As the sands of time slowly dissolve into the bottomless pit of eternity's hourglass, it helps to use important mileposts like the advent of a new year to measure how far we've moved since the last milepost. 2013 was supposed to bring the issue of the fiduciary standard to a head. Instead, delays have moved that into 2014. But 2013 proved that time eventually erodes all myths.

“Morningstar Star Ratings: Do They or Don't They Predict?” (FiduciaryNews.com, Jan. 29, 2013) The idea that mutual fund rating agencies might have lost their magic stems from the trend of moving to single portfolios, which called into question the relevance of those rating agencies. But, upon closer analysis, we began to wonder if the ratings really meant anything in the first place. Early Morningstar studies indicated their ratings weren't meant to be predictive. After conflicting subsequent studies, most seem to agree it's best to use Morningstar for its data aggregation value and not its ratings system.

“Anticipating the Bond Bubble Burst: Protecting Your 401k Plan,” (FiduciaryNews.com, March 19, 2013) This article in itself merely repeated the warnings of the last three years. This time, however, the real danger would show up sooner. When the feds began to hint about quantitative easing, bond funds and certain balanced funds felt the pinch of a sudden rise in interest rates. So, while the equity markets teased all-time highs, bond funds lost money.

Although this wasn't the “bondocalypse” everyone had been worrying about, it was a hint of things to come. According to a New York Times article, bonds lost 3.7 percent in May and an additional 2.7 percent in June. Bond funds might have been the hardest hit, but those increasingly popular single-portfolio funds were hit, as well.

Will the falling bond market move more 401(k) investors toward all-equity funds balanced by a touch of stable value funds? We might find the answer in 2014.

“A 401k Must Read: Mutual Fund Expense Ratio Myth Busted,” (FiduciaryNews.com, Oct. 9, 2012) Don't let the publication date fool you. Despite its appearance in late 2012, this was one of the most widely-read articles in 2013. We might want to consider why. The DOL's new mutual fund fee disclosure rule only became effective in July 2012. It took another six months for everyone to get some semblance of the data, bringing us into 2013. Since the focus was on lowering fees, it drew greater attention to the common fallacy that low-expense always do better than funds with higher expenses.

This became significant for two reasons. First, it showed, using actual data, that the commonly held belief in the relationship between low fees and higher returns really only applies to index funds, not actively managed funds. Second, this reality is consistent with the DOL's advice not to look solely at the lowest fee and to consider other, perhaps more important, value considerations (e.g., better performance).

In the end, we learn that “lowest fee” is not the panacea we might have thought it was in mid-2012 at the onset of the fee disclosure rule. It will be interesting to see how this plays out going forward.

What surprises does 2014 hold for us? What new lessons will we learn? What old myths will be quashed? With regulators edging toward some form of universal fiduciary standard, the next 12 months may prove to be the most significant year in a while.