Wealth manager Tilney is in merger talks with fellow-wealth manager Smith & Williamson.
A deal would create a firm with revenue of nearly £500m and assets under management of in excess of £45bn.
The pair have been in talks for a couple of months, according to people familiar with the situation.
Read more: Why times are tough for UK asset managers
Both firms have strong discretionary investment management businesses, while Tilney has a large financial planning arm.
Smith & Williamson is also a top ten UK accountancy firm which offers services such as tax planning to its clients.
In 2017 Smith & Williamson held an unsuccessful round of merger talks with wealth manager Rathbones.
Tilney launched an alternative bid, but Smith & Williamson chose instead to pursue a deal with Rathbones that ultimately collapsed.
Following the failed tie-up talks with Rathbones, Smith & Williamson publicly committed itself to a stock market listing by 2020.
Sources with knowledge of the talks, which were first reported by the Sunday Times, said it was too early to say if a combined firm would pursue a flotation.
Tilney was acquired by private equity firm Permira from Deutsche Bank in 2014.
Mergers and acquisitions in the asset management and wealth management space is being driven by tightening regulation which has forced firms to seek economies of scale.
Tilney declined to comment. Smith & Williamson was contacted for comment.