A New Tool for Assessing Financial Decision Making Abilities in Older Adults

NAPSA 2016

Peter A. Lichtenberg, Ph.D, ABPPDirector IOG and Professor of Psychology

Wayne State University Institute of GerontologyDetroit, Michigan

p.lichtenberg@wayne.edu

AcknowledgementsResearch team at WSU APSLisa Ficker, Ph.D. Cynthia FarrellAnnalise Rahman –Filipiak, MA Rachel RichardsEvan Gross, MAMichael Sugarman, MA Legal ColleaguesDaniel Paulson, Ph.D. Sandy Mall

Howard CollensElder Law of Michigan Pat SimaskoRon TatroKeith Morris Oakland County SAVE task force

MiCPA Expert PanelistsJudith Trepeck Funders:

National Institute of JusticeRetirement Research Foundation

• Dementia definition and Demography • Dementia Detection: 4 Methods to improve

detection• Financial Competency• Financial Exploitation• Assessing Financial Decision Making

Cognitive or Neuropsychiatric Symptoms that:

1. Interfere with ability to function in usual activities2. Represent a decline from previous functioning3. Not due to delirium or major psychiatric disorder4. Cognitive impairment detected through history and

objective assessment5. At least problems in 2 domains (memory, reasoning,

visuospatial, language, personality change)

1. Meet criteria for dementia2. Insidious onset3. Clear-cut history of worsening cognition4. Variety of presentations; amnestic most

common, language (word finding), executive dysfunction

CIND (n=241)

Age 71-79 16%

Age 80-89 29%

Age 90+ 39%

Total 22%

AD (n=98)

Age 71-79 3.5%

Age 80-89 10.2%

Age 90+ 22.4%

Total 8%

50% of persons with mild AD and 93% of those with moderate AD had impaired financial

capacity

Year Age 65-74 Age 75-84 Age 85+ Total

2000 0.3 2.4 1.8 4.52010 0.3 2.4 2.4 5.12020 0.3 2.6 2.8 5.72030 0.5 3.8 3.5 7.72040 0.4 5.0 5.6 11.02050 0.4 4.8 8.0 13.2

Hebert et al., Arch Neurol (2003), 60, 1119

1. Self Report2. Informant Report

3. Triggers4. Cognitive Screening

• “Decision making capacity is the cornerstone assessment for any cases of elder abuse while

balancing autonomy, beneficence and paternalism.”

The Gerontologist, 2014; vol. 54, p. 156

1. Basic Monetary Skills2. Financial Conceptual Knowledge

3. Cash Transactions 4. Checkbook Management

5. Bank Statement Management6. Financial Judgment

7. Bill Payment8. Knowledge of Assets/Estate Arrangements

Early CognitiveDecline

Impaired FinancialDecisional Skills

Vulnerability to Financial Exploitation

(1) the potential loss of financial skills and financial judgment; (2) the inability to detect and therefore prevent financial exploitation.

(3) the presence of psychiatric sx-paranoia

1. Executional

2. Decision-Making

Random samples help us understand the range of individual differences

Hsu and Willis: 10 year study of couples where one person had cognitive decline:

• Money management problems preceded giving up control of finances

• 33% of persons with dementia remained the primary financial decision maker

25% of sample where one partner was cognitively in the range of dementia retained decision making capacity

despite loss of executional skills

• MetLife Study– impact estimated at 2.9 Billion dollars per year, and 10% increase between 2008-2010.

• Study measured media coverage not incidence

Conrad et al. (2010)

FTC: Older adults likely to be targets of specific types of fraud:• Prize promotions (e.g. sweepstakes, lottery)• Government Imposter (e.g. IRS) : Complaints have tripled to 276,662 from

2012-2014• Tech Support Scams

Daniel Kaufman, October 2015 testimony to congress: Deputy Director, Consumer

Protection

Federal Perspectives on Fraud

• 2009: n– 131 of 1200 agents at Moneygram accounted for 95% of fraudulent money transfers-- $118 million paid in restitution and fines (Ignored warnings about its employees, actively discouraged employees from following fraud procedures)

• 2005 $8.1 Million dollar settlement with Western Union for failing to take steps to stop fraudsters from using its system

• 2014: 60 month sentence for Jamaican citizen on lottery scam

Federal Prosecution Triumphs against Fraud

• Self report fraud 2008 and 2012: 5.0% (347 out of 6,920) to

6.1% (442 out of 7,252)

• Examining new fraud cases between 2008-2012, n=4461

Lichtenberg et al., 2013;2016Clinical Gerontologist:Longitudinal Predictors

Lichtenberg et al. 2013 & 2016 Psychological Vulnerability

• 2013: The strongest finding, however, was fraud prevalence in those with the highest depression and the lowest social-needs fulfillment (14%) compared to the prevalence among the rest of the sample (4.1%; X2=

20.49; p < .001).

