The takeover was first announced in September 2019, with Tilney agreeing to pay £625m for its rival.
But a stock exchange announcement this week from a major, listed shareholder in Smith & Williamson revealed the deal has hit regulatory hurdles, with the Financial Conduct Authority not giving its approval to the deal.
The regulator does not issue statements on these matters so there are no details about why approval was not forthcoming.
AGF is a wealth management firm based in Canada which owns just less than 30 per cent of Smith & Williamson and in a statement to the Toronto Stock Exchange it said discussions with the FCA were "ongoing".
In a joint statement, Tilney and Smith & Williamson said: “As part of the regulatory process to approve the transaction, the FCA has raised a number of issues with the proposed transaction as currently structured.
"As a result, Tilney is engaging with the FCA to seek to address its concerns and understand what requirements need to be met for a new application that are consistent with the strategic rationale and investment case.
"Both parties continue to believe that a merger of Tilney and Smith & Williamson represents a significant opportunity to create the UK’s leading wealth management and professional services business and remain fully committed to the merger.
"Tilney and Smith & Williamson are already highly successful standalone groups, both of which are trading well and have excellent growth prospects."
The deal had been expected to completed formally in early 2020, but this will now be delayed.
The takeover was approved by competition regulators in December.
Smith & Williamson has been a target of consolidators for some time, with Rathbones previously expressing interest before that deal collapsed.