The Old “Borello” Test

Prior to the California Supreme Court’s ruling in Dynamex, the Borello test prevailed. Under the Borello “economic realities test,” courts first evaluated whether the person to whom service is rendered has the right to control the manner and means of accomplishing the results desired. Then, a number of additional factors are taken into consideration, none of which are dispositive on its own, but all of which are evaluated in the totality of the circumstances. These factors generally included:

1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
2. Whether or not the work is a part of the regular business of the principal or alleged employer;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job; and
11. Whether or not the parties believe they are creating an employer-employee relationship.

The New “ABC” Test

The Supreme Court in Dynamex reevaluated the multi-factor Borello test, and as a result there is a new, three-factor “ABC” test used when evaluating whether a worker has been properly classified as an independent contractor. The Court held that the analysis begins with the rebuttable presumption that a worker is an employee and that an entity classifying a worker as an independent contractor bears the burden of rebutting the presumption by establishing each of the following three factors:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Failure to satisfy any of the three factors of the ABC test results in a finding that the worker is an employee and not an independent contractor.

What This Means for Hiring Entities

The new ABC Test provides a more rigid framework for compliance and less flexibility in the “grey” areas. As a result, hiring entities should be cautious when classifying workers as independent contractors to ensure that the worker’s classification will satisfy the ABC test. Hiring entities are encouraged to seek the advice of experienced legal counsel whenever classifying certain workers as independent contractors.

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The state accounts for 12% of the population, but has outperformed that (percentage-wise) in almost ever economic metric. Coming out of the great recession, in the years 2012 to 2016, California accounted for 17% of the growth in the U.S.

Industries in California have also flexed their muscles. Tech, shipping, and entertainment have also turn the tables to recovery faster in California that elsewhere. We find numerous California companies living on the Fortune 500 list. Most would know Apple, Wells Fargo, and Hewlett-Packard. But cities like Los Angeles are quietly the home of engineering and constructions behemoths such as CBRE Group, Aecom, and Reliance Steel & Aluminum.

Among other Fortune 500 companies in the state are companies like McKesson, Oracle, Disney, Facebook, Qualcomm, Gap, Western Digital, Mattel, Schwab, and, well, a few dozen more.

On downside noted is that with more success, California has a greater downside if the economy reverses, but let’s be happy we’re on the right side of this economy for now! •

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Financially, what does this mean? We that remains to be tallied, but ESPN has already said the Rams value has gone from $1.45 billion to about $2.9 billion since the move. Yup, doubled.

The Los Angeles Times has published estimates that with the completion of the $2.6 billion stadium to be shared between the Rams and Chargers, a team like the Rams could bring in $330 million a year.

Of course that could go up or down, depending on lots of other factors, but if this past season is any indication, Los Angeles just might choose to rally round their long lost Ram team with a lot of dollars going into the team coffers! •

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January saw long lines outside new dispensaries, extended hours, and shortages. Weed business is definitely booming in the golden state.

The Marijuana Business Daily recently reported on some examples of retailers not just cruising. One retailer had been seeing about 150 customers a day (medicinal), only to see that jump to more than 300 a day in the new year.

Workers in the shops are working long hours trying to keep up with the demand. One retailer was quoted as saying they are hiring as fast as they can to help out. They are hiring for “every single position” in their business! •

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“Home sales will likely continue to struggle as we enter 2018, slowing the flow of agent fees,” told First Tuesday Journal, a top California real estate publication. “Historically low inventory for sale coupled with rapidly rising prices have discouraged potential home buyers.”

The publication also predicts the next rise in sales won’t likely be until 2019. That is, assuming residential construction can increase enough to boost turnover and inventory.

That being said, real estate agent Stephanie Vitacco of Keller Williams sees homes selling when priced at just the right spot. “The inventory in the San Fernando Valley is at one of the lowest levels I’ve seen in more than 30 years of selling. Houses are moving but the price point is tricky. Priced a tad too high and the house will sit. Priced correctly and there are multiple offers.”

Meanwhile, the California Association of Realtors reports that median prices in the state remain high. Median prices across the state averaged more than $540,000 (as of November 2017). Sales to list ratios, a measure of negotiation potential has been around 98.9%, meaning homes have been selling for just about listing price during the recent past.•

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Jeff established JDM in 2002 so that he could advise clients outside the sales culture of Wall Street. Prior to launching JDM, Jeff worked as a Financial Consultant and Certified Financial Manager at a leading global investment firm.

