Measures of Financial Capacity: A Review

The WALLET Study: Financial Decision Making and Key Financial Behaviors Associated with Excess Spending

OBJECTIVES

The Wealth Accumulation and Losses in Later life Early Cognitive Transitions (WALLET) study data was used to examine correlates with excess spending in older adults who do and do not have early memory loss.

METHODS

The WALLET study collected detailed financial information from participants' primary checking account statements (n = 150). Information on participant sociodemographic, health, and disability status, memory functioning, financial decision-making, and financial literacy was also collected. Participants either had no memory problems or early memory loss. Bivariate and multiple regression analyses were conducted.

RESULTS

The early memory loss group had significantly higher excess spending than those with no memory loss. Financial decision-making and higher-risk financial behaviors were also linked to higher excess spending. Early memory loss was no longer statistically significant after accounting for financial stressors and resources.

CONCLUSIONS

The multidimensional nature of financial capacity assessment has long been known. The WALLET study data is unique, however, in that it demonstrates the links between excess spending with decision-making, early memory loss, and a set of specific financial behaviors.

CLINICAL IMPLICATIONS

Real-world assessments of financial management and financial decision-making yield important information about how older adults are managing money and making key financial decisions. Checking account reviews can be used to determine excess spending.

Mental capacity assessment in the multi-professional real world: a qualitative study of six areas of uncertainty

Background

The Mental Capacity Act 2005 of England and Wales is a ground-breaking piece of legislation with reach into healthcare, social care and legal settings. Professionals have needed to develop skills to assess mental capacity and handle malign influence, but it is unclear how assessments are implemented in real world settings. Our previously reported survey found professionals juggling competing resources in complex systems, often struggling to stay up to date with law.The current follow-up study uses one-to-one interviews of professionals to characterise in detail six areas of uncertainty faced when assessing mental capacity, whilst suggesting ways to make improvements.

Methods

Forty-four healthcare, social care and legal professionals were interviewed, using a semi-structured topic guide. Transcripts were analysed using framework analysis: a qualitative technique built to investigate healthcare policy.

Results

Our topic guide generated 21 themes. In relation to the six areas of uncertainty: 1) Many participants stressed the importance of capturing a holistic view, adding that their own profession was best-placed for this - although a medical diagnosis was often needed. 2) The presumption of capacity was a laudable aim, though not always easy to operationalise and occasionally being open to abuse. 3) There was cautious interest in psychometric testing, providing a cognitive context for decisions. 4) Undue influence was infrequent, but remained under-emphasised in training. 5) Multi-professional assessments were common, despite doubts about fitting these within local resources and the law. 6) Remote assessment was generally acceptable, if inadequate for identifying coercion.

Conclusions

Practical constraints and competing demands were reported by professionals working within real world systems. Assessment processes must be versatile, equally applicable in routine and emergency settings, across diverse decisional types, for both generalist and specialist assessors, and able to handle coercion. Recognising these challenges will guide development of best practices in assessment and associated policy.

Correlations between Dementia and Loneliness

This review describes associations between dementia and loneliness on the neurobiological and epidemiological levels according to the recent body of literature. The aim of this study was to highlight major lines of research in this field. Sociocognitive skills and social interactions present complex interdependencies with dementia which may be explained by two theories. According to the first one, not sufficiently engaging in social or cognitive activities results in brain atrophy. The second one claims that brain neurogenesis and synaptic density are being increased by social connections. The relationship between loneliness and dementia could be mediated by sensory loss, including hearing and visual impairment, as well as depression and psychotic symptoms. Loneliness itself might cause a depletion in sensory and cognitive stimulation which results in a decrease in neural reserve. Certain changes in the structures of the brain caused by loneliness were found in imaging examination. Loneliness appears to be a crucial risk factor for dementia in recent times due to the modern lifestyle and consequences of the outbreak of COVID-19. Additional studies are required to understand more completely the key tenets of this topic and therefore to improve the prevention and treatment of dementia.

Novel methods for assessment of vulnerability to financial exploitation (FE)

Financial exploitation (FE) is a complex problem influenced by many factors. This article introduces two novel methods for assessment of FE vulnerability: (1) performance-based measures of financial skills using web-based simulations of common financial tasks; (2) scam vulnerability measures based on credibility ratings of common scam scenarios. Older adults who were male, younger, Hispanic, more educated, with higher incomes performed better on the simulated financial tasks. Better performance was also related to higher cognitive function and numeracy, and more experience with technology. On the scenario-based measures, older adults who were male, younger, African American, less educated, and lower income showed higher FE vulnerability. Higher scam vulnerability was also related to poorer performance on the simulated financial tasks, lower cognitive function, less experience with technology, more financial conflict/anxiety, more impulsivity, and more stranger-initiated FE. Findings indicate that these novel measures show promise as valid indicators of vulnerability to FE.

