A Person-Centered Approach to Financial Capacity Assessment: Preliminary Development of a New Rating Scale

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Authors:  Peter Lichtenberg, Wayne State University; Jonathan Stoltman, Wayne State University; Lisa Flicker, Wayne State University; Madelyn Iris, CJE SeniorLife; Benjamin Mast, University of Louisville, Kentucky

Publication: Clinical Gerontologist

Year: 2015

Focus Area: 2000 to present, Aging, Decision Making; Financial Literacy

Relevance: Impairment in financial decision making is associated with increased susceptibility to financial exploitation in older adults, yet existing assessment instruments use neutral or hypothetical stimuli (e.g., “How could you be sure the price of a car is fair?”) rather than stimuli that examine the specific individual’s actual situation and financial judgment or transaction. The Lichtenberg Financial Decision Rating Scale (LFDRS) uses a person-centered method to identify functioning and risk in five domains: financial situational awareness, psychological vulnerability, sentinel financial decision/transaction, financial exploitation, and undue influence.

Summary: The LFDRS was developed through Concept Mapping methods and input from experts fields related to financial capacity, elder abuse, and aging. Reliability of the instrument was was tested by videotaping its administration with five older adults. Five experts watched the interviews and independently rated the integrity of a participant’s financial decisional abilities as fully capable, marginally capable, or not capable. The final scale consists of 61 multiple-choice questions that were asked of
all participants. Application of this scale can improve gerontologists’ ability to assess financial capacity and vulnerability to financial exploitation.

Author Abstract: Financial exploitation and financial capacity issues often overlap when a gerontologist assesses whether an older adult’s financial decision is an autonomous, capable choice. Our goal is to describe a new conceptual model for assessing financial decisions using principles of person-centered approaches and to introduce a new instrument, the Lichtenberg Financial Decision Rating Scale (LFDRS). We created a conceptual model, convened meetings of experts from various disciplines to critique the model and provide input on content and structure, and selected final items. We then videotaped administration of the LFDRS to five older adults and had 10 experts provide independent ratings. The LFDRS demonstrated good to excellent interrater agreement. The LFDRS is a new tool that allows gerontologists to systematically gather information about a specific financial decision and the decisional abilities in question.

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Mild Cognitive Impairment and Susceptibility to Scams in Old Age

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Authors:  Duke Han, Rush University Medical Center and VA Long Beach Healthcare System; Patricia Boyle, Rush University Medical Center; Bryan James, Rush University Medical Center; Lei Yu, Rush University Medical Center; David Bennett, Rush University Medical Center

Publication: Journal of Alzheimer’s Disease

Year: 2015

Focus Area: 2000 to present, Aging, Decision Making, Victim Profiling

Relevance: A greater understanding of the factors that impact susceptibility to scams in old age is an urgent and important public health concern. Elders with MCI, typically show no impairments in functional activities of daily living, but if older adults with MCI show greater susceptibility, it implies that the diagnoses affects a broader range of behaviors and has important implications for clinicians who treat these older patients. This study extends the findings from an earlier study that found greater susceptibility to scams in older adults without cognitive impairment.

Summary: This study involved 730 participants recruited from the Rush Memory and Aging Project, a community-dwelling sample of adults. The mean age of the overall sample was 81.8 years.

  • For assessment of susceptibility to scams, participants rated their agreement with five statements that address topics such as suspiciousness of claims that seem too good to be true, being targeted by con-artists, and telemarketing behaviors. A battery of 21 cognitive measures was administered.
  • The researchers found that the presence of MCI was associated with greater susceptibility to scams which was equivalent to the effect of more than 5 additional years of age.
  • Among the domains of cognition that were evaluated, episodic memory and perceptual speed were associated with susceptibility to scams in older adults with MCI.