• 2016: Fraud prevalence among those with clinically significant depression and the lowest 10% in social-

needs fulfillment (8.7%) was more than twice as high compared to the rest of the sample • (4.1%; χ2 = 7.85, p = .005).

• Formed 2 New Scales:

Lichtenberg Financial Decision Making Rating Scale (LFDRS)

Lichtenberg Financial Decision Screening Scale (LFDSS)

Overall Goal:Assessment at Point of

Decision

• 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

• Originally for capacity for psychiatric treatment and guardianship, then health decisions

• ID 4 aspects of decision making: Communicating

1. Choice2. Understanding3. Appreciation4. Reasoning

• 10 items: To be administered in an interview format

• Multiple choice• Focuses on the 4 intellectual factors and

potential for undue influence• Professional does the rating on each item and

does not just record older adult’s responses.• Overall judgment score based in part on don’t

know or inaccurate responses.

Reliability and Validity Estimates

• LFDSS administered to consecutive clients by APS workers, Attorneys, Financial Planners, Social Workers, CPAs and Physicians

• Professionals make final rating of decision making abilities and we compared their ratings to two risk scoring systems

N % Mean Standard Deviation

Referral Source Adult Protective Services 80 37.6Professionals 133 62.4

Age (years) 213 76.93 (10.10)Age Categories (4) Below 65 26 12.2

65-74 yrs 56 26.375 - 84 yrs 74 34.785+ years 57 26.8

Gender female 121 56.8male 92 43.2

Highest Grade of Education (years) 183 13.66 (2.87)Category Education Less than High School 19 10.3

High School 80 43.5Some college + 85 46.2Missing Education 29 .0

Lichtenberg Financial Decision Screening Scale (dichotomous variables) 213 .98 (1.81)

Lichtenberg Financial Decision Screening Scale (ordinal variables) 213 4.50 (3.91)

Key Points

• Large sample size 213• Good distribution of age and education• Able to be used by Professionals of all

backgrounds (APS, Financial, Legal)

Dichotomous Variablesa Ordinal Variablesb

N AlphaMcDonald's

Omega Total

Explained Common Variance

(ECV)

AlphaMcDonald's

Omega Total

Explained Common Variance

(ECV) Total Sample 213 0.958 0.958 85.052 0.904 0.906 75.339Male 92 0.973 0.977 78.605 0.929 0.941 54.747Female 121 0.940 0.949 71.446 0.873 0.875 69.208College and above 85 0.918 0.932 39.731 0.874 0.879 62.550High school and below 99 0.944 0.950 72.605 0.858 0.863 55.205Less than 75 years old 82 0.968 0.973 71.592 0.918 0.926 64.62275 years old or greater 131 0.949 0.950 82.819 0.886 0.888 76.418Adult Protective Services 80 0.942 0.943 70.302 0.912 0.914 73.326Professionals 133 0.947 0.956 58.786 0.846 0.855 62.620

aAlpha, McDonald’s Omega Total and Explained Common Variance all calculated using tetrachoric correlations. Explained Common Variance was obtained from a bi-factor model.bAlpha, McDonald’s Omega Total and Explained Common Variance all calculated using polychoric correlations. Explained Common Variance was obtained from a bi-factor model.

Key Points

• Excellent Internal Consistency of items• One factor structure and holds across ages,

education, gender

Cutoff Score: Ordinal Risk Scoring

• Cutoff score of 5 or greater

Sensitivity Specificity PPV NPV.88 .91 .84 .93

• The LFDSS is a structured, multiple choice interview that should be administered in a standardized fashion. In introducing the LFDSS to the older adult, read out loud the following one-sentence explanation:

“I am going to ask you a set of questions to better understand the financial transaction/decision you are making or have already made. Please

answer these as best you can and feel free to elaborate on any of your answers.”

