When do financial decision-making abilities peak? It is probably much early that you’d imagine. Studies have found that it is the mid-50s. Then skills begin to deteriorate. “The older the wiser” adage doesn’t translate to managing finances.
The Economist recently wrote a piece about the response from the banking industry. A move is underway to become more “age friendly.” But this is a difficult line to walk. If they get it right, however, it could provide added value to aging customers.
One-third of the wealth
As of 2010, those over the age of 65 made up a mere 13 percent of the American population, but they held more than a third of the wealth. It is not surprising that scam artists target this age group. We discussed some of the deceptive practices they use in our January blog post.
Financial abuse of the elderly has been tricky to monitor, because victims are often too embarrassed to report it. One financial-services firm puts the potential annual losses as high as $37 billion from the elder financial exploitation or abuse.
Power of attorney to “read-only” access
While many banks have been slow to respond to the risks, some are training staff to identify signs of financial abuse and even dementia. First Financial Bank now awards staff members with a “Fraud Buster” pin when they uncover a scam.
Algorithms are another way to spot changing spending patterns. A British bank has used data to identify, monitor and advise high-risk customers.
But when should banks act? This question is tough to answer. Generally, a power of attorney is the only recognized document to transfer authority when incapacitated. Sometimes this can pose its own risks if a relative takes advantage of the situation and drains an account.
This is where some experimentation may start happening. A “read-only” access would allow for monitoring of accounts and with an option to delay payments on questionable transactions.
The late detection of cognitive decline can easily cause problems. Declining financial skills can be a sign of dementia or other problems. But is might also leave aging parents and relatives without enough income to cover expenses. To address concerns and start the conversation about the decline of a loved one, speak with an elder law attorney.