Author Abstract: Background: Falling victim to financial scams can have a significant impact upon social and financial wellbeing and independence. A large proportion of scam victims are older adults, but whether older victims with mild cognitive impairment (MCI) are at higher risk remains unknown. Objective: We tested the hypothesis that older persons with MCI exhibit greater susceptibility to scams compared to those without cognitive impairment. Methods: Seven hundred and thirty older adults without dementia were recruited from the Rush Memory and Aging Project, a community-based epidemiologic study of aging. Participants completed a five-item self-report measure of susceptibility to scams, a battery of cognitive measures, and clinical diagnostic evaluations. Results: In models adjusted for age, education, and gender, the presence of MCI was associated with greater susceptibility to scams (B = 0.125, SE = 0.063, p-value = 0.047). Further, in analyses of the role of specific cognitive systems in susceptibility to scams among persons with MCI (n = 144), the level of performance in two systems, episodic memory and perceptual speed abilities, were associated with susceptibility. Conclusions: Adults with MCI may be more susceptible to scams in old age than older persons with normal cognition. Lower abilities in specific cognitive systems, particularly perceptual speed and episodic memory, may contribute to greater susceptibility to scams in those with MCI.

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Importance of Numeracy as a Risk Factor for Elder Financial Exploitation in a Community Sample

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Authors: Stacey Wood, Department of Psychology at Scripps College; Pi-Ju Liu, Department of Psychology at University of SanFrancisco, California; Yaniv Hanoch, School of Psychology at University of Plymouth; Sara Estevez-Cores, Department of Psychology at Scripps College

Publication: Journals of Gerontology: Psychological Science

Year: 2015

Focus Area: 2000 to present, Aging, Decision Making, Financial Literacy

Relevance: Numeracy is the capacity to understand and manipulate basic mathematical concepts. Older adults tend to be less numerate than younger adults and therefore may be at higher risk for poor decision making and financial exploitation.

Summary: In the current study, the authors interviewed a sample of older adults ages 60+ to identify risk factors for financial exploitation. They included executive functioning, general cognitive functioning, and numeracy. It was hypothesized that lower scores on all of the cognitive measures will be a critical risk factor for higher scores on the fraud susceptibility measure, particularly lower numeracy.

  • A total of 201 community-dwelling adults aged 60 and older were recruited to participate.
  • Less numerate participants reported risk of experiencing financial exploitation significantly more frequently.
  • Numeracy remained a significant predictor in the presence of other risk factors, including dependency, physical and mental health, as well as overall cognition.

Author Abstract: Objectives: To examine the role of numeracy, or comfort with numbers, as a potential risk factor for financial elder exploitation in a community sample. Method: Individually administered surveys were given to 201 independent, community-dwelling adults aged 60 and older. Risk for financial elder exploitation was assessed using the Older Adult Financial Exploitation Measure (OAFEM). Other variables of interest included numeracy, executive functioning, and other risk factors identified from the literature. Assessments were completed individually at the Wood Lab at Scripps College in Claremont, CA and neighboring community centers. Results: After controlling for other variables, including education, lower numeracy was related to higher scores on the OAFEM consistent with higher risk for financial exploitation. Self-reported physical and mental health, male gender, and younger age were also related to increased risk. Conclusions: Results indicated that numeracy is a significant risk factor for elder financial exploitation after controlling for other commonly reported variables. These findings are consistent with the broader literature relating numeracy to wealth and debt levels and extend them to the area of elder financial exploitation.

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Individual Differences in Risky Decision-Making Among Seniors Reflect Increased Reward Sensitivity

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Authors: James F. Cavanagh1,2, David Neville2, Michael X. Cohen2,3, Irene Van de Vijver2, Helga Harsay2, Poppy Watson2, Jessika I.  Buitenweg2, and K. Richard Ridderinkhof2

1 Brown University,  2 University of Amsterdam, 3 University of Arizona

Publication: Frontiers in Neuroscience

Year: 2012

Focus Area: Aging, Decision–Making

Relevance: Understanding the decision-making process in older adults, especially with respect to risky decisions, may help identify vulnerabilities to fraud victimization.

