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Financial Delegation in Late Adulthood
Sylvain Hohn
Anup BasuUwe Dulleck
Nicolas CherbuinJulie Henry
Sylvain Hohn Financial Delegation in Late Adulthood
BEST Conference13 February 2020Brisbane
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Research Background
Financial decision-making in late adulthood can be problematic.Older individuals are more likely to
show decreased financial skills esp. with onset of cognitive impairment(Triebel et al., 2009)
forget paying bills (Hsu & Willis, 2013)
invest in fraudulent schemes (Hsu & Willis, 2013)
making poorer financial choices (Agarwal et al., 2009)
Motivation: Assess preparedness to delegate financial decision-making inlate adulthood.
Sylvain Hohn Financial Delegation in Late Adulthood 1 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Research Overview
Question
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Telephone Survey
Overall cognitive
functioning
Advertisement,
RecruitmentDelegation
Experiment
Willingness to
transfer decisions
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Telephone Survey
Overall cognitive
functioning
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?
Sylvain Hohn Financial Delegation in Late Adulthood 2 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Area (Participants)
Sylvain Hohn Financial Delegation in Late Adulthood 3 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Participants
Age Distribution in Greater Brisbane Area
Sample (s) Population (p) ∆s−p
Age cnt rel cnt rel rel
60 – 64 22 17.19% 114276 28.27% –11.09%
65 – 69 36 28.13% 103118 25.51% +2.61%
70 – 74 31 24.22% 75090 18.58% +5.64%
75 – 79 27 21.09% 52275 12.93% +8.16%
80 – 84 8 6.25% 35231 8.72% –2.47%
85 – 89 4 3.13% 24172 5.98% –2.86%
Sum 128 100% 404162 100% 0
Sylvain Hohn Financial Delegation in Late Adulthood 4 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Telephone Screening
Question 1
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Advertisement,
RecruitmentDelegation
Experiment
Willingness to
transfer decisions
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?Telephone Survey
Overall cognitive
functioning
Question 1
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Advertisement,
RecruitmentDelegation
Experiment
Willingness to
transfer decisions
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?Telephone Survey
Overall cognitive
functioning
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Sylvain Hohn Financial Delegation in Late Adulthood 5 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Telephone Example
Please count backwards from 20 to 1
I’m going to read you a list of 10 words.
Please listen carefully and try to remember them.
When I am done, tell me as many as you can in
any order. Ready?
Read words at a 1 second pace.
Now, tell me all the words you can remember.
Sylvain Hohn Financial Delegation in Late Adulthood 6 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Financial Assessment
Question 1
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Advertisement,
RecruitmentDelegation
Experiment
Willingness to
transfer decisions
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?Telephone Survey
Overall cognitive
functioning
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Question 1
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Advertisement,
RecruitmentDelegation
Experiment
Willingness to
transfer decisions
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?Telephone Survey
Overall cognitive
functioning
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Sylvain Hohn Financial Delegation in Late Adulthood 7 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Example Financial AssessmentBasic arithmetic calculation - Give person menu (Item H) and say:
You have $7.00 and want to buy lunch, here is the menu:
(i). How much would a sandwich and a coffee cost you?
(ii). What can you buy for $7.00?
(iii). You buy four oranges for $2, how much are they each?
[Correct answer= 50 cents]
(iv). You have a $5.00 note. You spend $3.60.
How much change should you get? [Correct answer = $1.40]
If person says that s/he would usually use a calculator (and has
OWN calculator with him/her) - allow person to use it and observe
procedure. Responses with/without calculator scored as below)
(i) - (iv) each correct response = 1 point
0
1
2
3
4
33.
Sylvain Hohn Financial Delegation in Late Adulthood 8 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Delegation Experiment
Question 1
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Telephone Survey
Overall cognitive
functioning
Advertisement,
RecruitmentDelegation
Experiment
Willingness to
transfer decisions
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Question 1
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Telephone Survey
Overall cognitive
functioning
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?
Advertisement,
Recruitment
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Sylvain Hohn Financial Delegation in Late Adulthood 9 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
Example Decision-Making Task (substantial)
27. Assume that you have debts on your current credit card. You come
across another card that offers substantially lower interest rates for the
balance amount that you transfer from your old card for 6 months. New
purchases, however, attract a higher interest rate than your old card offers.
