Morgan Keegan's brokerage force has stayed in wait-and-see mode as parent firm Regions Financial looks to sell that business, but that could all change if uncertainty about the firm's future persists or if a new deal presents unfavorable terms, experts say.

More than six months after Regions Financial first put Morgan Keegan on the block, talks for its possible acquisition continue. Raymond James Financial has reportedly entered back into acquisition discussions alongside Stifel Financial Corp. It would be unlikely that either of those discussions would result in a deal before the end of the year, unnamed sources told Bloomberg.

Raymond James, Stifel Nicolaus and Regions Financial declined to comment for this story.

The sale efforts come after Morgan Keegan has wrestled with investors' legal claims reportedly topping $1 billion related to mutual fund sales. Regions also agreed to a $210 million settlement with regulators this year regarding Morgan Keegan's handling of its mutual funds.

What has held up the sale process most is not Morgan Keegan's legal liabilities, which would not likely be included in a deal, but changes in the market, according to Guggenheim Securities Managing Director Marty Mosby, an analyst who follows the firm.

Regions Financial's sale talks for Morgan Keegan have moved in two phases, Mosby said. That included a first phase soliciting possible private equity buyers, and now a second phase seeking a strategic buyer.

"The market basically collapsed beneath them," Mosby said, following the U.S. debt ceiling debate, European crisis and failure of MF Global. "With all the uncertainty and increase in the equity costs, it didn't make sense for private equity to do this deal anymore."

The uncertainty of who will take on its ownership-whether it is another regional or private equity firm-has so far not led to a mass exodus of its wealth management force as they wait to see what the future holds.

"It's amazing to me what a loyal lot, and kudos to Morgan Keegan, for having created that sense of loyalty that most of them haven't left," commented Mindy Diamond, president and CEO of Chester, N.J.-based recruiting firm Diamond Consultants.

However, there have been some exits from Morgan Keegan in recent months. That includes Jim Dornan, who moved from leading Morgan Keegan's Washington, D.C.-area offices to Janney Montgomery Scott in November, where he's now SVP and regional manager.

A two-member financial adviser team, including Chris Wallace and Sarah Ehrlich, moved to Morgan Stanley Smith Barney in Gaithersburg, Md., earlier this month. Their move to Morgan Stanley was less than six months after they joined Morgan Keegan from Bank of America Merrill Lynch. Together, Wallace and Ehrlich had $100 million in client assets under management and about $1 million in annual fees and commissions.

The departures that have happened so far are probably not enough to have a dramatic effect on the firm's bottom line, Mosby said. But the new year could be a tipping point as a deal that the advisers are hoping for has not materialized, he said.

"As you go through this year-end period, the mental anguish of now going from, 'Oh, wow, we've got a new situation that may be great' to 'Oh, no, we don't know what's going to happen,'" Mosby said. That reaction could be more pronounced in areas like Memphis, where "there's only so many seats in town" for new employment, Mosby said.

Recruiters who are actively talking to Morgan Keegan financial advisers say most want to stay and see what a possible deal could mean for them.

Many of those advisers are hoping for retention packages and an unchanged business model, Diamond said of her firm's conversations Morgan Keegan advisers. More attrition would come if those hopes do not come to fruition, Diamond predicts.

"Even though most of the advisers haven't left, they certainly all have a Plan B," Diamond said. "Most of them have done their due diligence and have a pretty good sense of where they'd go if it doesn't work out."

Nicholas Bischoff, president of West Tisbury, Mass.-based recruiting firm Chilmark Consultants, said he has also seen strong loyalty from Morgan Keegan's brokerage ranks.

"Morgan Keegan reps are growing impatient but they love the company they work for and have a strong appreciation for management. They are hopeful that whoever buys them does not come in and upset the apple cart," Bischoff commented. MME

Lorie Konish writes for On Wall Street.

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