Summary: This study used a computer-based game to investigate the effect of age on risky decision-making. Previous work on the cognitive changes associated with aging has been mixed with respect to risk aversion among seniors. Some studies have shown that seniors are risk averse on computer tasks like the one in the current study, but a recent review of the literature found that seniors are risk-seeking in most learned tasks.

The task used in current study is called the Balloon Analog Risk Task (BART), in which a balloon with a cash value is presented on a screen. Participants “pump” the balloon to increases the cash value and can cash-out at any time to move the cash into a virtual bank. But each successive pump increases the risk that the balloon will pop and erase all earnings.

The study found that seniors (age 60+) showed greater reward-based risk taking than younger participants (ages 18-26) in a high-risk scenario. Seniors were characterized by more popped balloons than young adults and showed heightened reward sensitivity. Still, there was no ultimate difference in earnings between seniors and young adults, so it is not possible to determine whether seniors were impulsive or were just following a different strategy.

Author Abstract/First Paragraph: Increasing age is associated with subtle but meaningful changes in decision-making. It is unknown, however, to what degree these psychological changes are reflective of age-related changes in decision quality. Here, we investigated the effect of age on latent cognitive processes associated with risky decision-making on the Balloon Analog Risk Task (BART). In the BART, participants repetitively inflate a balloon in order to increase potential reward. At any point, participants can decide to cash-out to harvest the reward, or they can continue, risking a balloon pop that erases all earnings. We found that among seniors, increasing age was associated with greater reward-related risk taking when the balloon has a higher probability of popping (i.e., a “high risk” condition). Cognitive modeling results from hierarchical Bayesian estimation suggested that performance differences were due to increased reward sensitivity in high risk conditions in seniors.

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Neural and behavioral bases of age differences in perceptions of trust

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Title: Neural and behavioral bases of age differences in perceptions of trust

Authors: Elizabeth Castle, Naomi Eisenberger, Teresa Seeman, Wesley Moons, Ian Boggero, Mark Grinblatt and Shelley Taylor; University of California, Los Angeles

Publication: Proceedings of the National Academy of Sciences of the United States of America (PNAS)

Year: 2012

Focus Area: Victim Profiling, Decision Making, Emotion/Motivation, Aging

Relevance: Understanding the biological basis of why older adults may be more vulnerable to financial fraud is helpful in order to develop more effective means of protecting them.

Summary: This study suggests that older adults’ vulnerability to fraud may result from their lack of response to visual cues of untrustworthiness.  In the first part of the study, older and younger adults rated people in photographs as “trustworthy,” “neutral,” or “untrustworthy” based on cues like insincere smiles, averted gazes, and postural difference.  Older adults and younger adults performed equally well when identifying people judged to be trustworthy or neutral, but older adults were much more likely to rate suspicious-looking people as approachable. In the second part of the study, participants underwent functional magnetic resonance imaging (fMRI) brain scans while evaluating the photographs. The researchers found that an area in the brain called the anterior insula, which is linked to disgust, displayed different patterns of activation in the two groups of participants. The younger adults showed anterior insula activation whenever they were making the ratings of the faces and especially when viewing the untrustworthy faces. In contrast, the older adults displayed very little anterior insula activation during evaluation of all faces.

Author Abstract: Older adults are disproportionately vulnerable to fraud, and federal agencies have speculated that excessive trust explains their greater vulnerability. Two studies, one behavioral and one using neuroimaging methodology, identified age differences in trust and their neural underpinnings. Older and younger adults rated faces high in trust cues similarly, but older adults perceived faces with cues to untrustworthiness to be significantly more trustworthy and approachable than younger adults. This age-related pattern was mirrored in neural activation to cues of trustworthiness. Whereas younger adults showed greater anterior insula activation to untrustworthy versus trustworthy faces, older adults showed muted activation of the anterior insula to untrustworthy faces. The insula has been shown to support interoceptive awareness that forms the basis of “gut feelings,” which represent expected risk and predict risk-avoidant behavior. Thus, a diminished “gut” response to cues of untrustworthiness may partially underlie older adults’ vulnerability to fraud.