What is the best strategy in paying down the debts?
Possible answers:
× Transferring all debts to the new card and closing down the old card
account.
× Not taking the new card - steadily paying off the debts on the old card.
→ Transferring all the debts to the new card, but making purchases with
the old one only.
× Making purchases with the new card while steadily paying off the debts
on the old card.
Sylvain Hohn Financial Delegation in Late Adulthood 10 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Financial Risk in Late AdulthoodResearch OverviewTelephone ScreeningFinancial AssessmentDelegation Experiment
No Revoke/Revoke
Question
1Answer
correct1 point
Question
2Answer
correct1 point
Question
3Answer
correct1 point
Question
4Answer
correct1 point
Question
5Answer
correct1 point
Question
6Answer
wrong0 points
Question
7Answer
correct1 point
Question
8Partner
transfer
Answer
correct1 point
Question
9Partner
transfer
Answer
wrong0 points
Question
10Partner
transfer
Answer
correct1 point
score:
8/10
RevokeNo Revoke
Question
1Answer
correct1 point
Question
2Answer
correct1 point
Question
3Answer
correct1 point
Question
7Answer
correct1 point
Question
8Answer
correct1 point
Question
9Answer
wrong0 points
Question
4Answer
correct1 point
Question
5Partner
transfer
Answer
wrong0 points
Question
6Partner
transfer
Answer
correct1 point
Question
10Partner
transfer
Answer
correct1 point
score:
8/10
Sylvain Hohn Financial Delegation in Late Adulthood 11 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Financial Decision Delegation
Question 1
How do key
factors such as
education, age,
gender and
option to revoke
influence the
willingness to
transfer financial
decisions?
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Telephone Survey
Overall cognitive
functioning
Advertisement,
RecruitmentDelegation
Experiment
Willingness to
transfer decisions
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Cognitive
Assessment
Executive
Functioning,
Memory
Financial Assessment
Everyday financial
abilities, estate
management, etc.
Telephone Survey
Overall cognitive
functioning
Question 2
How do different
elements of
cognition relate
to Financial
Capacity (FC)?
Advertisement,
Recruitment
Telephone Survey
Ability to
communicate,
dementia and
stroke screening
Sylvain Hohn Financial Delegation in Late Adulthood 12 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 1 (value of control)
Literature related to transfer of decision-making rights:
Concept of Desirability of Control is known for many years inPsychology literature (Adler, 1927) and instruments for measurementhave been developed (Burger and Cooper, 1979).
Largely overlooked in Economics but recently gained attention:
Self-Interest trough agents in ultimatum game (Fershtman and Gneezy,2001) and in dictator game (Hamman et al., 2010)Participants are willing to pay Control Premium in order to retain agencyover their choices (Owens et al., 2014; Bobadilla-Suarez et al., 2017)
Sylvain Hohn Financial Delegation in Late Adulthood 13 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 1 (value of control)
Members of the couple who have a lower Financial Capacity (FC) delegateless often than they should if their aim was to maximise financialdecision-making quality.
Sylvain Hohn Financial Delegation in Late Adulthood 14 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 2 (specialisation)
Most prominent theories of household decision-making:1 specialisation of tasks and responsibilities (Becker, 1965; 1973)2 bargaining power (including Bertocchi et al., 2014; Luehrmann and
Maurer, 2007; Dobbelsteen and Kooreman, 1997; Elder and Rudolph,2003)
⇒ Couples split household tasks such that each member is responsiblefor one or more domains.
Sylvain Hohn Financial Delegation in Late Adulthood 15 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 2 (specialisation)
One member of each couple has higher Financial Capacity (FC). Thisspecialist should make more financial decisions.
Sylvain Hohn Financial Delegation in Late Adulthood 16 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 3 (option to revoke)
Decision-making rights ri have a positive value1 p(ri ) such that∑ni=1 p(ri ) <
∑n+1i=1 p(ri )
Future events like health, workplace situation, force majeure are notforeseeable.→ Transferring decision-making rights for the future holds ambiguity.→ Presence of ambiguity increases perceived risk (Ellsberg Paradox)(Ellsberg, 1961).
1The marginal value of decision-making rights is diminishing (Iyengar and Lepper,2000; Vohs et al., 2008).
Sylvain Hohn Financial Delegation in Late Adulthood 17 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 3 (option to revoke)
An option to revoke financial decision delegation increases the willingness todelegate.
