Which payment models should NOT be used for compensating Municipal Advisors?

The payment model that should not be used for compensating Municipal Advisors is the contingent basis. This model involves compensation that is dependent on the outcome of the advisory services, such as success-based fees. Such a structure can lead to conflicts of interest, where an advisor may be tempted to prioritize certain financial outcomes or products to secure their compensation, rather than acting in the best interest of the municipality they are advising.

Municipal Advisors are tasked with providing unbiased advice to public entities, and relying on a contingent payment model undermines this impartiality. By being compensated based on the results of their advice, there may be an undue influence on the advisor's decisions, which can compromise the integrity of the advisory relationship. Other payment structures, such as hourly, retainer, or fixed fee, align better with ethical standards in the advisory context as they promote objectivity and ensure that advisors are focused on providing the best possible guidance, regardless of the financial outcome.