happened during this pandemic era. And so we have the DNA of a remote culture, almost just by the circumstances of the world that we lived in at the time. And so we’re Chicago based, about two-thirds of our employees are still based in Chicago or Chicagoland area. We do hire nationwide now, and so we have the DNA of a hybrid work environment, can support remote employees.

Brian Barnes (34:23):

And by virtue of that, you get really good at managing remote stuff. So we are better at documenting onboarding. We’re better at doing remote training of the job, better at doing social events over remote stuff. And so we had to do that over from 2020 to 2022 and that has really just continued. We still have space for 250 people in Chicago, and so we offer a very flexible hybrid environment of most teams still do see benefits of getting face-to-face interaction, having social interaction.

Brian Barnes (34:53):

They just don’t need to commute five days a week. They can get that one or two days a week and then be able to save 30 minutes on each side of their workday through the commute, better handle family life and the like. So we have in this post-pandemic, if we can say that, who knows if it’s actually over, we support a very hybrid culture of being able to try to get the best of both worlds. And they’re pros and cons to everything, we’re giving up little here and there, but we think it’s a right blend of people can still interact in person. They can still get that face-to-face interaction. They can still develop relationships that are probably harder to do over Zoom than face-to-face.

Brian Barnes (35:33):

But then they also have a lot of flexibility of, they don’t have to waste unnecessary time in their commute. They can still participate in social events over the internet. They don’t have to fly somewhere to take a small meeting and deal with jet lag and travel, and losing your bags and stuff like that. So we try to have the affordance of both and try to take the best aspects of both, while minimizing the worst aspects of either.

Clay Finck (35:57):

Like I said in the beginning, it’s pretty surreal getting to be able to talk to you as fast as M1 has scaled and the assets you guys have on your platform. And it’s almost a corny question and I think of what sort of struggles or how you came around to being as successful as you are in building M1?

Clay Finck (36:14):

I’d imagine that hiring the right people to build out all these fantastic products on your platform is something that’s really key to your success. I’m curious, what other maybe tips or big things you’ve learned along the way that you’d like to share?

Brian Barnes (36:29):

Entrepreneurship is an interesting thing that started the company, what would it be? Almost seven years ago now. The best line, and I don’t know who said it, but I co-opted is, “The highs are high, the lows are low, and they’re 10 minutes apart.” And there are times where you think you’re taking over the world, you’re successful. You’re patting yourself on the back and then something goes wrong. And you’re like, “Why did I do this? I had a stable job, could have made more money elsewhere. I’m such a failure. This is going to be really embarrassing.”

Brian Barnes (36:52):

And so I think that’s the nature of the journey. And so you do have to have a little bit of stomach for wild swings, ambiguity, uncertain on the future. And a little bit like you’re going into a vast unknown, and you have to know that that’s happening and do the best of it. And a little bit of we’re David versus Goliath. We’re trying to say, “Hey, with the small team and really strong design people, technologists, engineers, we can build something that can take on the giants of the Schwab, the Fidelity because there are too slow and archaic, and dealing with old mainframes and just can’t innovate as fast.”

Brian Barnes (37:24):

You hit it. The people that you bring on are everything. None of this can happen in solo efforts. M1, when we were six people, I could keep it all in my head. When we’re now 300, it’s not a chance in the world that you can keep everything that’s going on. And so every single person that you bring on is another stamp or grooving in of the culture that you’re going to develop. I was super fortunate for the early team, many of which are still with the company. They bring on additional great people. Those great people bring on additional great people.

Brian Barnes (37:53):

And so it really is the spreading network effects of the individuals that you bring on at the company, that the company is nothing more than the individuals at it, working on a shared problem. And so there’s a lot of nuance of how to do certain things and make decisions in life, but it really does come down to people, find people that you respect, think highly of, there’s this sort of thing, hire people you would be happy to work for.

Brian Barnes (38:15):

And I do think just maintaining a very high bar on the individuals that join you on the journey because they’re going to go through the ups and downs as well. And so they have to be committed to the mission, the purpose, the value. They’re all talented individuals that could get jobs elsewhere. And so you really have to find talented people, sort of lock arms and be crusaders together for a common mission.