Sylvain Hohn Financial Delegation in Late Adulthood 18 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 4 (gender differences)
Some studies find lower levels of financial literacy in women (Lusardi,2008; Fonseca et al., 2012; Elder and Rudolph, 2003).
Gender gap decreases and often disappears at the age of expectedwidowhood (Hsu, 2011).
In Australia, men are responsible for financial decision-making moreoften then women are (Johnston et al., 2015).
When women earn a higher income than their husbands, couples oftenwork together to “produce men’s dominance in a variety of ways”(Tichenor, 2015).
Sylvain Hohn Financial Delegation in Late Adulthood 19 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Hypothesis 4 (gender differences)
Men are less likely to delegate to their spouse.
Sylvain Hohn Financial Delegation in Late Adulthood 20 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Value of Control
Participants transferring in baseline and treatment group
Transfer Rate
f m Total
No Revoke 28.13% 3.13% 15.63%
Revoke 81.25% 6.25% 43.75%
⇒ In both groups the transfer rate is less than 50%. Supports Hypothesis 1(Value of Control).
Sylvain Hohn Financial Delegation in Late Adulthood 21 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Transfer to Specialist
OLS: Influence of Financial Capacity on Financial Decision-Making
(1) (2)Dependent Var: Financial Decision-Making Score
FC 0.037∗∗∗ 0.025∗
(0.013) (0.013)Age -0.050∗∗ -0.050∗∗
(0.021) (0.021)Male 0.381 0.383
(0.270) (0.280)Schooling 0.057∗
(0.030)Constant 7.490∗∗∗ 7.608∗∗∗
(1.844) (1.833)
Obs. 128 118
Standard errors in parentheses; ∗ p < 0.1, ∗∗ p < 0.05, ∗∗∗ p < 0.01
Sylvain Hohn Financial Delegation in Late Adulthood 22 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Transfer to Specialist
Marginal Effects of Probit Estimation: Willingness to Delegate
Transfer Takes Place
Male -0.357∗∗∗
(0.051)Revoke Treatment 0.219∗∗∗
(0.056)Higher FC -0.133∗∗
(0.060)Higher Education -0.116∗
(0.065)Age -0.007
(0.005)
Observations 118
Standard errors in parentheses∗ p < 0.1, ∗∗ p < 0.05, ∗∗∗ p < 0.001
Sylvain Hohn Financial Delegation in Late Adulthood 23 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Transfer to Specialist
Financial capacity has impact on financial decision-making.⇒ Participants with lower financial capacity are more likely to transfer.
Years of schooling has impact on financial decision-making.⇒ Participants with less years of schooling are more likely to transfer.
Supports Hypothesis 2 (Transfer to Specialist).
Sylvain Hohn Financial Delegation in Late Adulthood 24 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
RevokeDifferences Between Revoke and No Revoke Groups
Obs Mean 95% CI
Financial Competence No Revoke 64 59.73 56.92 62.55(1.41)
Revoke 64 58.98 56.33 61.36(1.33)
Total 128
Age No Revoke 64 72.19 70.50 73.88(0.84)
Revoke 64 70.96 69.40 72.53(0.78)
Total 128
University No Revoke 58 0.5 0.37 0.63(0.07)
Revoke 60 0.58 0.45 0.71(0.06)
Total 118
Female Set=1 No Revoke 64
Revoke 64
Total 128
Standard errors in parentheses
Sylvain Hohn Financial Delegation in Late Adulthood 25 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Revoke
Participants Transferring in No Revoke/Revoke Group
questions No Revoke Revoketransferred participants total participants total1 0 0 11 112 4 8 7 143 0 0 5 04 1 4 3 125 2 10 2 106 2 12 0 07 1 7 0 0
Total 10 41 28 47
Sylvain Hohn Financial Delegation in Late Adulthood 26 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Revoke
Marginal Effects of Probit Estimation: Willingness to Delegate
(1) (2)Transfer Takes Place
Male -0.434∗∗∗ -0.357∗∗∗
(0.038) (0.051)Revoke Treatment 0.256∗∗∗ 0.219∗∗∗
(0.053) (0.056)Higher FC -0.133∗∗
(0.060)Higher Education -0.116∗
(0.065)Age -0.007
(0.005)
Observations 128 118
Standard errors in parentheses∗ p < 0.1, ∗∗ p < 0.05, ∗∗∗ p < 0.001
Sylvain Hohn Financial Delegation in Late Adulthood 27 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Revoke
⇒ Participants in the revoke group are more likely to delegate. SupportsHypothesis 3 (Revoke).
