​Next tech: The Internet of Things

Sensors embedded through the environment will create the Internet of Things—how will the financial services be affected?

​Next tech: The Internet of Things
It is said every seven years the economy needs to create another new industry to maintain economic growth and put new young employees just coming into the economy to work For a couple of cycles the economic growth has come from digital technologies. In the late 1990s it was the dot-com boom as desktop computers were networked. Then came the social media-digital 2.0 boom as handheld devices emerged. Now comes the third wave of the net revolution, the so-called Internet of Things. 

The dream of the tech utopians has always been the creation of an all-pervasive, digitized networked economy. The dream is as old as computing. But the idea that all the "things" out there--the cars, washing machines and alarm systems--could all be worked into the networked economy seems finally to be coming to fruition.  A report out from PriceWaterhouseCoopers this week suggests in companies have embarked on a gradual but massive adoption of technology, including sensors to collect wireless data, that will shift the way we all live and work.

"From refrigerators to parking spaces to houses, the Internet of Things is bringing billions of things into the digital fold, which will make the 'IofT' a multi-trillion dollar industry by 2020," PwC says in its report. Twenty-twenty is only six years into the future. The Internet of Things is rapidly coming to be. 

Twenty percent of companies are investigating such devices according to PwC. So get ready for sensors in everything from the garden to the car. Heart monitoring implants, biochip transponders on farm animals, automobiles with built-in sensors, field operation devices that assist fire-fighters in search and rescue, drivers paying for parking and gas right from the car. Almost thirty billion devices will be hooked into the Internet of Things by 2020.

Does any of this matter for an advisors practice? Maybe. Smart meters in the home will provide opportunities for advisors to help clients save money on everyday bills. For boomers that are lite on retirement savings, penny-pinching is going to be key to maintaining a tolerable retirement. But there may be some bigger shifts coming to the financial services as a result of the Internet of Things.

The Technology Policy group of the Financial Services Roundtable in the United States published an August 2014 report talking about the changes coming to the insurance industry. According to the report, property and casualty insurance could shift from a "reimbursement" model toy a "prevention and loss control" model, where rates and costs are managed through the smart monitoring of homes and property to prevent loss before it occurs. The overall picture of risk in the environment will become clearer as monitoring devices through the system are networked. Monitoring drivers in the car will lead to lower insurance rates. Clients that only drive a bit might end up buying 10,000 miles worth of insurance, the actual consumption of such servies able to be precisely monitored.