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Age-Related Differences in Deception

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Relevance: Understanding age-related differences in lie detection ability could offer insight as to which age group is more susceptible to falling for fraud pitches.

Summary: An interesting question in deception research is whether lying and lie detection ability change with age.  On one hand, both lying and the ability to spot a lie may improve with age due to greater experience. On the other hand, the ability to lie and to detect lies may decrease with age due to cognitive decline. This study addresses the question by comparing younger and older adults’ abilities to lie as judged by both younger and older listeners. Additionally, in order to learn about the specific processes that may account for age-related differences in deception, the researchers tested the listeners’ ability to identify emotion and to estimate age in facial recognition tasks.  In the study, 30 young adults (17 to 26) and 30 older adults (60-89) judged the veracity of opinion statements made by 10 young adults (<30) and 10 older adults (>60).

Key findings of the study include:

  • Older adults were relatively transparent in that both young and older listeners found it easier to differentiate truths from lies in older adult speakers.
  • Older adults were worse than younger adults in differentiating truths from lies by both younger and older speakers.
  • Emotion recognition, but not age recognition, from facial cues is related to lie detection ability.

The researchers conclude that it is easier for people to discern when an older adult is lying or telling the truth compared with a young adult. In other words, older adults are worse liars. Regarding lie detection, the researchers conclude that older adults have more difficulty differentiating lies from truths than do younger adults. In other words, older adults are also worse lie detectors. Additionally, the study suggests that the decline in lie detection ability with age is related to a decline in emotional recognition.

Author Abstract: Young and older participants judged the veracity of young and older speakers’ opinions about topical issues. All participants found it easier to judge when an older adult was lying relative to a young adult, and older adults were worse than young adults at telling when speakers were telling the truth versus lying. Neither young nor older adults were advantaged when judging a speaker from the same age group. Overall, older adults were more transparent as liars and were worse at detecting lies, with older adults’ worse emotion recognition fully mediating the relation between age group and lie detection failures.

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A neuropsychological test of belief and doubt: damage to ventromedial prefrontal cortex increases credulity for misleading advertising

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Authors: Erik Asp , Kenneth Manzel, Bryan Koestner, Catherine A. Cole, Natalie L. Denburg, and Daniel Tranel (University of Iowa)

Publication: Frontiers in Neuroscience

Year: 2012

Focus Area(s): Aging, Decision Making, Consumer Behavior

Relevance: Understanding the neural pathways that underlie belief and doubt offers neuroanatomical insight as to why older adults may be more vulnerable to fraud.

Summary: This article studies brain damaged participants in order to explore the neuroanatomical mechanisms that render individuals susceptible to misleading information. According to the False Tagging Theory (FTT), a theoretical model of belief and doubt, all ideas are initially believed to be true and doubt occurs only when the prefrontal cortex “tags” cognitive representations with false value. The authors of this study suggest that the ventromedial prefrontal cortex (vmPFC) is particularly important for false tagging, such that damage to this area of the brain causes a “doubt deficit” that results in greater credulity.

To test this hypothesis, the researchers showed three groups of participants (18 patients with vmPFC damage, 21 patients with brain damage to other areas of the brain, and 10 participants with no brain damage) several misleading advertisements and tested their belief in the ads, and their intent to purchase the advertised items. The study found that patients with vmPFC damage were much more likely to believe false advertisements and had the highest purchase intention of all three groups.

The  vmPFC tends to disproportionately lose integrity and functionality in old age; thus, the researchers suggest that vulnerability to misleading information and fraud in older adults is likely the result of a damaged “doubt process” mediated by the vmPFC. This finding may enable caregivers and relatives to be more understanding of decision making by older adults.

