The advisers, who include Bernie Myers, Sir Evelyn's right- hand man, corporate finance chief Russell Edey and privatisation expert Tony Alt, are expected to tell Sir Evelyn that a sale must now be settled quickly to prevent a repeat of Warburg's abortive engagement to Morgan Stanley.
Sir Evelyn, the 63-year-old scion of the Anglo-French banking family, is understood to be furious that he was not consulted earlier over Smith's plan to break away.
Rothschild's, which is 70 per cent controlled by Sir Evelyn, is Smith's biggest shareholder. Smith's, one of the few remaining large stockbroking houses not yet in foreign hands, is in talks with Merrill Lynch of the US and Commerzbank of Germany.
And it emerged this weekend that over a year ago Smith's talked informally to banks such as the Deutsche-owned Morgan Grenfell about inviting a bid.
Merrill Lynch is still seen as the front-runner to buy Smith's. Merrill's Christopher Reeves, who resigned as chief executive of Morgan Grenfell after the Guinness affair, is playing a key role in negotiations, along with Herb Allison and Jerry Kenney.
The three senior bankers advising Sir Evelyn will emphasise the risk that any delay would encourage key Smith staff and clients to leave for competitors. That would leave Rothschild with an imploding asset.
They will cite Warburg, which earlier this year lost valuable staff after merger talks with Morgan Stanley were prematurely revealed and then abandoned, driving the merchant bank into the arms of Swiss Bank Corporation on unattractive terms.
A failure by Rothschild to agree a sale would expose the merchant bank's lack of strategic direction in a world where the collapse of Barings has made life more difficult for small players.
Rothschild's Swiss private bank is understood to have lost some deposits because of fears about small banks, only a few years after suffering losses of over SF100m (pounds 54m) through fraud. Venture capital employs only three people, and the asset management business handles a comparatively tiny pounds 10bn, restricted by Sir Evelyn's reluctance to use the family name for retail products - a reluctance not shared by his more entrepreneurial cousin Jacob, Lord Rothschild.
At the same time, senior directors are keen to use the pounds 120m from the Smith sale to revitalise Rothschild's stronger businesses, including corporate finance where Deutsche Telecom is among recent new clients. Rothschild may seek to retain the ability to call on Smith's underwriting capability, though Merrill is thought unlikely to agree to any very restrictive arrangement.
Mr Edey, who was brought up in South Africa, is believed to be particularly aware of potential uses for the pounds 120m. Rothschild is a leading gold bullion banker and, like Smith, has long-standing ties with South Africa, where it once financed the De Beers diamond mines.
The bank is believed to have ambitions to advise the mining companies like De Beers and Anglo American and develop business in what is potentially one of the most attractive emerging markets. Smith, founded by two South Africans in 1924, has the makings of a successful business in Johannesburg, but Rothschild has no office of its own there.
Intermediaries are already planning to offer Rothschild acquisitions in fund management companies and Continental private and boutique merchant banks.
But one analyst pointed out that "pounds 120m does not buy much in fund management these days. Only CIN Management, Govett and Henderson are likely to be available." Others believe Sir Evelyn will be reluctant to spend money on acquisitions even after the 1986 purchase of the Smith stake for around pounds 4m has proved so successful.
Bid speculation has driven up the prices of fellow merchant banks Schroders and Hambros. But Sir Evelyn would never sell the family bank, nor was Merrill interested in buying it alongside Smith.
A formal announcement is expected early this week. Smith holds its AGM on Thursday and will be obliged to make a statement then if not before.