Guardianship: A medicolegal review for clinicians

Guardianship may pose an ethical dilemma for physicians, who must balance protecting vulnerable patients from potential safety concerns with respecting their autonomy. Older adults with dementia are particularly susceptible to loss of independence and the ability to participate in medical decision making. To have the capacity for medical decision making, individuals must understand relevant information, appreciate their circumstances, demonstrate reasoning, and express a consistent choice free from coercion. Although capacity assessments are usually task-specific, geriatricians and other specialists may be asked to comment on capacity more globally. These determinations may be used to support a Petition for the Appointment of a Guardian of a Legally Incapacitated Adult, the legal process of pursuing guardianship in probate court. Assigned guardians may be known to the incapacitated individual (e.g., a family member or friend) or may be professional guardians with no prior relationship to the ward. Guardians are encouraged to use substituted decision-making, taking into account the ward's previously expressed values and preferences. Although a number of viable alternatives to guardianship exist, numerous systemic barriers may prevent these from being fully explored. The ongoing need for guardianship should be periodically revisited and reassessed. Data about guardians and wards is shockingly sparse, as there are no centralized databases. Laws and regulations for guardianships vary significantly between states. Physicians can serve as important allies and advocates for patients with cognitive impairment at risk of incapacity, can help preserve their autonomy for as long as possible, and ensure appropriate protections are in place if the patient does lose their decision-making ability.

Assessing numerical reasoning provides insight into financial literacy

Financial literacy is linked to financial well-being and decision making. While financial literacy and numeracy skills are strongly related, the relevance of different aspects of numeracy (mental arithmetic, math achievement, and numerical reasoning) for financial literacy has not yet been examined. Data were collected from 88 cognitively healthy adults, mean age = 50 years (SD = 15); mean education = 15 years (SD = 2); 61% females; with 56% Caucasian, 36% Black, and 90% non-Hispanic. Financial literacy was measured with the widely used Big Three scale, and numeracy was measured with the Wechsler Adult Intelligence Scale-III, Arithmetic subtest; the Wide Range Achievement Test-IV, Math Computation subtest; and the Weller's Abbreviated Numeracy Scale (WANS). Regressions analyses were conducted with financial literacy as the outcome variable and each numeracy measure along with demographics (age, sex, and education) as the predictors. In all the models, only the numeracy measures were significant as individual predictors, with numerical reasoning holding the strongest association with financial literacy, followed by mental arithmetic and math achievement. The current study supports the existing literature that numeracy is important for financial literacy, and provides empirical evidence for the specific contributions of individual numeracy measures that clinicians may use to garner impressions about financial skills.

The neglected contributions of self-efficacy to older adults’ financial capacity

Purpose

An ageing population comes with its own set of challenges such as impaired financial capacity and resultant dependency on others to manage financial affairs. Dependency, in turn, as the evidence suggests, creates opportunities for financial exploitation of older adults. Related studies have primarily examined the clinical features and correlates of financial capacity or have attempted to develop its multidimensional measures. Both of which do little to resolve issues associated with impaired financial capacity. This paper aims to make a case for future researchers to assess older adults’ financial capacity from a non-clinical aspect.

Design/methodology/approach

Drawing on the notion of self-efficacy, as encapsulated within the social cognitive theory, this paper presents evidence from a host of different domains to demonstrate the potential contributions of self-efficacy to older adults’ financial capacity.

Findings

The contributions of self-efficacy in preserving older adults’ financial capacity appear to be much more profound than is currently acknowledged in the literature, thereby overlooking potentially promising and cost-effective interventions for autonomous ageing.

Originality/value

This paper presents a novel application of self-efficacy to autonomous ageing. Within this context, potential routes to the deployment of self-efficacy-based interventions are also discussed.

Loneliness Interacts With Cognition in Relation to Healthcare and Financial Decision Making Among Community-Dwelling Older Adults

BACKGROUND AND OBJECTIVES

Cognition is a known determinant of healthcare and financial decision making in old age. Social vulnerabilities also might play a role in such decisions; however, the evidence for this is less clear. Here, we examined the association of loneliness with decision making and tested the hypothesis that loneliness is associated with decision making via its interaction with global cognition.

RESEARCH DESIGN AND METHODS

Participants were 1,121 nondemented older adults from the Rush Memory and Aging Project. Healthcare and financial decision making was assessed via a performance-based measure; loneliness was assessed via the De Jong Gierveld Loneliness Scale; and cognition was assessed via a 19-test neuropsychological battery.

RESULTS

In a regression model adjusted for age, sex, and education, global cognition was associated with decision making (B = 2.43, SE = 0.14, p < .001) but loneliness was not (B = -0.04, SE = 0.11, p = .72). However, in a model including the interaction of loneliness with global cognition, the interaction was significant (B = 0.44, SE = 0.20, p = .03), such that the detrimental effect of loneliness on decision making was stronger when cognition was low. In secondary analyses examining the interaction of loneliness with 5 specific cognitive domains, the interaction between loneliness and working memory with decision making was significant (B = 0.35, SE = 0.15, p = .02).

