Aging, Cognitive decline, financial management and

financial decision-making:

Peter A. Lichtenberg, Ph.D, ABPP

Director, IOG and Professor of Psychology
Wayne State University Institute of Gerontology, Detroit, MI
 Overview of session
• Cognitive Aging Primer
• Cognitive Aging and Financial Management
• Cognitive decline, dementia and financial management
• Financial Decision-Making, what it is and how it relates to financial
exploitation
Vol. 17, No.1, pp. 1-6
 Cognitively healthy older adults and those
with cognitive decline
• Given cognitive aging why do 95% of older adults manage debt, pay
bills and maintain good credit just as well as 50 year olds?

Ans: Crystallized Intelligence (for those who have been managing

finances for years).

For those taking over finances—it becomes a fluid intelligence task and
not as solid in managing finances.
 Now the scary part of the financial story
• Angrisani & Lee, 2019
• Health and Retirement study—longitudinal data

• Decrements in wealth linked to diagnosis of Alzheimer’s

• 61% of sample with decrements had cognitive decline but remained

untreated/diagnosed
 “Chance favors the prepared mind.”

• Neurosyphillis • “August D”
− Delusions all
• Worked with Nissl the time
and Kraepelin − Memory
impairment
constant (vs.
intermittent)
1. Meet criteria for dementia
2. Insidious onset
3. Clear-cut history of worsening cognition
4. Variety of presentations; amnestic most
common, language (word finding), executive
dysfunction
 Consumer Finance Protection Bureau (CFPB)
Suspicious Activity Reports (SARs) 2019
• Reports from Financial Institutions: Deposit Institutions (Banks, Credit
Unions) and Money Services Businesses (e.g. Moneygram, Western
Union)
• SAR reports quadrupled between 2013 (1300/month) and 2017
(5700/month)
• 2017 losses connected to SARs $1.7 Billion in 2017
• 80% SARs loss to an older adult; Mean loss $34,000; 7% $100K+
• 69% 60yo+
• 56% 70yo+
• 33% 80yo+
 Comparison of FE characteristics between
MSB and DI Institutions

- Money Services Businesses (MSB) - Deposit Institutions (DI)

- 69% Stranger Scams - 27% Stranger Scams
- Romance, Relative in Need, Lottery - 67% knew Suspect

- Overall: 51% Stranger; 36% Known person (70% family; 19% Fiduciary)
- Biggest losses—Fiduciary Average loss $83,600
Marson Financial Capacity Domains
1) Basic Monetary Skills
2) Financial Conceptual Knowledge
3) Cash Transactions
4) Checkbook Management
5) Bank Statement Management
6) Financial Judgment
7) Bill Payment
8) Knowledge of Assets/Estate
Arrangements
 Danial C.
Marson
Tabel 6.
Capacity Outcomes
On FCI-6
Domains for AD
Patient
Subgroup
 Limits of Marson et al. Approach

1. Overly cognitive—decision making is influenced

by many other factors

2. Hypothetical financial judgments– little relevance

to older adult’s experience may over-emphasize
deficits

Shivapour et al. 2012

“Critical that instruments be tailored to specific decisions”
New Approach to Conceptualization and Measurement
of Financial Decision Making

The Lichtenberg
Financial Decision Rating Scale
(LFDRS)
Groundbreaking Work of Applebaum and Grisso 1988
of Financial Decision Making
• Originally for capacity for psychiatric treatment
and guardianship, then health decisions
• ID 4 aspects of decision making: Communicating
1. Choice
2. Understanding
3. Appreciation
4. Reasoning
 Using Person-Centered Principles
for Financial Capacity

• People are more than the sum of their cognitive abilities:

Context and psychological vulnerability are key aspects too

• Traditional approaches overemphasize deficits and

under-emphasize strengths: Hypothetical Vignettes
over-emphasize deficits

• Subjective experience of PWD remains important:

Analyzing the actual decision is critical
 Case Study #2 :
Romance Inheritance Scam
• 82-year-old divorced retiree — net worth $12M — mostly in properties
• Gets tangled in romance scams with “2 different women who want to marry him”
• Inheritance Twist: The women need to marry and go to Ireland to receive “their
$15M estate” because
“in their culture only married women can receive inheritance.” Need attorney and
other fees
• Sends several hundred thousand to “the attorneys”
• Drives 1000 miles to look for one of the “wives”
• I’m called in to do an evaluation
 Case Study cont.