Sylvain Hohn Financial Delegation in Late Adulthood 28 / 34
OLS: Interaction Effects Between Revoke and Selected Variables
Transfer takes place
Gender(male=1) -0.246∗∗∗
(0.086)Revoke -0.181
(0.295)Gender(male=1) × Revoke -0.399∗∗∗
(0.118)FC lower 0.219∗∗∗
(0.082)Revoke × FC lower -0.218∗
(0.114)Education Difference -0.021∗∗∗
(0.007)Gender(male=1) × Education Difference 0.026∗∗∗
(0.010)Age -0.010∗∗
(0.004)rBIS 0.026∗∗∗
(0.010)FFFS-Flight -0.099∗∗∗
(0.030)Revoke × FFFS-Flight 0.104∗∗∗
(0.039)Partner IQCODE 0.216∗
(0.120)Constant 0.331
(0.493)
Observations 118R2 0.607
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Gender Bias T-test of Characteristics of Male and Female Participants
Obs Mean 95% CI
Years of Schooling Female 59 13.02 12.42 13.61(0.30)
Male 59 14.18 13.55 14.81(0.32)
Total 118
Financial Capacity Female 64 59.16 56.68 61.63(1.24)
Male 64 59.56 56.59 62.54(1.49)
Total 128
Financial Capacity Female 64 0.4219 0.2975 0.5462higher (within couple) (0.0622)
Male 64 0.5781 0.4538 0.7025(0.0622)
Total 128
Age Female 64 70.58 68.98 72.18(0.8)
Male 64 72.58 70.95 74.21(0.82)
Total 128
Standard errors in parentheses
Sylvain Hohn Financial Delegation in Late Adulthood 30 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Gender Bias
Marginal Effects of Probit Estimation: Willingness to Delegate
(1) (2)Transfer Takes Place
Male -0.434∗∗∗ -0.357∗∗∗
(0.038) (0.051)Revoke Treatment 0.256∗∗∗ 0.219∗∗∗
(0.053) (0.056)Higher FC -0.133∗∗
(0.060)Higher Education -0.116∗
(0.065)Age -0.007
(0.005)
Observations 128 118
Standard errors in parentheses∗ p < 0.1, ∗∗ p < 0.05, ∗∗∗ p < 0.001
Sylvain Hohn Financial Delegation in Late Adulthood 31 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
RevokeOLS: Interaction Effects Between Gender and Selected Variables
Transfer takes place
Gender(male=1) -0.422∗∗∗
(0.155)Revoke 0.466∗∗∗
(0.085)Gender(male=1) × Revoke -0.432∗∗∗
(0.121)FC lower 0.105∗
(0.061)Education Difference -0.019∗∗∗
(0.007)Gender(male=1) × Education Difference 0.017∗
(0.010)FFFS-Fight -0.067∗∗∗
(0.025)Gender(male=1) × FFFS-Fight 0.060∗
(0.033)Constant 0.447∗∗∗
(0.109)
Observations 118R2 0.544
Standard errors in parenthesesSylvain Hohn Financial Delegation in Late Adulthood 32 / 34
Research BackgroundFinancial Decision Delegation
Conclusion
Development of HypothesesResults
Gender Bias
⇒ Men are less likely to delegate.Supports Hypothesis 4 (Gender Bias).
Sylvain Hohn Financial Delegation in Late Adulthood 33 / 34
Research BackgroundFinancial Decision Delegation
ConclusionConclusion
Conclusion
Influence of key factors on willingness to delegate
Within couples financial delegation to the better financialdecision-maker is more likely.
An option to revoke can significantly increase the willingness todelegate financial decisions.
Men are less likely to delegate financial decisions, even though onaverage they are not better financial decision makers.
Sylvain Hohn Financial Delegation in Late Adulthood 34 / 34
Research BackgroundFinancial Decision Delegation
ConclusionConclusion
Thank you for your attention :)
Questions please?
Sylvain Hohn Financial Delegation in Late Adulthood 34 / 34