Morgan Keegan loses 3 brokers as auction drags

Tue Dec 13, 2011 3:42pm EST

* Maryland team Wallace and Ehrlich join Morgan Stanley

* Dallas broker Sparkman joins Wunderlich Securities

* Recruiters say 20 Morgan Keegan advisers left since June

By Joseph A. Giannone

Dec 13 (Reuters) - Regional brokerage Morgan Keegan has lost three more financial advisers to rivals in the past week, the latest in a score of departures since parent Regions Financial put the unit up for sale in June.

Last Wednesday, Chris Wallace and Sarah Ehrlich left Morgan Keegan's Rockville, Maryland, office to rejoin Morgan Stanley Smith Barney in nearby Gaithersburg, FINRA records show.

The duo, which generated $1.35 million of revenue in the past year, had left Morgan Stanley in early June to join Morgan Keegan -- just weeks before Regions announced it was putting the Memphis-based brokerage and investment banking unit up for sale.

Morgan Keegan advisers on average generated more than $300,000 a year in commissions and fees, so the loss of a $1 million team is significant.

Meanwhile, Dallas broker Howard Sparkman, a 17-year veteran of Morgan Keegan, left to join Wunderlich Securities on Friday. He follows in the footsteps of Morgan Keegan alumnus James Parrish, who after 23 years at the firm joined Wunderlich in May as co-president of its private client group.

Defections from Morgan Keegan are slowly eroding its value, which has recruited almost no experienced brokers to replace roughly 20 departures since June, including 10 who collectively managed about $700 million in assets.

"The firm is suffering death by a thousand cuts," said Ron Edde, a broker recruiter at Armstrong Financial Group in Carlsbad, California.

Morgan Keegan had 1,218 financial advisers as of the end of October, six more than in mid-September. That figure includes rookie advisers coming up through the firm's training program.

Alabama-based Regions bought Morgan Keegan for $789 million in 2001, part of a wave of bank-broker combinations. Regions has struggled since the financial crisis, and remains one of the few major banks that still has not repaid its 2008 U.S. bailout funds.

Regions on June 22 said it was putting the unit up for sale, the same day the bank agreed to pay $200 million to settle with regulators over Morgan Keegan's sales of bond funds that cratered in value during the financial crisis.

The auction has dragged on as a succession of private equity buyers and rival brokerages walked away from Morgan Keegan or else submitted bids deemed too low by Regions. The bank's executives have assured shareholders they expected to announce some resolution to the sales process soon.

The lack of certainty, though, has made it more difficult for Morgan Keegan to recruit or retain advisers.

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