• Impact: Failure to pay taxes—about to be foreclosed on,

rotted food in fridge, not sleeping, eating, getting calls
round the clock
• Neurocognitive: Exceptionally smart, high functioning
with executive deficits and paranoia.
• Despite intervention by bank,and FBI, he still believes
the women exist and this is a legit enterprise
• States: “I am worth several million so let me spend the
money the way I want.”
 LFDRS-SF (FVA) Highlights
Q4 What is your primary financial goal for this decision? Lifestyle (no monetary goal; meet a need or desire)
• Do you agree with the respondent's answer? No
• Please select what you feel the correct response to be Earn money (or retain value of investment)
• Please provide input on why you do not agree He wants control of his money so that he can continue to
pursue romance/inheritance
Q5 How will this decision impact you now and over time?
• Improve financial position
• Do you agree with the respondent's answer? No
• Please select what you feel the correct response to be Negative impact/debt
• Please provide input on why you do not agree Already a history of losing money
Q6 How much risk is there to your financial well-being? Low risk or none
• Do you agree with the respondent's answer? No
• Please select what you feel the correct response to be High risk

-continued-
 LFDRS-SF (FVA) Highlights cont.
Q18 How often do your monthly expenses exceed your regular monthly income? Some of the time
• Notes: Last several months during the scam
Q26 How worried are you that someone will take away your financial freedom? Very worried
Q28 As you have grown older, has a relationship with a family member or friend become strained
due to finances? Yes
• Q28 If YES, how strained?
You terminated contact with this person due to problems
Q34 How likely is it that someone now wants to take or use your money without your permission?
Very likely
LFDSS Questions 1-3
LFDSS Questions 4-6
LFDSS Questions 7-10
 CFA Items For Financial Awareness Subscale
ITEM DESCRIPTION

#2 How worried are you about having enough money to pay for things?

#3 Overall, how satisfied are you with your finances?

#5 How satisfied are you with this money management arrangement?

#6 How confident are you in making big financial decisions?

#7b How often do you worry about financial decisions you’verecently made?

#13 How often do your expenses exceed your regular monthly income?

#15 Change in finances since you've gotten older in terms of seeking advice?
Financial Awareness as Contextual Factor
(n=200)
• 58% somewhat or very worried about having
enough money to pay for things
• 29% unsure or not confident about making big
financial decisions
• 28.5% worried about financial decisions they
recently made
• 45% financially helping someone
 CFA for Psychosocial Vulnerability Subscale
ITEM DESCRIPTION
#20 How often do you wish that you had someone to talk to about finances?
#21 How often do you feel anxious about financial decisions?
#24 How often do you feel downhearted?
#25b Has memory loss interfered with your everyday financial activities?
#25c Has a physician or other healthcare professional evaluated your memory?
#28 How often are you treated with less respect re to finances
#29 How fearful are you that someone will take away your financial freedom?

#30 How often do you feel relieved when talking about finances because you were lonely?
Psychological Vulnerability as Contextual Factor
(n=200)
• 41% wish they had someone to talk to about finances
• 38.5% anxious about own finances
• 35% lost confidante in past 2 years
• 42.5% downhearted or blue about finances
• 35% state treated with less respect around financial
transactions
• 14.5% rate self as having poorer memory, thinking skills
than 1 year ago
CFA for Susceptibility (Influence and FE) Subscale

ITEM DESCRIPTION

#52 Has a relationship with a family member/friend become strained due to

finances as you have grown older?

#53 How often has a person talked you into a decision to spend money?

#55 Did anyone ever tell you that someone else you know wants to take
your money?

#57 Have you had any conflicts with anyone about the way you spend money?

#60 Has anyone used or taken your money without your permission?

#61 How likely is it that anyone now wants to take or use your money without
your permission?
 Susceptibility Subscale

• 30% had a relationship changed due to finances

• 19% been talked into purchase originally did not want
• 16% conflicts about money
• 20% had money taken: half of which were large amounts
• 7.5% worried that someone wanted to take over their finances
 Takeaway messages
• Experience with finances protects financial management skills in
aging
• Cognitive decline is associated with wealth decrements before
diagnosis
• Financial decision making is often a key element to important
financial transactions
• Cognition, financial management, financial decision-making all play a
key role in financial exploitation