The recently announced billion-dollar deal for Raymond James to buy the Morgan Keegan brokerage and investment banking arm of Regions Financial Corp. closes sometime this month or next. (In addition to the $930 million purchase price, the deal includes a $250 million dividend to Regions paid by Morgan Keegan.)

That will leave Regions, a financial institution with some $127 billion in assets and 1,700 branches spread across 16 southeastern and midwestern states, with a gaping hole in its once-vaunted investment program.

According to a source close to the companies, Regions Bank will hold on to its private banking operation, which deals with very high-end clients. And it has some 1,800 or so bankers with Series 6 licenses who can sell bank clients insurance products like annuities.

But there will no longer be a platform to address the needs of the vast number of bank clients with investable assets of up to several hundred thousand dollars.

Those advisors—there were more than 1,000 of them—were Morgan Keegan employees and will go to Raymond James as part of the deal.

So now industry observers are wondering what the bank's plans are going forward.

Will management bring in a third-party platform to address that need? Will it opt to construct a broker-dealer internally from scratch? Or will it perhaps do some combination of the two?

Several career consultants and headhunters in the financial advising field who spoke to Bank Investment Consultant said that the bank may be leaning towards a go-it-alone approach. "They have to do something," says Rick Rummage, president of the Rummage Group in Reston, Va. (Note: Rummage is also a regular contributor to the magazine). If a client were to walk in most of their branches now and ask for assistance in rolling over a $200,000 401(k), they would be out of luck, Rummage says.

Rummage says that market buzz expects the bank to build its own broker-dealer operation. "That's a one-to-two-year project to build a good program," Rummage says. "If they do it right, they're a big enough bank that they could be a big player. The question is, 'Are they going to spend the money it takes to get high-quality advisors?'"

In the near term, the absence of a broker-dealer operation will clearly be felt. Morgan Keegan contributed an impressive 18.5% of total revenue to Regions Financial, which is more than twice what the investment program of most other banks in the country contribute, according to published reports. Industrywide, that percentage was in the single digits last year.

Paul Werlin, an executive recruiter and founder of Human Capital Resources, a bank financial advisor recruiting firm, notes that there are a lot of unanswered questions regarding the future of Regions' wealth management plans. "In the past, Regions Bank had a very large platform," he notes, "but the way it worked was if a client needed a financial advisor, he was referred to Morgan Keegan." (Werlin is also a contributor to the magazine.)

For its part, Regions has announced that it is establishing a significant new wealth management operation to cater to the bank's wealthier clients. Since it held on to the wealth management unit of Morgan Keegan, it will add that to its private banking and trust operations to form one wealth management division. Bill Ritter, formerly head of the bank's Alabama, Georgia and South Carolina region, has been put in charge of the new unit.

But the bank is not commenting on its plans regarding financial advisors to deal with less wealthy bank clients, and the issue wasn't addressed in the bank's latest earnings call with analysts. But a source at the bank says the expectation is that there will be something, whether it's done internally, through a third-party or by some kind of hybrid.

Scott Smith, an associate director at Boston-based Cerulli Associates, says: "Building an in-house investment program is the most expensive way to go. The cheapest is to work with a third-party marketer. But the other alternative is to team up with a third-party marketer that helps you build your own platform. Companies like LPL offer that kind of arrangement."

He explains, "You can use all the plumbing from the third-party firm, and then gradually reduce that role."

Tyler Cloherty, also at Cerulli, notes that Regions Bank also has some 400 advisors, though he says these tend not to be high-level advisors. "Regions could use them to serve at least some of their client base," he says. But he adds, "That would mean having each advisor covering three or four branches"

Such a solution would be a temporary stop-gap measure, he says. "They would have to spend a lot of money to bring in good people.... It would be much cheaper to hire a third-party marketer, but Regions may want more control."

Rummage agrees that Regions Bank could draw on its remaining core of advisors, and adds that the bank could also select the best of its many Series-6 licensed bankers and pay to train them and move them up to a Series-7 license.

That approach could work for maybe 10% to 15% of the bank's reps, he suggests, which would add another 200 to 300 advisors.

One thing's for sure. While Regions Bank is not tipping its hand about its plans, some kind of broker-dealer operation is certainly in the cards. "I think Regions Financial likes the broker-dealer business," says Jeff Harralson, a bank analyst with Keefe Bruyette & Woods Inc. "The sale of Morgan Keegan was not about getting rid of the broker-dealer platform. It was about raising cash and repaying the bank's $3.5 billion in TARP [Troubled Assets Relief Program] funds more quickly."

Harralson says, "I think having just sold Morgan Keegan, Regions Financial may give it a year to figure out what to do, but my feeling is that they will probably decide to grow it internally."