Clay Finck (38:36):

One more question that just came to mind.

Brian Barnes (38:38):


Clay Finck (38:38):

I really enjoy listening to one of our other host’s episodes, Preston Pysh. He’s talking about the macro environment quite a bit. And one of his recent episodes, they mentioned at the beginning, how in the world is someone conducting business in this environment? Just with the swings we see and call it interest rates, inflation and all the things happening on that front. In 2021, it might have been super easy for a company to raise money at, if they’re taking on a loan, maybe it’s super low rate. Whereas this year, you see layoffs at a lot of these tech companies. It’s probably a lot more difficult to raise money.

Clay Finck (39:14):

How has M1 Finance sort of weathered through this? And maybe you could speak to what it’s been like being a business owner in this, what seems to be a pretty crazy environment?

Brian Barnes (39:25):

Yeah. It’s been crazy to say the least. I think the tough thing is any business that’s successful is going to operate over long periods of time, and it’s something that within those long periods of time, the business cycle, the hype cycle, you’re going to have booms, you’re going to have bus, you’re going to have things go your way. You’re going to have things go against you. And so it is sort of the tailwinds, headwinds perspective.

Brian Barnes (39:51):

Last two years, 2020 and 2021, massive tailwinds at our back. It was despite COVID, high level of interest in retail investing, low interest rates, tech valuations were high, fundraising was interesting. People were coming after FinTech companies. And so we benefited at what was happening in the background. And I think the last six months, everything turned into a pretty significant headwind.

Brian Barnes (40:14):

I think how you operate in that is you have to be adaptive and dynamic that you can’t… I am probably too long-term oriented of are you putting the building blocks in place? Are you planting the seeds now that bear fruit meaningfully down the road? But there are like you have to survive and thrive day to day, week to week, month to month. And so you have to be responsive, adaptive to the situation that you’re in. And as time goes on, you learn more things. You’re pointing the ship in a direction and you might learn things now that you didn’t know six months ago, a year from now. And you’re always sort of fine-tuning and optimizing the machine.

Brian Barnes (40:47):

But I also do think there is a benefit of zooming out and saying, a company does have to operate through significant cycles. It needs to deliver value in good times and bad. It takes a long time to develop and productize and optimize, and scale things of value and consequence. And so a little bit of you’re reacting day to day, but you’re also thinking like, are we planting enough seeds that may take three, four, five years to bear fruit? But when they do, the bounty is full.

Brian Barnes (41:17):

And so I think it’s constantly being able to have both of those perspectives in play of short-term with long-term optimization.

Clay Finck (41:25):

Thank you for that, Brian. And thank you for joining me on the show. This was a really fun conversation. Really appreciate it of you hopping on to chat with me. Before we close it out, I want to give you the handoff to where people can connect with you and M1 Finance, and whatever else you’d like to share?

Brian Barnes (41:43):

Yeah. I appreciate you inviting me on the show. It was a lot of fun. We should do it again. M1, so it’s M1.com, letter M, number 1.com is our website. You could find us on Apple App Store, Google Play Store. We’re on all the social media profiles. M1 is more active on all those profiles than me. So you can follow me on Twitter, but I think I have three tweets, so no use in sharing that.

Clay Finck (42:05):

Awesome. I’ll be sure to link all that in the show notes. Thanks, Brian.

Brian Barnes (42:09):

Yeah. Thanks for having me.

Clay Finck (42:11):

All right. I hope you enjoyed today’s episode. Please go ahead and follow us on your favorite podcast app, so you can get these episodes delivered automatically. If you’ve been enjoying the podcast, we would really appreciate it if you left us a rating or review on the podcast app you’re on. This will really help us in the search algorithm so others can discover the show as well. And if you haven’t already done so, be sure to check out our website, theinvestorspodcast.com. There you’ll find all of our episodes, some educational resources, as well as our TIP finance tool that Robert and I use to manage our own stock portfolios. And with that, we’ll see you again next time.

Outro (42:47):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.


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