He earned his CFP® designation from the College for Financial Planning, a Master of Science in Financial Services from the Institute of Business and Finance, a Professional Designation in Personal Financial Planning from UCLA, and he has completed executive education at Harvard’s Kennedy School of Government in Investment Decisions and Behavioral Finance. Jeff has also served as a Certified Financial Educator with the Heartland Institute of Financial Education, is certified in Long Term Care, and has a California Life Insurance license.

Does JDM Financial Group have an investment philosophy?

We base our approach on the belief that good financial decisions must be good life decisions and, therefore, that financial decision making should begin with an understanding of a client’s values and goals.  In this way, our advice is customized to each client.

What advice do you have for investors looking to a trusted advisor?

You may trust your financial advisor.  But for them to be worthy of this trust, they should be acting only in your best interest.  In other words, they should be acting only in the capacity of a “fiduciary.” A fiduciary is a professional who is required by the regulations that govern him or her to put clients’ interest ahead of their own when providing advice. To know if your financial advisor is a fiduciary (and worthy of the trust you place in him or her) or just a sales professional (caveat emptor), you need to investigate.

How do I know I am not overpaying for my investments?

When it comes to investment expenses, a good financial advisor minimizes your costs and maximizes your benefits. If a mutual fund or money manager is charging, say, 1%, then this manager should be outperforming peers that charge less.  It is not simply a question of cost but of value and optimization.  A good advisor helps you optimize. A client should ask their advisor for this type of analysis.

Why the concern about investment commissions and the importance of only paying “fees?”

Your advisor should work for you and, therefore, be paid only by you. If an advisor can receive payment from a mutual fund company in the form of a commission, then this advisor may not be acting with only your interests in mind. If an ­advisor can accept investment commissions, then his/her decisions may be influenced by a commission structure or other hidden incentives.

What are some of the common mistakes you see investors making today?

For clients who have an advisor, the most common mistake is not being aware of the incentives driving an advisor’s advice.  As a client, it is important to be clear on how certain advice may be influenced by how an advisor is compensated. Ideally, the advisor receives the same compensation regardless of the advice they render.

For clients who don’t have a financial advisor, the mistake is waiting until costly mistakes are made before hiring a trustworthy and capable professional. It can be difficult to find someone that you like and trust but it is important to keep searching until you find an expert who can help you get this right. •

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She was previously President of Stone, Harris & Stone, which was acquired by Poms & Associates in March 2012. In the years that she was with Stone, Harris, & Stone, Vikki increased gross premiums from $4 million to more than $20 million annually. In the five years she was president of the company, she grew the organization 70 percent.

Vikki earned a Bachelor of Science in Finance/Business Administration from the University of Southern California, Marshall School of Business.

In 2007, in recognition of her stellar leadership, Vikki was named “Women’s CEO of the Year” by the San Fernando Valley Business Journal.

In 2012 and 2016, she was named Property & Casualty Producer of the Year at her current agency. Over the years you’ve developed a real expertise in business insurance and commercial property and casualty for manufacturers and distributors.

What are the most common problems you find when you look into a potential client’s existing policies and coverage?

It’s the old expression, “the devil is in the details.” Insurance companies giveth and taketh away in the policies and they are very challenging to comprehend. When we review policies, we often find critical coverages improperly written or endorsements missing that could have a profound impact on the outcome of a claim.

A lot of people say “insurance is insurance,” but when we spoke to some of your clients, they told us you really are unique not just an “insurance person,” but a trusted advisor to company owners and CEOs. What makes you so unique and so valuable?

We look at what is driving the claims. We dwell down on what the “cause” is in addition to the placement of coverage. When we start to identify what the causes of loss are, the types of injuries, we send in our Risk Management and Loss Control teams to work with our clients to create a safer environment. We look at the culture and ways to elevate teams. Work Comp claims and premiums are one of the biggest items on a company’s P&L, they are painful and California is a very challenging state to do business in. We also focus on open claims and work with the carriers to make sure they are not over reserved and work hard to get the claims closed. All of this ultimately results in the lowering of premiums.

You’re a bit of an innovator, searching for unique insurance products. For example…drones! How did you get into drone coverage, and become known as the “queen of drone” insurance?