Author Abstract: We have proposed the False Tagging Theory (FTT) as a neurobiological model of belief and doubt processes. The theory posits that the prefrontal cortex is critical for normative doubt toward properly comprehended ideas or cognitions. Such doubt is important for advantageous decisions, for example in the financial and consumer purchasing realms. Here, using a neuropsychological approach, we put the FTT to an empirical test, hypothesizing that focal damage to the ventromedial prefrontal cortex (vmPFC) would cause a “doubt deficit” that would result in higher credulity and purchase intention for consumer products featured in misleading advertisements. We presented 8 consumer ads to 18 patients with focal brain damage to the vmPFC, 21 patients with focal brain damage outside the prefrontal cortex, and 10 demographically similar healthy comparison participants. Patients with vmPFC damage were (1) more credulous to misleading ads; and (2) showed the highest intention to purchase the products in the misleading advertisements, relative to patients with brain damage outside the prefrontal cortex and healthy comparison participants. The pattern of findings was obtained even for ads in which the misleading bent was “corrected” by a disclaimer. The evidence is consistent with our proposal that damage to the vmPFC disrupts a “false tagging mechanism” which normally produces doubt and skepticism for cognitive representations. We suggest that the disruption increases credulity for misleading information, even when the misleading information is corrected for by a disclaimer. This mechanism could help explain poor financial decision-making when persons with ventromedial prefrontal dysfunction (e.g., caused by neurological injury or aging) are exposed to persuasive information.

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The psychology of scams: Provoking and committing errors of judgment

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Authors: Office of Fair Trading (prepared by University of Exeter School of Psychology)
Year: 2009

Relevance: We may make errors of judgment when we succumb to legitimate sales appeals. This work seeks to identify what particular errors lead to scam victimization.

    “[A] modest probability of falling for a scam is no longer an inexplicable exception to the general tendency of human choice, but rather an inevitable by-product of the processes that enable normal economic life to continue.” (p. 15)

Summary: This work includes an extensive literature review of scams (mass-marketed consumer frauds) and outlines four studies:

1. Extended interviews with scam victims

  • In addition to providing useful subjective feedback, these were also “text-mined” for psychological features that characterized victimization. For instance, most victims described perceived legitimacy and high reward in the scam ploy.

2. Text-mining scam communications

  • By categorizing the language of different scams, the researchers could identify key ploys typifying scams generally: appeals to trust/authority & visceral (vividly emotional) triggers referencing the future (“phantom fixation”).

3. Victim/Non-victim comparison – susceptibility to errors of judgments

  • “There was no evidence that any of the decision error propensities distinguished victims… from non-victims more effectively than others” (p. 121)
  • However, victims did report trying harder to understand scams than did non-victims. This counter-intuitive result may reflect non-victims reflex to discard promotional materials, rather than a careful attentiveness on the part of victims.

4. Scam simulation experiment – “hot” and “cold” conditions

  • By varying whether a mailed survey initially looked like a scam mailing (“hot” condition) or an innocuous mailing (“cold” condition), researchers were able to garner more direct feedback from people targeted by a “scam” – in this case from those who, by opening the mailing, had demonstrated interest in the ploy
  • Impact of $$: In the “cold” condition, respondents indicated that they would have been more likely to respond to the ploy when the prize was larger. In the “hot” condition, however, the manipulation cues were most critical.
  • The differences between conditions suggest that in-the-moment feedback may be particularly important when studying fraud and its victims.

First Paragraph: According to the Office of Fair Trading (2006), 3.2 million adults in the UK fall victim to mass marketed scams every year, and collectively lose £3.5 billion. Victims of scams are often labelled as ‘greedy’ or ‘gullible’ and elicit the reaction, ‘How on earth could anyone fall for that?’ However, such labels are unhelpful and superficial generalisations that presume all of us are perfectly rational consumers, ignoring the fact that all of us are vulnerable to a persuasive approach at one time or another. Clearly, responding to a scam is an error of judgement – so our research sought to identify the main categories of decision error that typify victim responses, and to understand the psychology of persuasion employed by scammers to try to provoke such errors.

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Social Influence: Compliance and Comformity

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Authors: Robert B. Cialdini & Noah J. Goldstein, Arizona State University

Publication: Annual Review of Psychology

Year: 2004

Focus Area: Persuasion, Decision Making

Relevance: Understanding what makes an individual more likely to comply with a request may help explain how fraud is achieved.

