In 2012, Howard Marks made a simple observation about investing: Mistakes are essential to success. But not your own. Other people’s.
It sounds obvious. Learn from others. Avoid the pain.
But in practice, most investors don’t operate that way. They learn the hard way, through their own reactions, their own decisions, and their own regret.
That’s what makes this so difficult. And that’s where advisors have the most value.
Because the first step isn’t helping clients profit from others’ mistakes.
It’s helping them avoid their own.
Minimizing Mistakes Starts With Reality
If investors made decisions based purely on logic, this wouldn’t be an issue.
But they don’t.
Making mistakes is far more natural than making disciplined, long-term decisions. That’s not a flaw in your client. It’s how people are wired.
So the goal isn’t perfection. It’s putting the right defenses in place.
Because behavior doesn’t come from nowhere. It comes from perception.
And perception is shaped by the information we consume.
The Information Problem
Investors are constantly taking in information, both consciously and unconsciously.
The conscious side is obvious:
- Market performance
- Recent volatility
- News headlines
- Expert forecasts
The problem is that much of this information is incomplete, biased, or designed to provoke a reaction.
Media outlets are incentivized to capture attention. Negative stories do that better than balanced ones. If it bleeds, it leads.
Other voices in the financial space often have their own angle. A forecast. A narrative. A position to defend. Data gets selected to support the story, not necessarily to reflect the full picture.
So even when investors think they are being informed, they are often being influenced.
The Influence You Don’t See
Then there’s the part investors don’t even realize is happening.
Unconscious influence.
Behavioral science has shown us that decisions are shaped by both cognitive shortcuts and emotional responses.
These biases push investors toward fast, reactive decisions. They feel right in the moment. They often feel urgent.
But that doesn’t make them correct.
And over time, those decisions tend to show up as the same familiar mistakes:
- Buying after markets rise
- Selling after markets fall
- Overreacting to headlines
- Abandoning a plan at the worst possible time
These aren’t knowledge problems. They’re behavioral ones.
The Antidote Is Simple, Not Easy
If mistakes are driven by perception and bias, the solution isn’t more information.
It’s better processing.
The first step is helping clients understand that their reactions, even the strong ones, are normal. This isn’t about intelligence. It’s about being human.
From there, you need a process that slows decisions down.
And the most effective one is simple: Talk it through.
Engaging the Pre-Frontal Cortex
When clients talk through a concern, something important happens.
They move from reacting to thinking. From emotion to analysis. From impulse to comparison.
That shift activates the part of the brain responsible for reasoning and decision-making. It doesn’t eliminate emotion, but it balances it.
Now instead of reacting to a headline, clients can:
- Compare options
- Reconnect to their plan
- Evaluate tradeoffs
- Consider consequences
That’s where better decisions happen.
But that process doesn’t activate on its own. It has to be triggered.
The Value of an “Open Door” Policy
Most advisors assume clients will reach out when something feels off.
Many won’t.
They don’t want to overreact. They don’t want to be “that client.” They tell themselves they should be able to handle it.
Until they can’t.
And by the time they do reach out, the decision is already forming. The emotional momentum is already there.
That’s why an open door policy matters. But more importantly, it needs to be actively reinforced.
Clients should know, repeatedly, that reaching out early is part of the process, not a sign that something is wrong.
Because the earlier the conversation happens, the easier it is to guide the outcome.
Where Advisors Create the Most Value
Avoiding mistakes doesn’t show up on a performance report.
But it shows up everywhere else.
It shows up in following the plan, avoiding the pain of regret, and improving the overall investment experience.
And that’s where advisors separate themselves.
Not by predicting markets nor reacting faster.
But by helping clients think better before they act.
This is exactly why so much of the work done at Behavioral Finance Network is centered around communication. The right message, at the right time, can change how a client processes what they’re seeing and feeling.
And that often makes the difference between a mistake and discipline.
The Bottom Line
Everyone agrees that learning from others’ mistakes is better than learning from your own.
Very few investors actually do it.
Because in the moment, it doesn’t feel like a mistake. It feels like the right move.
That’s why the real job isn’t just providing answers.
It’s helping clients slow down long enough to think clearly.
Because when they do, they put themselves in a position to avoid the mistake altogether.
And that’s where long-term success really comes from.