LOL, I am most certainly not the “queen of drone” insurance. A few years ago, I had a great opportunity come my way and recognized what was on the horizon. I was fortunate to have the support of Dave Poms to create a program to place coverage for drone manufacturers, distributors and operators.

If you were speaking to a group of business owners, let’s say manufacturers and distributors specifically, what advice would you give them when shopping for new policies or insurance agents?

Focus on your Risk Management, Loss Control and culture. Look at the source of the problem. I often use the example of… you go to the doctor and say you have a pain in your stomach and the doctor gives you a pill to alleviate the pain. I would choose to have a doctor say, let’s look at what is “causing” the pain and if we can get rid of that, you don’t need a pill.

You need to dwell down on the why and be willing to look at that. I can place coverage, we are strong negotiators and technically savvy…it takes more to tackle the real issues in a company. •

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HP, Dell, and Lenovo make great computers.

But Apple is a great brand. Adidas and Converse are excellent shoes. But Nike just does it.

BMW and Toyota make amazing hybrid cards. But Tesla? Well, they’re Tesla.

Some brands seem to be born leaders. Forged in the fires of competitive marketplaces, they find a way to rise above the competition. They grow fast. They become more profitable, more quickly.

But possibly the most powerful asset they develop is the intangible. They have “it.” The right stuff. Marketing mojo. Southwest. Amazon. Fitbit. Chipotle. GoPro. Starbucks. However, the list is not endless. In fact, it’s very limited. These are these brands “Alpha Brands.” Like the Alpha Dog, they are leaders of the pack. The may be bigger, or not. They may be tougher, or not. But one thing is undeniable—they are recognized by all as leaders.

And lead, they do. They lead in style and substance. What they do is not always successful, but it is always substantial. And significant.

Walmart is a market leader because they sell more. But they don’t have “it.” Toyota is a powerful brand, but not an inspirational brand. Jet Blue is innovative, but not a major force in its industry.

What makes an alpha brand standout, not just as successful but as an icon? What makes us go from liking or wanting their products to intense desire, respect, and admiration? What makes people “disciples” or even evangelists of Alpha Brands?

This was the basis for a meta research project I embarked upon with an elite group of graduate and undergraduate students at Pepperdine University. Thus began our search to decipher the Alpha Brand code.

THE ALPHA MENTALITY

We’ve all heard of the Alpha Male. It comes from studies of wolves, originally by Rudolph Schenkel in the 1940s. It was then greatly updated and expanded with a book called The Wolf: Ecology and Behavior of an Endangered Species by David Mech.

The actual theories have migrated away from the aggressive dominance of these wolves into more of “leader couples” that procreate new packs of offspring. The concept of “alpha” has since taken on an identity of its own in modern business.

Today we think of Alpha Brands as companies, brands of products that are leaders. They are not just leaders but they are powerful leaders, leaders with distinct points of view, with the power to stand up to others, and with an unrelenting sense that leadership is in their brand DNA. Our studies have indicated these brands share key traits, traits that become almost synonymous with their markets, or certainly innovation in their markets. They command respect, market position, and excessive brand value far beyond competitors.

Armed with an understanding of these traits, we set about to find what actions caused them to emerge. Our goal was to final causal relationships—things that these brands did that caused them to be who they are.

The result is a list of nine different business practices and attitudes that are found in all of our Alpha Brand examples. Remember that some companies may in fact be larger. Others may command great marketshare, mindshare, or brand equity. But Alpha Brands seem to transcend simple financial success, and they win over the hearts and minds of customers.

Here’s a rundown of the traits our findings revealed about Alpha Brands.

Innovation

Clearly this is a dominant trait. Alpha Brands appear to gain large and rapid followings as a direct result of innovation. As an example, this is the hallmark of Apple. Their products are cool, hip, problem solving, and innovative. While some will argue who the inventors of products actually were, the collective consumer mindset sees Apple as the innovator of the GUI (graphic users interface) personal computer, the iPod (and MP3 players), the iPad (and media-based tablets), and the iPhone (smartphones in general).

Differentiation

It takes guts, but it pays to take the risk and be different. CNN changed television and news forever with the 24-hour news channel. Prior to CNN, news was only found a certain hours on television, or in a pinch, “news breaks” when things when there was breaking news to be found. But CNN opted to be different. Many thought they couldn’t fill the 24 hours and that viewers would tire.