DISCUSSION AND IMPLICATIONS

Our results suggest that loneliness compromises healthcare and financial decision making among older adults with lower global cognition and, more specifically, lower working memory.

Financial judgment determination in adults with ADHD

ADHD has a debilitating influence on everyday functioning, including the capability to make financial decisions. The capability to make financial decisions is a multidimensional construct that includes financial knowledge, financial judgment, financial performance and related contextual factors. So far, the majority of studies in adults with ADHD focused on financial performance, while the other aspects of financial capability were less explored. The current study aims to partly bridge this gap by examining the ability of financial judgment in adults with ADHD. Thirty-nine adults with ADHD and 83 adults without ADHD were included. All participants were assessed with the Financial Competence Assessment Inventory (FCAI) and Financial Decision-Making Interview (FDMI) which both assess the four abilities of financial judgment, i.e., understanding, appreciation, reasoning and communication. The results show that adults with ADHD, compared to adults without ADHD, obtained significantly lower scores on understanding (according to the FCAI and FDMI). Furthermore, adults with ADHD showed a significantly lower appreciation, reasoning and communication (according to the FCAI) than adults without ADHD. In conclusion, adults with ADHD have difficulties with financial judgment especially with the ability to understand information that is relevant for a financial situation or transaction. Furthermore, adults with ADHD were found to have problems with appreciating, reasoning and communicating about practical information that partly relates to their own financial situation (as assessed with the FCAI). A careful assessment of financial capability in adults with ADHD, therefore, appears warranted in clinical practice.

Synthetic review of financial capacity in cognitive disorders: Foundations, interventions, and innovations

Purpose of review

Financial capacity (FC) is a complex, multi-dimensional construct that changes over the lifespan and commonly becomes impaired as individuals age and develop dementia. Impaired FC results in several important negative outcomes including loss of independence and increased victimization and abuse. The goal of this review is to synthesize current knowledge of the assessment and intervention of impaired financial capacity in order to propose its further development in the context of technological advancements.

Recent Findings

Current methods of assessing FC are based on conceptual foundations that include judgment, procedural, and other pragmatic skills. The neurocognitive correlates of FC include basic arithmetic skills, attention, and visual memory. These cognitive domains are presently assessed through clinical and neuropsychological evaluation as well as instruments specifically designed to assess financial capacity. Despite having a firm conceptual and neurocognitive foundation, current assessment methods of FC are limited by their ability to be flexible, individualizable, or scalable.

Summary

Computer and software technologies such as artificial intelligence, virtual reality, and the internet of things are exciting tools to achieve the ultimate goal of developing measures that allow patients to maintain or support maximal independence in financial functioning. These tools will allow for contemporaneous and ecologically valid assessment and would be useful to legal professionals and clinicians in determinations of financial competency and capacity. Moreover, interventions that provide safety and monitoring while allowing patients maximal autonomy of preserved financial abilities are needed.

Informant Report of Financial Capacity for Individuals With Chronic Acquired Brain Injury: An Assessment of Informant Accuracy

OBJECTIVE

Primarily, to investigate the association between informant report and objective performance on specific financial capacity (FC) tasks by adults with chronic, moderate to severe acquired brain injury, and to examine the nature of misestimates by the informants.

DESIGN

Cross-sectional design.

SETTING

A postacute, community-based rehabilitation center.

PARTICIPANTS

Data were obtained from 22 chronic acquired brain injury (CABI) adults, mean age of 46.6 years (SD = 8.67), mean years of education of 13.45 years (SD = 2.15), with moderate to severe acquired brain injury (86% had traumatic brain injury), with a mean postinjury period of 17.14 years (SD = 9.5). Whereas the CABI adults completed the Financial Competence Assessment Inventory interview-a combination of self-report and performance-based assessment, 22 informants completed a specifically designed parallel version of the interview.

RESULTS

Pearson correlations and 1-sample t tests based on the discrepancy scores between informant report and CABI group's performance were used. The CABI group's performance was not associated with its informant's perceptions. One-sample t tests revealed that informants both underestimated and overestimated CABI group's performance.

CONCLUSIONS

Results indicate lack of correspondence between self- and informant ratings. Further investigation revealed that misestimations by informants occurred in contrary directions with CABI adults' performance being inaccurately rated. These findings raise critical issues related to assuming that the informant report can be used as a "gold standard" for collecting functional data related to financial management, and the idea that obtaining objective data on financial tasks may represent a more valid method of assessing financial competency in adults with brain injury.

Investing: the case for recognition as an independent capacity

In this article, we provide support for the need to recognize investing as an independent capacity. A comparison of the definitions and models of financial and investing capacities revealed significant differences between them. A review of the status of investing capacity assessment revealed that there are currently no investing capacity specific assessment instruments (ICSAIs). Implications for researchers and clinicians resulting from the lack of recognition of investing as an independent capacity are discussed and used as a rational for the need to develop ICSAIs. The benefits of ICSAI development for financial, legal, and clinical professionals as well as for investors are discussed, and a direction for future investing capacity research is proposed.