Decisional Ability Questions 1-2

1. What is the financial decision you are making?a) Investment planning (retirement,

insurance, portfolio balancing)b) Estate planning (will, beneficiary,

gifts)c) Major purchase (home, car,

renovations)d) Don’t know/inaccurate

2. Was this your idea or did someone suggest it or accompany you?a) My ideab) Someone else suggested/drove me

herec) Don’t know/inaccurate

Questions 3-53. What is the purpose of you decision?

a) Benefit self, plan, peace of mind

b) Benefit family (whom?)c) Benefit charity (which?)d) Benefit someone else

(whom?)e) Don’t know/inaccurate

4. What is the primary financial goal?a) Earn money through

investmentb) Share wealthc) Give someone access to my

moneyd) Gift someone or a charity

(Which?)e) Don’t know/inaccurate

5. How will this decision impact you now and over time?

a) Improve financial positionb) No impactc) Negative impact/debtd) Don’t know/inaccurate

Scale cannot be used without permission of Dr. Lichtenberg

Questions 6-76. How much risk is involved?

a) Low risk or noneb) Moderate riskc) High riskd) Don’t know/inaccurate

7. How may someone else be negatively affected?

a) No one will be negatively affectedb) Family members (who and why?)c) Someone else (who and why?)d) Charity (which and why?)e) Don’t know/inaccurate

Questions 8-108. Who benefits most from this financial

decision?a) I dob) Familyc) Friendd) Caregivere) Charity/organizationf) Don’t know/inaccurate

9. Does this decision change previous planned gifts or bequests to family, friends, or organizations?

a) Nob) Yes (who and why?)c) Don’t know/inaccurate

10. To what extent did you talk with anyone regarding this decision?a) Not at allb) Mentioned it (to whom?)c) Discussed in depth (with whom?)d) Don’t know/inaccurate

Scale cannot be used without permission of Dr. Lichtenberg

Case #1: A 68-year-old high school graduate is considering buying a new home for her grandson.

• She has relatively few resources herself and this purchase would put her at risk for financial hardship

• She will lack access to the cash she will spend and that she will be responsible for the mortgage payments

• She would be financially responsible should her grandson decide to no longer pay the monthly bills.

• Grandson is marginally employed and has no financial resources; making an investment in him a significant risk.

LFDSS Questions and Answers:• #2 Your idea or did someone else suggest this? “My grandson’s

idea but I like it.”• #4 Primary financial goal? She is unsure.• #5 How will decision impact you now and over time? She says it

will improve her position but Rater said that is inaccurate.• #6 How much risk to your financial well-being? She says none;

Rater says that there is moderate to high risk and therefore response is inaccurate.

• #8 Who benefits most from this decision? She reports “I do” but clearly grandson would be major beneficiary.

The Rater marks this a 0 for Decisional Abilities, “Major Concerns,” and Substantiates case

Let’s Review: • The woman in question communicates:

– Choice (buy a home for her grandson)– Rationale (he will have a nice place to live)

• But the woman lacks:– Understanding (goal, who benefits) – Appreciation (financial impact, risk to financial well-being)

Case #3: 86 year old man; master’s degree• #1 Financially support his daughter• #2 His idea• #3 Purpose: Benefit family—love her• #4 Impact on finances: None/slight• #6 Risk to financial well being: Small• #8 Who benefits most: Family• #10 Discuss with? No one

• No Decisional Ability Concerns

• Case not substantiated for FE

• When you want to better understand an older adult’s financial decision(s) or transaction(s)

• Build Rapport first— then ask some of the easy questions about finances—

1. How confident with financial decisions,?2. How anxious about money decisions?3. Any financial decisions you regret or worry about?

• When administering the scale: Make it conversational and not robotic/don’t rapid fire questions

• Ask for clarification and elaboration on items after scale has been administered

• Financial Situational Awareness

• Psychological Vulnerability

• Undue Influence• Past Financial

Exploitation

• Express: - Choice- Rationale- Understanding- Appreciation

Five videotaped interviews were rated by five experts from each of the two expert groups for a total of 10 raters Used Marson’s inter-rater

agreement metric 94% agreement: 47/50 ratings

among raters

Lisa J. Ficker, Ph.D.Wayne State UniversityInstitute of Gerontology87 E Ferry StreetDetroit, MI 48202

Annalise Rahman-Filipiak, M.A. Wayne State UniversityInstitute of Gerontology87 E Ferry StreetDetroit, MI 48202

Peter A. Lichtenberg PhD, ABPP, Lisa J. Ficker PhD & Annalise Rahman-Filipiak MA (2015):

Financial Decision-Making Abilities and Exploitation in Older African Americans:

Preliminary Validity Evidence for the Lichtenberg Financial Decision Rating Scale (LFDRS),