Rapid Rise To A Leadership Position

Fitbit enjoys one of the rare-air branding perks of being a product that has become a common term. Just as Kleenex is often used as a term for facial tissue, Fitbit leaped on the scene shortly after the great recession, and emerged as a cool tech/fitness device. The company has had operation and financial issues, but less than a decade later, it is still synonymous with fitness tracking.

Response to Hidden Customer Wants/Needs

Listening to demands of a customer or client is key to building a better mousetrap. For decade upon decade, sports fans devoured the sports pages of newspapers. As television moved into media dominance, the Entertainment and Sports Programming Network emerged as a sports-lovers dream channel. Whereas newscasts only devoted only a small percentage to sports scores, and newspapers and magazines offered deeper though less timely sports coverage, ESPN was the fix sports addicts secretly hungered for. ESPN recognized a deep desire and fulfilled it with what is still to this day, some 30 years later, a market leading media property.

Fearless Perseverance

Sticking to what you passionate about is critical to becoming an Alpha Brand. I remember attending a tradeshow where the fledgling company GoPro was giving away free cameras. They looked like little toys, and people literally handed them back when they got them. Little did they (and me) know what was to come. These little cameras were revolutionary. They were easy to use, durable as heck, and launched a whole new category of photo product. GoPro has not sat back on its laurels. It has in fact continued to lead and dominate the action camera market, despite the entry of from large companies like Sony, Garmin and Polaroid.

Profound Belief In The Concept

Much has been written about Phil Knight and Bill Bowerman, creators of Nike. But unless you have read about their early history, you might not realize that they started business as Blue Ribbon Sports. They operated that way for years before parting ways with their major supplier. Renamed as Nike, their first ad campaign, “There is no finish line,” launched the brand into a new direction. Rather than rely on features and specifications of shoes, Nike embarked on created a brand attitude. This morphed into “Just Do It” a few years later, and the rest is truly brand history. Phil and Bill brought intimate market knowledge to their brand and let that emerge as a primary force for selling the product.

Clear Understanding of What Their Customers Value

As airlines fought to provide new services, including many tied to upper class service and new large-scale aircraft like the Boeing 747, Southwest Airlines bucked the trends. By researching, studying, and testing new services (or lack of) Southwest realized that their customers wanted cheap flights, lots of them, and would give up assigned seats, meals, and priority boarding to get what they wanted. It was only by knowing this that Southwest was able to innovate and dominate the short haul air business.

Accept Risk (Fight)

Steve Ells worked in food, and witnessed the rise in popularity of taquerías and mission-style (oversized) burritos, but a burrito-focused restaurant was an iffy proposition at best. Launched with a loan from his father, Ells figured he needed to sell about 100 burritos a day at his restaurant Chipotle. While not impossible, this was in the face of competition around literally every corner. By his second month, he was selling more than 1,000 burritos a day. Growth was rapid and soon he was seen as a challenge to major chains. But thanks to the innovative assembly line, a huge following among college students and millennials, not to mention an influx of investment from McDonald’s, Ells beat the odds, and the competition, to brand leadership.

Clear Understanding of Market Positions

A century ago, furniture was an investment. Craftsman built tables and chairs and sofas, many of which are still around today. By mid-last century, economy versions were appearing. Ikea, a Swedish startup in the 1940s, wove its way into a unique niche. They created furniture with modern Scandinavian design, easily transported and assembled, and affordable. With this unique positioning and product offering, Ikea was able to avoid head-to-head competition in many furniture niches, and found this unique brand was easily exported to other companies. They still operate on basically the same concept with more than 400 stores in more than 40 countries, selling nearly $40 billion a year. •

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Fatherhood has a way of forcing us to reexamine our views in a way that is always not so easy.

I always felt that, as a father, part of my role was to try to put my son’s newfound experiences into perspective. He had just graduated college and was starting a new job. He was on his way to a successful career, and we had frequent discussions about success and what that meant. I wanted to give him the benefit of my hard-earned wisdom, so I decided to spend some time determining my own definition of success.

I wanted a simpler way to measure success that I could pass along to my son. Otherwise, how would he know what success looked like? How would he know if he had achieved it? How would he know when it was okay to step off the treadmill?

How do any of us know?

