Automated Financial Management (AFM)

By Sterling Xie. Edited by Arjun Chandrasekar.


Technological growth recently has been remarkable. This growth has left its impact on the financial market with the newfound growth of the automated financial management system, a system of automated investment strategies that have been seen to outperform mutual fund and self-managed stock portfolios. 

Investment Perspective

Robo-advisors from automated financial management systems allow users to specify an investment type (whether it be long-term or short-term, more diversified or more specific, more or less risky, etc.) in order to create the best balance in portfolio development and management. In a study conducted by Michael Reher and Celine Sun of Harvard University, automated financial management systems lower the threshold for the initial investment into investment portfolios, thus increasing account flexibility and “disproportionately rais[ing] new account formation by less-wealthy investors”. Reher and Sun further note that AFMs are particularly impactful on increasing diversification in comparison to traditional portfolios. 

Business Perspective 

Businesses use automated financial management systems to streamline workflow and keep more accurate financial records. Digitizing financial management records creates a more dynamic timeline of a company’s financial records, allowing for more accurate and strategic decisions that are analytical of the past. AFM systems also forecast potential risks and suggested decisions in order to boost productivity, creating more efficiency and time for other, more pressing tasks. As such, McKinsey & Company in 2021 explains the automation of financial processes in businesses has gone up over 57% in the past three years. 

The Future of AFM

Automated financial management systems will likely be used widely by both private investors and businesses in order to boost efficiency and productivity as it allows for operations at a consistent pace and investment analysis at a constant pace. However, there are certain balances that need to be created in order to create the most effective financial system. According to Beth F. Kaplan and David Cutbill of Deloitte, “in order to elevate its role as a more strategic business partner, finance will need to balance human and machine-based competencies,” training tomorrow’s professionals to be competent in the analysis of machine-created data, effectively eliminating the need for human resources in data collection.


Automated financial management systems are critical to the growth of our economies and investment portfolios today. Although they are not yet widely accepted in most companies and personal portfolios, they certainly play a key role in determining what our future looks like. AFM systems are likely going to replace low-level analysts in portfolio creating as a result of their ability to efficiently and constantly produce metadata for data analysis. 

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