Older adults can be vulnerable to financial abuse as their cognitive capacity declines. Poor judgment on money matters is hardly confined to one age group, of course. But a line is crossed when manipulative acquaintances, family members, or complete strangers compromise a senior’s own decision-making acumen.
The U.S. Department of Justice has long targeted elder financial abuse. A significant barrier to identification of such abuse has been difficulty distinguishing older adults’ authentic — even if at times regrettable — financial decision-making from incidents of manipulation by others.
To help separate cases of abuse from the exercise of seniors’ authentic judgment, researchers are crafting social science tools to quantify an individual’s capacity for financial judgment. Establishing a baseline of a senior’s own cognitive capacity can enable justice system actors, clinicians, and social service providers to pin down, and then act upon, cases of financial abuse of the elderly. An NIJ-sponsored study led by Peter A. Lichtenberg, a psychology professor at Wayne State University (MI) and an expert in geriatric neuropsychology, has refined and evaluated three tools he developed to measure seniors’ financial judgment:
- A financial decision rating scale — a measure of decision-making capacity assessing an individual senior’s actual financial decisions. Expanding on a framework first developed by Lichtenberg’s research team, the comprehensive rating scale consists of 68 items informing financial decision-making.
- A financial decision screening scale — a tool to help intervening agencies and fiduciaries assess an individual’s financial decisional capacity and prevent exploitation.
- A rating scale for friends and family members — a means to learn from those close to a senior important factual details and impressions that enhance understanding of that person’s decision-making ability.
In the end, the research:
- Confirmed the comprehensive rating scale’s reliability and validated the conceptual model, finding that (as hypothesized) cognition is a predictor of financial risk — but with a caveat noting the rating scale’s inability to predict decision-making risk scores.
- Found that the screening scale had excellent internal consistency, supporting its use by service providers and advisors as a screening instrument in the field.
- Concluded that the friends and family rating scale “is a useful tool” for collecting data on an older adult’s ability to conduct a financial transaction, demonstrating adequate ability to detect the friend or family member’s concerns over financial exploitation. The findings are further discussed below.
Study Design and Data Analysis
To test the first of the three new tools, the Lichtenberg Financial Decision Rating Scale, the researchers interviewed a sample of 200 older adults who were in the process of making a significant financial decision or had made one in the preceding six months. Nearly three quarters of the sample were females (74%), with slightly more than half (52%) Black and slightly less (48%) non-Hispanic white. The minimum participant age was 60 and the mean age was 77.
Participants took part in interviews and in cognitive and financial testing sessions, with financial decisions in four categories deemed significant: (1) investment planning, (2) estate planning, (3) major purchases, and (4) gift giving.
To assess the second tool, the Lichtenberg Financial Decision Screening Scale, the researchers trained adult protective service workers, attorneys, and financial services professionals to deploy the 10-item scale with 213 participants. The mean age of participants was 77 and the majority (56.8%) were female.
To test the third tool, the Lichtenberg Financial Decision Rating Scale—Friends and Family, the Wayne State team recruited and gathered data from 150 “informants,” that is, informal caregivers of an older adult. Of the sample, 83% percent were female. The caregivers were 18 to 88 years old, with a mean age of 62.2. They cared for senior adults ranging in age from 60 to 95, with a mean age of 72.7. The mean number of years the informant had known the senior was 42.7 years.
Measuring the tools’ effectiveness entailed a “factor analysis” statistical method to reduce multifaceted subjective concepts to a number on a linear scale. The method can create analytical clarity in cases where the structure of the data analyzed lends itself to reduction of a large number of variables into a small number of factors that can be expressed on a line, a quality known as “unidimensionality.” The method thus crunches multidimensional data into linear (that is, easily measured and compared) data. An example of scaling would be a statistical process reducing “self-worth,” a psychological concept with a number of component layers and high complexity, to a linear — unidimensional — measure, ranging from low to high self-worth.
The Wayne State team’s factor analysis led to findings shaped by quantification of subjective factors informing the comprehensive rating scale and the screening scale.
With respect to the Lichtenberg Financial Decision Rating Scale (the comprehensive rating scale), the tool demonstrated utility in assessing psychometric properties, which are properties related to the measure of psychological factors. That utility, the researchers concluded, supported its broad use going forward for gauging the financial judgment of older adults. The team developed long and short forms of the rating scale for use by clinicians in assessing financial judgment. As noted, the researchers’ analysis of the utility of the Lichtenberg Financial Decision Rating Scale confirmed that a subject’s cognition was a good predictor of financial risk scores, but “[f]inancial management scores…were not predictive of decision-making risk scores.”
With respect to the Lichtenberg Financial Decision Screening Scale (the screening tool designed to help social service professionals, clinicians, attorneys, and others identify seniors at financial risk), the research found the tool is a reliable, valid instrument with excellent internal consistency and clinical utility properties.
With respect to the Lichtenberg Financial Decision Rating Scale—Friends and Family (the rating scale for evaluating information received from friends and family of seniors), the researchers concluded the scale is a useful tool for collecting informant information on a senior’s ability to make a major financial decision.
Fighting financial abuse of seniors often requires reliably separating cases of an individual’s own deteriorating judgment from cases of undue influence — not a simple task. Development of standard social science instruments that can assess, at baseline, seniors’ financial judgment can go a long way toward equipping social service providers and law enforcement agencies to identify and react to wrongful manipulation of seniors’ financial assets.
The NIJ-sponsored research on rating and screening tools developed by Wayne State University tends to confirm their value for addressing an insidious social ill targeting some of our most vulnerable citizens.