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What's Really the Hardest Talk to Have With Your Parents

It's tougher than telling them to give up their car keys

By Chuck Jaffe

(This article previously appeared on

Adult children often have trouble telling their elderly parents when it’s time to give up driving. It may be even harder telling mom and dad that they need to give up the keys to their investment portfolio and to running their life’s savings.

And yet a recent study by researchers from the University of Missouri and Texas Tech University confirms that many adults need to do just that with their aging parents because older adults have a “toxic combination” of high self-confidence and low financial literacy.

Countless studies have shown that cognitive abilities diminish with age, and it would seem obvious that this extends beyond driving and decision-making and into financial literacy. The study confirmed that intellectual decline for the average person, but coupled it with research showing that older individuals retain their self-confidence about their financial knowledge.

Intellectual Decline and Financial Fraud

That increases both the potential for honest mistakes and for becoming a victim of financial fraud, where the elderly are a prime target of scammers.

Specifically, the study by Mizzou’s John Howe as well as Michael Finke and Sandra Huston from Texas Tech put nearly 4,000 individuals aged 60 and up through a financial literacy assessment test, with questions about investing, insurance, savings, borrowing and more.

The results showed the older someone gets, the more likely they are to experience a decline in their ability to understand and make good decisions about personal finances. They might think a savings account is the best place for long-term growth of their money, for example, or they might not understand how borrowing money impacts their net worth.

Despite the diminishing cognitive abilities, however, the researchers found that participants’ self-confidence actually increased slightly.

Diminishing Cognitive Abilities, Rising  Financial Self-Confidence

In short, the more disconnected the seniors became from reality, the more they believed they could do a grand job making decisions about their money and investments.

“If you can anticipate this and see it coming, you can begin to watch for it, you can ask your family doctor about doing basic tests as part of an annual physical and more,” said Howe. “You can also start to take steps — like working with an adviser, or simplifying [a portfolio] or working with the kids — that can help to minimize the problem.”

Anticipating these issues is one thing; getting an elderly parent to act on them is another.

Many families have a hard time talking about money, and many older parents believe that when their adult children take an interest, it is in order to take control and/or secure some future payout.

How the Financial Services Industry Makes Things Harder

Even if someone recognizes the predicament in themselves and bypasses the family to hire financial help, they’re stepping right into the line of fire, trying to hire an adviser or working to overhaul a portfolio just as it’s becoming tougher for them to know who to trust and how to trust-but-verify a new planner’s pitch.


The financial-services business compounds the issue by advocating portfolios that are overly diversified and complicated. The new advisers that seniors seek out typically will want to construct “optimal” portfolios, adding complexity by throwing more funds into the asset mix in the search for the perfect result.

Savvy seniors — those with a good handle on their financial cognitive abilities — want their portfolios simple and streamlined as they age.

I have seen this firsthand, more than once.

My Dad, My Mom and Their Money

My father’s interest in managing his money and taking a hands-on approach picked up dramatically when he took a step into semi-retirement. A decade later and fully retired, however, he was anxious to simplify his portfolio, to hold fewer investments.

He used required minimum distributions to eliminate accounts and streamlined his portfolio by eliminating a number of smaller holdings. In the last few years before he died in 2012, he still was making the decisions, but had stopped doing his own research and was mostly relying on an adviser (me) to keep him updated on the quality of the portfolio and the need to make any changes.

Ironically, days after the Missouri/Texas Tech study was released, my mother — who inspired my interest in investing and who, in her late 80s, still reads balance sheets and proxies more carefully than most investors I know — said she was starting to feel like overseeing her investment portfolio had become a bit daunting.

A few years back, my mother made the decision to give up driving, without anyone needing to fight her for the keys. She’s not ready to step away from her investments by any stretch, but knowing that she is starting to seek out more help and wants a simpler portfolio will make it easier to advise her going forward.

“Most people don’t quite recognize that it’s becoming challenging, or that they’re spending less time on it and still thinking everything is OK,” said Howe. “The earlier that families can have talks about these issues and take control, the more someone can be confident about their finances as they age. … They can be confident that they have everything in place so that if and when the time comes that they need help, they’re getting it from people they trust, and people who know them and know what they were thinking about their money when they had all of their cognitive abilities.”

Building a relationship with a financial adviser starting earlier in life also lets that planner learn your money personality and may help them recognize when the cognitive issues are starting to occur, allowing them to alert family and leading to better transitions.

Said Howe: “No one knows when these problems will occur in their own life, but live long enough and you are likely to experience them. Planning for them in advance is the best way to make sure this is not a problem you have later in life.”

Chuck Jaffe is a senior columnist for MarketWatch. Through syndication in newspapers, his "Your Funds" column is the most widely read feature on mutual fund investing in America. He also writes a general-interest personal finance column and the Stupid Investment of the Week column. Chuck does two weekly podcasts for MarketWatch, and frequently makes guest appearances on television, and on radio shows across the country. Read More
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