(REUTERS) -- Defections from Morgan Keegan are slowly hollowing out the $1.5 billion brokerage, which has recruited almost no experienced hires to fill the gaps left by advisers who have left since June.
Several advisers and teams, including 10 advisers that managed at least $694 million in assets combined, have departed since the late June announcement that parent Regions Financial Corp RFC.N planned to sell Morgan Keegan.
Recruiters say as the sale drags on, more experienced staff will leave, and that begins to chip away at the value of the firm, now heading into its sixth month on the market.
"There's not a hard timeline, but there is a pragmatic timeline in that, let's face it, they're recruiting no new talent in there," said financial services recruiter Ron Edde of Armstrong Financial Group.
A $1.5 million Morgan Keegan team in Huntsville, Alabama left in September, and Edde expects to move another team this week.
The average Morgan Keegan broker produces roughly $300,000, annually, recruiters say, so each adviser departure with production north of $1 million is a sizeable loss for the firm.
The latest big defection: A team of three Morgan Keegan advisers in Cincinnati, Ohio that last year produced $1.7 million in revenue, which would make it three teams of $1 million or more in revenue to leave the firm since June.
James Dornan, a veteran with two decades of experience that Morgan Keegan hired less than a year ago to build the firm's Washington, D.C. presence, also left earlier this month for Janney Montgomery Scott, where he is now a regional manager.
"A lot of retail financial advisers that I talked to wanted to find out who the final parent company was" going to be, Dornan said. That slowed the recruiting process, he said.
Morgan Keegan declined to comment on the departure of Dornan.
Morgan Keegan had 1,218 financial advisers as of the end of October, six more from mid-September, according Morgan Keegan spokeswoman Kathy Ridley, with the latest additions to the firm's financial adviser base coming mainly from their training program.
Trainees differ from experienced recruits, who bring with them a book of business.
Recruiters say Morgan Keegan has had trouble hiring experienced advisers because of the uncertainty surrounding the sale of the brokerage. To many advisers, it is still unclear what the terms of the purchase might be or how soon a deal will be reached.
Regions Bank bought Morgan Keegan for $789 million in 2001. The firm's advisers had been a close-knit group that recruiters say felt strong loyalty to the Morgan Keegan brand. The bank disclosed plans to sell the division in June, the same day regulators announced a $200 million settlement with the firm over the mismanagement of troubled subprime mortgages.
Defending the claims became expensive for Regions, which has yet to repay the $3.5 billion of government bailout money it received after the financial crisis.
Regions re-opened talks with rival Stifel Financial Corp (SF.N) after bids from two private-equity groups came in lower than expected, sources familiar with the matter said earlier this month.
If another brokerage firm, like Stifel, buys the unit, Morgan Keegan advisers will likely have to go through a lengthy process involving the transfer of their clients' accounts to the new firm's existing broker-dealer platform.
That process is complicated because each client could have multiple accounts tied to the firm, from 529 education savings plans to individual retirement accounts, corporate accounts and personal accounts.
Avoiding such a process is one reason many advisers have stayed with the firm through the uncertainty, recruiters say. But if another brokerage looks to be the likely buyer, moving now becomes not as burdensome as staying put, making defecting before a sale a more attractive option for the advisers, they say.
If there are any changes to the operating platform, recruiters say the Morgan Keegan buyer will likely have to pay a premium, such as a bigger retention package, to keep the brokers on board.
"There's some kind of painful transition down the road," said Danny Sarch, a New York-based recruiter with Leitner Sarch Consultants.
(Reporting by Ashley Lau; Editing by Jennifer Merritt and Walden Siew)