Summary: This article offers a review of the recent literature in compliance and conformity, a branch of persuasion research.  The themes of compliance and conformity are outlined around three central motivations that, together, help determine whether a person accepts or resists an outside persuasion influence:

  • Accuracy: the desire to achieve one’s goals effectively requires an accurate perception of reality – one misperception may be “the difference between getting a bargain and being duped” (p. 592).  An influence that appears reasonable and informs one’s thinking in a valuable way is more likely to be accepted, a tendency that can be influenced by distraction, authority appeals, and reframing.
  • Affiliation: the desire to be part of a meaningful social group.  A request emanating from a favored person or group, or that draws upon favored group identification, is more likely to be granted.  This tendency can be manipulated using flattery, reciprocation, and similarity appeals.
  • Maintenance of a positive self-conception: the desire to preserve a positive image of oneself.  A request framed to contribute to a person’s self-image is more likely to be granted.  This desire can be manipulated through appeals to consistency, public commitment, and follow-up techniques.

Author Abstract: This review covers recent developments in the social influence literature, focusing primarily on compliance and conformity research published between 1997 and 2002. The principles and processes underlying a target’s susceptibility to outside influences are considered in light of three goals fundamental to rewarding human functioning. Specifically, targets are motivated to form accurate perceptions of reality and react accordingly, to develop and preserve meaningful social relationships, and to maintain a favorable self-concept. Consistent with the current movement in compliance and conformity research, this review emphasizes the ways in which these goals interact with external forces to engender social influence processes that are subtle, indirect, and outside of awareness.

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Deception: From Ancient Empires to Internet Dating

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Authors: Brooke Harrington, Ed., & Guido Möllering (Max Planck Institute), Paul Thompson & Hany Farid (Dartmouth College), Jeffrey T. Hancock (Cornell University), Tom Lutz (University of California, Riverside), Maureen O’Sullivan (University of San Francisco), Carl T. Bergstrom (University of Washington), Gary Urton, Frederick Schauer & Richard Zeckhauser (Harvard University), Mark G. Frank (State University of New York),  Gary Alan Fine (Northwestern University), Ford Rowan (George Washington University), William Glenney IV (Naval Operations’ Strategic Studies Group), & Kenneth Fields (Stanford University)

Publication: Stanford University Press
Year: 2009
Focus Area: Deception

Relevance: By synthesizing the fragmented world of deception research across the humanities and sciences, this text serves as a “status report on deception” (p. 2).

Summary: The interwoven contributions to this work are organized around four themes of deception:

  1. defining & detecting deception
  2. technology & deception
  3. the relationship between deception & trust
  4. social institutions through which deception is perpetrated & regulated

Each theme is addressed from three or four different perspectives, all of which account for and refer to the other works.  This creates a cohesive and broad view of the state of deception research, while allowing for the varying definitions, foci, and opinions within the field.  Of particular relevance to financial fraud are the sections on:

  • cognitive hacking (Paul Thompson, Dartmouth College)
  • digital deception (Jeffrey T. Hancock, Cornell University)
  • digital doctoring (Hany Farid, Dartmouth College)
  • method acting in daily life (Tom Lutz, University of California, Riverside)
  • fraud in financial markets (Brooke Harrington, Max Planck Institute)
  • why most people are poor lie detectors (Maureen O’Sullivan, University of San Francisco)

Opening Paragraph: Deception and especially lying are typically ascribed to human beings and often distinguished from other forms of conveying incorrect or misleading information by intentionality.  If a person is merely ignorant of the truth, then telling something other than the truth would not usually be considered lying, except that pretending to know the truth is itself a kind of deception.  (Different ideas about intentionality are presented elsewhere in this volume, along with proposals to distinguish lying from deception.) –excerpted from Foreword by Murray Gell-Mann, Santa Fe Institute (Nobel Prize in physics, 1969)

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