This is what I came up with: “Success is the ability to do whatever you want to do, whenever you want to do it, with people who are meaningful to you.”

I was struck by how this definition gave each of us wide latitude for tailoring it to our own lives. It did not prescribe any specific elements or prerequisites. It did not even address the acquisition of wealth or power, only what we chose to do with it, and whom, if anyone, we chose to do it with. Most importantly, it addressed the ability to reclaim and use time—truly our most limited resource.

I tried this definition out with one of my clients, a woman whose company had grown exponentially in the last few years. “You missed one of the most important parts of success,” she scolded me. “I have the ability to do whatever I want, whenever I want. I just don’t have the freedom to do it. I’m way too busy growing my company.”

I revised my definition: “Success is the ability and the freedom to do whatever you want to do, whenever you want to do it, with people who are meaningful to you.”

Clearly, success is not about stopping the activities that have given you financial freedom. It is about stopping the activities that prevent you from enjoying that financial freedom.

Some people never retire — not because they want more money, but because they truly love their jobs. They love waking up in the morning and doing their work. Albert Schweitzer, winner of the Nobel Peace Prize, said, “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.”

I remember my experience as the head of children’s entertainment at A&M Records. I was traveling all over the country, staying at the best hotels, eating at the finest restaurants, going to the greatest concerts and surrounded on a daily basis by interesting, forward-thinking creative people. I really loved my job. I woke on Monday with the same enthusiasm with which I woke on Saturday.

One day, I was speaking with one of my colleagues at the record company after a pretty amazing concert the night before. We both just couldn’t believe we were 27 years old and were living a life that as teenagers we could only dream about. “I would do this job for free,” my colleague exclaimed.

We didn’t know it, but we were already successful. We already did what we loved all the time with people we enjoyed. At a young age, we had achieved what so many never do.

There was a great column by Panos Mourdoukoutas in Forbes Magazine that, interestingly, appeared on a New Year’s Day, that time of year when so many people are making resolutions. It explained his view of the correlation between success and being happy. He asked the reader to consider two simple questions: “What am I doing today?” and “Why am I doing it?”

“If you are happy with the answers you came up with to both questions, get out of bed and enjoy the day,” he wrote. “If you are struggling to find the right answers, close your eyes and go back over the items on your to-do list.”

Imagine if you didn’t like the answers. Perhaps the top of your list might be filled with admirable goals and tasks—but they’re not right for you. They are right for somebody else who has been setting your agenda, or perhaps for the someone you think you should become. The goals that are important, the ones that will move you toward the happiest life, may have been systematically pushed down to the bottom of your list, minimized over time or even forgotten. That’s how you can wake up and wonder why if you have so much money and “success,” you are still unhappy.

People still think of success as the precursor to happiness, but the ladder of success leads, rung by rung, merely to more success. You might get the promotion or the bigger paycheck, and you are still nowhere even near the ladder to happiness.

It’s a terrible wake-up call, the kind Peggy Lee sang about. “Is That All There Is?” is a profound expression of disillusionment. The lyrics tell of a life’s major milestones, followed by that question — Is that all there is? After so much achievement, why does it all feel so empty?

The endless pursuit of success is understandable if you’re still hustling to pay your rent. There is a minimum level of financial security that people absolutely must have for shelter and food. Once those basic needs are met, though, there is time and energy for focusing on other types of goals, such as being happy.

Are your basic needs met? If so, it is time to take a hard look at how much time you need to spend following the money, and how much time you would like to spend following your passions.
Draw a vertical line down a piece of paper. On the left side, list your successes and accomplishments. On the right, make note of the specific moments of happiness each of these accomplishments afforded you. Were they worth it?

On a second sheet of paper, write down all of the experiences you wanted to have—alone or with others—that you couldn’t because you were busy pursuing success. Was the success worth it?
How do you know when you have achieved success: When you have given yourself the ability and freedom to do whatever you want to do, whenever you want to do it, with people who are meaningful to you.

To be clear, I am not opposed to making money. The problem with the endless pursuit of success is not the success or the money; it’s the endless pursuit of it—usually to the exclusion or minimization of the moments that make us happy.

Take the time now to reorient your energy toward enjoying happiness on your journey. It doesn’t mean you have to quit your job or give away your fortune. On the contrary, it means that the pursuit of success should afford you the ability to enjoy all of those moments of happiness.

Now. While you can. •

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