Journal of Elder Abuse & Neglect, DOI: 10.1080/08946566.2015.1078760

Peter A. Lichtenberg, Ph.D., ABPP*Wayne State UniversityInstitute of Gerontology87 E Ferry StreetDetroit, MI 48202313-664-2633 (phone)313-663-2667 (fax)p.lichtenberg@wayne.edu

mailto:p.lichtenberg@wayne.edu

% (n) M (SD)Age 69.59 (5.99)

GenderFemale 89.9 (62)

Male 10.1 (7)Education 14.75 (2.48)

WRAT-R Reading Grade Level 10.40 (3.00)

Table 1: Descriptive Statistics for Sample Characteristics (n = 69)

Investment/Estate Planning 18%Major Purchase 64%Financial difficulty (e.g. bankruptcy) 18%

Peter A. Lichtenberg, Ph.D., ABPP, Wayne State University

Current FinancialDecision or Transaction

Table 2: Financial Exploitation and Decisional Ability Concern Frequencies (n = 69)

% (n)Financial Exploitation

Yes 18.81 (13)No 81. 2 (56)

Decisional Ability Concerns

Major Concerns 4.3 (3)Some Concerns 7.2 (5)

No Concerns 88.4 (61)

Table 3: Correlations between LFDRS Decisional Ability and Subscale Scores, Demographic, Cognitive, and Functional Variables (n = 69)

AgeEducatio

n MMSEILS Money

Mgmt.Decisional Ability r .126 .235* .327** .254*

Financial Situational Awareness r -.053 -.124 -.084 .043

Psychological Vulnerability r -.024 -.098 .004 -.001

Current Decision Total r .163 -.011 -.226* -.204*

Past Decision Total r -.019 -.062 -.061 -.037

Undue Influence r .040 -.028 .026 -.054Age r -.101 -.080

Education r .254* 240**

Note. ** = Significant at α =.005 level * = significant at α =.05 level

Key Points

• Good convergent validity for full scale and screening scale ratings—with MMSE and ILS money management

• Good divergent validity for financial awareness, psychological vulnerability, susceptibility to undue influence

Table 4: Correlations between LFDRS Subscales (n=69)

1 2 3 4 5 61. Decisional

Ability r -.304** -.210* -.364** .095 -.221*2. Financial Situational Awareness r .388** .171 .085 .284**

3. Psychological Vulnerability r -.047 .167 .266**

4. Current Decision Total r -.070 .066

5. Past Decision Total r .158

6. Undue Influence r ---

Note. ** = Significant at α =.005 level * = significant at α =.05 level

Key Points

• Subscales appropriately relate to full scale

χ2 = 12.2, p = .002

Overall, how satisfied are you with

your finances?**

Satisfied 23.1 (3) 41.1 (23)

Neither satisfied nor dissatisfied 15.4 (2) 46.4 (26)

Dissatisfied 61.5 (8) 12.5 (7)χ2 = 13.5, p = .001

How confident are you in making

big financial decisions?**

Confident 23.1 (3) 76.8 (43)

Financial Exploitation

Financial Exploitation

No Financial Exploitation

No Financial Exploitation

χ2 = 14.1, p = .001

How worried are you about having

enough money to pay for things?**

Not at all worried 7.7 (1) 41.1 (23)

Somewhat worried 46.2 (6) 50.0 (28)

Very worried 46.2 (6) 8.9 (5)

χ2 = 5.7, p = .017

Do you regret or worry about financial

decisions you've recently made?**

No 30.8 (4) 71.4 (40)

Yes 69.2 (9) 28.6 (16)

Financial Exploitation

Financial Exploitation

No Financial Exploitation

No Financial Exploitation

• A way to understand the older adult’s perspective on the situation

• Part of an assessment, just as observation, record reviews and other interviews are

• A novel way to assess informed decision making

It Is:• A check the box and look

at the score test• A complete interview: it

often raises more questions

• Something that takes the place of the interviewer’s skills

It Is Not:

• Use a counseling/education approach with your clients

• Find ways to bring a third party in to discuss matter also

• Slow process down—do not execute documents that day and make older person return

• Call Adult Protective Services if Financial Exploitation is discovered and cannot be resolved.

Lichtenberg Scales: The last

collaboration with my late wife

and colleague

Peter Lichtenberg, Ph.D.Email: p.lichtenberg@wayne.edu

Phone: Office 313-664-2633Cell 248-497-3088

Fax: 313-664-2667

mailto:p.lichtenberg@wayne.edu

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