Measures of Financial Capacity: A Review

Abstract

Measurement of financial capacity is complex and multidimensional. When selecting a measure of financial capacity, consideration should be made of the population of focus and the domains of capacity to be assessed. More work is needed on the cultural sensitivity of financial capacity measures, their acceptability, and their use in clinical work. Better understanding of when, and to whom, to administer different financial capacity measures could enhance the ability to accurately detect those suffering from impaired financial capacity, and prevent related negative outcomes like financial exploitation.

Informant Report of Financial Capacity for Individuals With Chronic Acquired Brain Injury: An Assessment of Informant Accuracy

“…Based on the current findings, we can suggest some strategies to approach this question, (1) Practitioners should preferably rely on collecting objective data whenever possible. This can be accomplished by using available instruments such as the FCAI, the financial domain in the Texas Functional Living Scale (TFLS)/Test of Everyday Functional Abilities (TEFA), among others (for a full review see 24,49,50 ), (2) For data which cannot be objectively collected (such as for understanding whether the individual budgets), the practitioner can gather such information through carefully worded questions. Instead of asking abstract and open-ended questions, practitioners can ask concrete questions with forced choice answers.…”

“…A variety of instruments are available for assessing FC and it is important to consider the psychometric properties of the instrument including the sample in which the instrument has been validated 24,49,50 . Another important consideration is the ease of accessing the instrument for clinical work and research.…”

Know thyself financially: How financial self‐awareness can benefit consumers and financial advisors

“…" Cramer, Tuokko, Mateer, and Hultsch (2004) developed a measure for assessing Awareness of Financial Skills which asked about difficulty with performing 34 different tasks, such as counting currency, writing checks, and balancing a check-book. The focus of their research was on financial incapacity of seniors, particularly those with cognitive deficits, such as dementia (Ghesquiere, McAfee, & Burnett, 2019). In contrast, our measure is applicable across the demographic spectrum and measures a broad-based understanding of one's current financial situation.…”

Investing: the case for recognition as an independent capacity

“…Thus far, reviews of FC instruments have overlooked the significance of the transaction of investing to the process of money management. Two separate reviews examined 88 and 10 financial capacity assessment instruments, respectively (Engel, Bar, Beaton, Green, & Dawson, 2016; Ghesquiere, McAfee, & Burnett, 2017). In Engel and colleagues’ review, they note that the comprehensiveness of an instrument is determined by the degree to which it “measures the entire construct of financial management skills”, and they identify nine skill domains “inclusive of all items found” across the instruments they reviewed.…”

“…For example, such instruments may focus on only one (decision-making) skill set of the entire range of skills that are required to complete investment transactions appropriately. Additionally these instruments provide only a small number of investing related items, rendering it difficult to make robust clinical conclusions with regard to either global investing capacity or any of the individual investing skills that the instruments do include, and appropriate interventions that compensate for investment skill weakness and build upon investment skill strength (Engel et al, 2016; Ghesquiere et al, 2017).…”