Best Practices

Selecting and Managing Municipal Advisors

Issuers should hire a municipal advisor (MA) prior to the undertaking of debt financing unless the issuer has sufficient in-house expertise and access to current bond market information, and issuers should select municipal advisors on the basis of merit using a competitive process and that issuers review those relationships periodically.

Note: This Best Practice (BP) is one of a group of five relating to the sale of bonds. These five BPs should be read and considered in conjunction with each other because of the interaction of the processes to which they apply. The five BPs are:

State and local governments engage MAs to assist in the structuring and issuance of bonds whether through a competitive or a negotiated sale process. While governments may hire MAs for other types of financial transactions, such as investments and swaps, this Best Practice is focused on MAs used primarily in conjunction with a bond sale, bank loan, or direct placement. A MA represents the issuer undertaking a debt obligation , and unlike other professionals of the financing team,, an MA has an explicit duty of care and duty of loyalty (a fiduciary duty) to the issuer per the Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Additionally, since the implementation of the 2010 Dodd-Frank Act, MAs are required register with the Securities and Exchange Commission (SEC) and Municipal Securities Rulemaking Board (MSRB) and meet professional and testing standards. Issuers should be aware that MSRB Rule G-23 prohibits a broker-dealer firm that also provides financial advisory services (in contrast to a non-broker-dealer municipal advisor) from serving as a MA to the issuer and an underwriter on the same transaction. Finally, it is important for issuers to become familiar with MA and underwriter responsibilities as discussed in the materials related to the SEC’s Municipal Advisor Rule. Resources to help issuers become familiar with the Rule are included in the references section of this document.

GFOR recommends that issuers hire a MA prior to the undertaking of debt financing. Issuers should ensure that the municipal advisor has the necessary expertise to assist the issuer in determining the best type of financing for the government, selecting other finance professionals, planning the bond sale, and successfully selling and closing the bonds. While a MA plays a key role on the financing team, it is important to note that the issuer remains in control of the decision-making process necessary for the issuance and sale of the bonds or implementing the financing.

The GFOA recommends that issuers select MAs on the basis of merit using a competitive process and that issuers review those relationships periodically. A competitive process using a request for proposals (RFP) or request for qualifications (RFQ) process as applicable provides the necessary information to objectively compare the qualifications of proposers and to select the most qualified firm based on the scope of services and evaluation criteria outlined in the RFP. Standards related to the selection and hiring of MAs should also be included in a government’s debt management policy, along with a statement of the government’s policies supporting diversity, equity and inclusion. The selection and use of MAs may vary depending on the level of municipal market knowledge, expertise, and experience of the issuer’s staff.

Before starting the RFP process, issuers should determine if it is seeking one MA for a specific transaction or a pool of MAs to select from for future transactions. Small governments may be looking to hire a MA to assist with a single transaction, whereas larger governments may retain a MA to assist them with a broad scope of work, in addition to possibly creating a pool of advisors to choose from for transactions that the government anticipates doing for a period of time (e.g., 3 years).  The RFP should be very clear as to the goal of the RFP, the required/scope of services being sought, contract timeframe, and type of relationship/communications needed throughout the specified PERIOD. In addition, the RFP should comply with applicable procurement requirements (i.e. diversity, equity, and inclusion and definitions thereof established by the entity).

The municipal advisor’s experience, expertise and relationships with external financial partners are extremely beneficial in assisting the issuer weigh the costs and benefits of various financing options.  Utilizing a municipal advisor when determining the type of financing vehicle, i.e., whether to do a competitive sale, negotiated sale, or bank placement is recommended. These discussions contribute to building communication and a relationship with the municipal advisor who is acting as the issuer’s fiduciary and trusted partner in the debt issue.   

Request for Proposal Content. The RFP should include at least the following components:

  • The MA is registered with the SEC and MSRB. Issuers can determine this by visiting the SEC website at and the MSRB’s municipal advisor registration page at 
  • A clear and concise description of the scope of work, specifying the length of the contract and indicating whether joint proposals with other firms are acceptable. 
  • Clarity on whether the issuer reserves the right to select more than one MA or to form municipal advisory teams. 
  • A requirement that all fee structures be presented in a standard format. Issuers also should ask all proposers to identify which fees are to be proposed on a not-to-exceed basis, describe any conditions attached to their fee proposal, and explicitly state which costs are included in the fee proposal and which costs are to be reimbursed. Any MSRB fees imposed upon municipal advisors should not be passed through to the issuer. 
  • A requirement that the proposer provide at least three references from other public-sector clients, preferably from ones that the firm provided similar services to those proposed to be undertaken as the result of the RFP. 
  • A description of the objective evaluation and selection criteria and explanation of how proposals will be evaluated. 

