The following is a guest blog post by Chris Morrison, PhD, ABPP. This post is part of SIFMA’s “Protecting Senior Investors” blog series, raising awareness and sharing information to help prevent elder financial exploitation. See our full series here. 

It might be easy to assume that financial exploitation and fraud are primarily perpetrated against cognitively compromised individuals – meaning individuals who suffer from conditions such as dementia or similar neurological disorders. However, this is not necessarily the case. The aging brain can be impacted by a variety of biological, psychological and environmental factors.  These factors can make even a healthy and apparently normal functioning individual compromised when it comes to financial decision-making.

While there are some “super agers” in the population (individuals in their 80s and beyond who function at much younger intellectual levels), the vast majority of adults will experience at least some isolated cognitive decline associated with typical brain aging as they progress through their sixth, seventh, and eighth decades (or beyond). Cognitive change in older adults is uneven and dependent on many factors, including educational background, overall intellectual capacity, health conditions, and lifestyle habits.  The following describes some of the ways in which cognition changes with age and how health and demographic factors can influence the ability to process financial information.

Healthy Aging

In healthy aging, most individuals will demonstrate a pattern of preserved, crystallized knowledge -meaning they will remember well-learned, factual information, but will experience some decline in other aspects of their cognitive functioning. The areas that often change with age include diminished processing speed or quickness of thought; a reduction in the volume of information a person can think about simultaneously (also known as working memory capacity); slower rate of new learning ability, as well as a decline in aspects of executive functions.

Executive Functions

Executive functions are the most complex type of cognitive abilities. Abilities within this category include planning, reasoning, problem solving and fluid manipulation of thought and behavior to adapt to changing situations. Changes in these functions can adversely affect future planning ability, financial decision making and susceptibility to manipulation and fraud.

Health Conditions

Compounding the normal aging process are health conditions which can make the brain selectively more vulnerable to age related changes. Such conditions are common (if not ubiquitous) in the aging population and do not necessarily come to mind when people think about “brain health.” For example, high blood pressure, high cholesterol, thyroid dysfunction and diabetes, when not well controlled, can all contribute to pathological disruption of brain functioning and lead to cognitive compromise. The same can be said of other “non-neurological” conditions, such as cardiac disease, endocrine dysfunction, autoimmune disorders and pulmonary dysfunction – to name a few.

Lifestyle Habits

Further contributing to, and potentially exacerbating normal age-related cognitive change, are lifestyle habits such as smoking, excessive alcohol consumption, lack of exercise, social isolation and limited intellectual stimulation. Mental health conditions such as depression and anxiety can also diminish cognitive efficiency and optimal engagement of cognitive capacity. These combined factors can result in reduced cognitive abilities in a range of areas such as memory and complex decision making, and can leave an individual particularly susceptible to financial exploitation or impair their ability to make sound financial decisions.  Perhaps most concerning, is that such issues can exist in otherwise normal functioning adults.

Mild Cognitive Impairment

In some cases, cognitive decline can go beyond what would be considered normal age-related change.  In such cases, an individual is considered to have mild cognitive impairment (MCI). While these individuals are impaired above and beyond normal cognitive change associated with healthy aging, the decline is not severe or significant enough to be categorized as dementia. The impact of cognitive decline in MCI is often seen in those most complex and intellectually-demanding situations long before a change in the person’s ability to complete their basic daily routine is noticed. Thus, although individuals with MCI may appear relatively intact and function reasonably well in most areas of life, their subtle cognitive deficits put them at even higher risk for poor decision making and financial exploitation.

What To Do

With the aging of America, those working in the financial services industry will increasingly be interacting with clients experiencing cognitive decline (whether due to the normal aging-process, MCI or a more severe condition), which could render them vulnerable to exploitation and affect their financial decision making – or at least their ability to quickly and easily understand their financial options.  As such, when working with senior clients, a new approach to interacting with clients and delivering information may be necessary to ensure that they are making informed decisions.

When working with this investor group, financial professionals can sometimes find themselves in a situation wherein they discover their client has been a victim of financial exploitation and may be in a position to take steps to protect their clients.  For this reason, it is important for financial advisors to be familiar with new laws that offer financial advisors the opportunity to intervene when confronted with suspicious activity.

For more information, visit SIFMA’s Senior Investor Protection Resource Center 

Chris Morrison is a Clinical Neuropsychologist at NYU Langone Medical Center.  She will be presenting with SIFMA at the American Bar Association’s upcoming National Aging & Law Conference on October 15 in Washington, D.C.