Requested Proposer Responses. RFPs should request relevant information related to the areas listed below in order to distinguish each firm’s qualifications and experience, including: 

  • Relevant experience of the individuals to be assigned to the issuer, identification of the individual in charge of day-to-day management, and the percentage of time committed for each individual on the account. 
  • Relevant experience of the firm with financings of the issuer or comparable issuers and financings of similar size, types and structures, including financings in same state. 
  • Discussion of the firm’s MA experience necessary to assist issuers with either competitive or negotiated sales. 
  • Demonstration of the firm’s understanding of the issuer’s financial situation, including ideas on how the issuer should approach financing issues such as bond structures, credit rating strategies and investor marketing strategies. 
  • Demonstration of the firm’s knowledge of local political, economic, legal, or other issues that may affect the proposed financing. 
  • Disclosure of the firm’s affiliation or relationship with any broker-dealer and whether any personnel of the MA firm who would provide advice to the issuer were associated with a broker-dealer firm within the two years preceding the RFP. 
  • Analytic capability of the firm and assigned individuals and the availability of ongoing training and educational services that could be provided to the issuer. 
  • Description of the firm’s access to sources of current market information to assist in pricing of negotiated sales and information to assist in the issuer in planning and executing competitive sales. 
  • Amounts and types of insurance carried, including the deductible amount, to cover errors and omissions, improper judgments, or negligence. 
  • Disclosure of any finder’s fees, fee splitting, payments to consultants, or other contractual arrangements of the firm that could present a real or perceived conflict of interest. 
  • Disclosure of any pending investigation of the firm or enforcement or disciplinary actions taken within the past three years by the SEC, FINRA, MSRB, or other regulatory bodies.

Additional Considerations. Issuers should also consider the following in conducting the MA selection process:

  • Take steps to maximize the number of respondents by posting the RFP on the government’s web site, using mailing lists, media advertising, resources of the GFOA and applicable professional directories. 
  • Allow adequate time for firms to develop their responses to the RFP. Two weeks should be appropriate for all but the most complicated RFPs.
  • Establish evaluation procedures and a systematic rating process, conduct interviews with proposers, and undertake reference checks. Where practicable, one individual should check all references using a standard set of questions to promote consistency. To remove any appearance of a conflict of interest resulting from political contributions or other activities, elected officials should not be part of the selection team. 
  • Document and retain the description of how the selection of the MA was made and the rankings of each firm. 
  • Provide for the issuer’s diversity, equity and inclusion goals
  • Ensure that federal regulations and any state and local regulations, standards or policies related to the disclosure of gifts, political contributions, or other financial arrangements are met.

Basis of Compensation. Fees paid to MAs should be on an hourly, fixed fee, or retainer basis, reflecting the nature of the services to the issuer. Generally, MA fees should not be paid on a contingent basis to remove the potential incentive for the MA to provide advice that might unnecessarily lead to the issuance of bonds. GFOA recognizes, however, that this may be difficult given the financial constraints of many issuers. In the case of contingent compensation arrangements, issuers should undertake ongoing due diligence to ensure that the financing plan remains appropriate for the issuer’s needs. Issuers should include a provision in the RFP prohibiting any firm from engaging in activities on behalf of the issuer that produce a direct or indirect financial gain for the municipal advisor, other than the agreed-upon compensation, without the issuer’s informed consent.

Contract for Municipal Advisory Services. Issuers should have a written contract for municipal advisory services that should detail the scope of services and basis of compensation. As part of the RFP package, the issuer may also include a Form of Contract which incorporates elements and provisions conforming to prevailing law and procurement processes and requires RFP respondents to comment on the acceptability of the Form of Contract. The comments on the acceptability of the Form of Contract should be part of the evaluation process. The contract development process should allow for reasonable negotiation over the final terms of the contract. A final negotiated contract should make clear those services that will be included within the basic municipal advisor fee and/or retainer fee and any services or reimbursable expenses that might be billed separately. Additionally, the contract should be clear that the MA will only receive compensation for work specifically authorized by the issuer to avoid incurring expenses for work not authorized by the issuer.

Managing Municipal Advisors. Prior to contract renewal, the issuer should evaluate the services provided by the MA.  Consider whether the MA has met the requirements of the contract, provided advice and deliverables in a timely manner, made personnel changes or conflicts of interest have arisen.  Most importantly, evaluate whether the MA has met their fiduciary obligations.


  • GFOA Issue Brief: SEC Municipal Advisor Rule
  • SEC Municipal Advisor Rule
  • SEC MA Rule Frequently Asked Questions
  • Best Practices Optimizing Debt Management, Government Finance Review, February 2013
  • GFOA Best Practice: Pricing Bonds in a Negotiated Sale
  • GFOA Best Practice: Selecting Bond Counsel
  • GFOA Best Practice: Selecting and Managing the Engagement of Underwriters for Negotiated Bond Sales
  • GFOA Best Practice: Selecting and Managing the Method of Sale of State and Local Government Bonds
  • MSRB Rule G-23
  • Board approval date: Friday, February 28, 2014