When you sell an advice business, the money changes hands on completion day. The liability does not. Every recommendation you have ever made, every transfer, every fund switch, every drawdown plan, remains capable of producing a complaint long after the client bank has moved to someone else's agency. Understanding who carries that exposure, and for how long, matters as much as the headline price.
This is the part of a sale that owners most often leave to the lawyers, and it is the part most likely to follow you into retirement if the deal is structured carelessly. The good news is that the mechanics are knowable. The rules on who answers a complaint are set by the deal structure you choose, the Financial Ombudsman Service's jurisdiction, and increasingly by the FCA's stated expectations of selling firms.
The long tail: why complaints arrive years later
Advice liability has a long tail because the harm, if there is any, often takes years to show. A pension transfer recommended today may look entirely sound until markets fall, the client's circumstances change, or a claims management company writes to everyone who transferred out of a particular scheme. The complaint arrives not when the advice is given but when the client comes to believe something went wrong.
The Financial Ombudsman Service's time limits reflect this. A complaint is generally in time if it is brought within six years of the event complained about, or within three years of the date the complainant became aware, or ought reasonably to have become aware, they had cause for complaint, whichever gives them longer. That second limb is the one that matters for sellers. A client who only discovers a problem in year nine can still bring a complaint in year twelve, because the three-year clock started when they found out, not when you advised them.
There is no general longstop for FOS complaints about regulated advice. Professional indemnity insurers know this, which is why run-off cover exists and why buyers ask about your complaints history before they ask about much else. If you want the detail on cover after you stop trading, run-off cover: what it costs and how long you need it works through the numbers.
Share sale: the liability travels with the company
In a share sale, the buyer acquires the company itself: its authorisation, its contracts, its client bank, and its history. The legal person that gave the advice continues to exist, and that legal person remains responsible for the advice. Complaints are made against the firm, the firm is now owned by the buyer, and so the buyer's group carries the exposure as a matter of first instance.
That is why share sales command the structure they do. The buyer is taking on an unknown quantity of historic liability, so the purchase agreement is dense with warranties about the advice given, disclosure schedules listing everything that might go wrong, and indemnities that pass specific risks back to you personally. The company answers the complaint; the indemnity decides whether the company then sends you the bill.
Due diligence on a share sale is therefore heavily weighted towards the past. Expect the buyer to sample client files, examine your defined benefit transfer history if you have one, review complaints records, and price the risk into the deal, either through the multiple, through retention of part of the consideration, or through the indemnity package. The trade-off is discussed more fully in asset sale or share sale: the choice that changes everything.
Asset sale: the liability stays with you
In an asset sale, the buyer takes the client bank, the recurring income and usually the goodwill, but not the company. Your company, and its regulatory history, stays behind with you. Advice given before completion remains the responsibility of the entity that gave it: yours.
For an appointed representative, the picture has an extra layer, because the principal firm carries regulatory responsibility for the advice given under its agency. But whether you were directly authorised or an AR, the commercial position in an asset sale is the same: the selling entity keeps the past. Novation moves the client relationships and the servicing rights across; it does not move historic liability with them.
This is where sellers most often misunderstand their position. Selling the client bank does not launder the history. The complaints keep coming to the firm that gave the advice, and that firm needs three things after completion: adequate financial resources to meet potential redress, run-off cover, and a plan for winding down its authorisation in good order rather than simply switching off the lights. An asset sale gives you a cleaner separation from future advice, but a longer personal relationship with past advice.
The FCA's position: redress cannot be left behind
The regulator has been explicit about this. The FCA's published expectations of firms selling client banks, first published in December 2023 and updated in January 2025, state plainly that the FCA will act where client banks are sold with redress liabilities left behind. The same guidance confirms that firms must hold adequate financial resources for potential redress, and that a sale which could affect the firm's risk profile, value or resources requires a SUP 15 notification to the regulator.
Read that as a description of the failure mode the FCA is policing: a firm sells its income-producing asset, distributes the proceeds, and leaves an empty shell to face the complaints, which then default to the compensation scheme. The guidance also confirms the client bank is the firm's asset, so a claim that someone else owns it needs proof, and it recognises merger and retirement as legitimate reasons for a sale. Selling is not the problem; selling in a way that strands the liabilities is.
The FCA's multi-firm review of consolidation, published on Fri 31st Oct 2025, looks at the same territory from the buyer's side: concerns about debt-funded acquisitions, pressure on regulated entities to upstream cash to service group debt, and the consumer harm that poorly managed integration can produce. For a seller this matters because a buyer whose group is stretched is a buyer less able to honour deferred consideration and less able to stand behind the liabilities it has taken on. The seller's reading of that review is covered in what the FCA's consolidation review means if you are selling, and the client bank guidance in detail in the FCA's expectations when a client bank is sold.
The practical consequence for your deal is that the treatment of historic liability should be explicit in the sale agreement, provisioned in the numbers, and defensible to the regulator. "We assumed the buyer was taking it" is not a position either party wants to explain later.
The FSCS backstop, and why relying on it is not a plan
If a firm cannot meet a valid redress claim and has ceased trading or is insolvent, the Financial Services Compensation Scheme can step in for eligible claimants. That is the safety net the FCA's client bank guidance is designed to protect: the scheme is funded by levies on the firms still trading, so every stranded liability becomes an industry cost.
Some sellers quietly treat the FSCS as the end state: wind the company up, let any future claims fall to the scheme, move on. Treating that as a plan has three problems. First, it is exactly the behaviour the FCA has said it will act against, and the regulator can pursue individuals as well as firms, including through the approval and fitness routes that matter if you ever intend to hold a regulated role again. Second, deliberately engineering a shortfall risks personal exposure that a properly structured sale would have avoided. Third, it hands your former clients, people who trusted you for decades, a compensation process with limits, delays and no relationship behind it. The backstop exists for failure, not for planning.
Indemnities and their limits
Indemnities are the contractual machinery that reallocates liability between you and the buyer, and they run in both directions. In a share sale, the buyer will want indemnities from you covering pre-completion advice, so that specific historic risks come back to you even though the company has changed hands. In an asset sale, you may negotiate an indemnity from the buyer covering post-completion servicing failures, so that the buyer's conduct after the handover does not land on your firm.
An indemnity is only ever as good as four things. Its scope: what events it actually covers, and complaint causes have a habit of falling between definitions drafted years earlier. Its caps and time limits: most indemnities are capped, often at or below the consideration, and expire after a negotiated period, while FOS liability, as above, has no general longstop. Its survival of your counterparty: an indemnity from a company that has since been restructured, sold on or wound up may be worth nothing when you need it. And its enforcement cost: recovering under an indemnity means a legal dispute with the party you did the deal with, funded by you, at a point in your retirement when you wanted nothing of the kind.
None of that makes indemnities pointless. It makes them one layer in a stack, alongside run-off cover, retained financial resources and a deal structure chosen with the long tail in mind. The wider warranty and indemnity package, and how the two differ, is covered in warranties and indemnities in advice firm sales, and the rest of the liability and run-off pillar deals with the insurance and regulatory mechanics around it.
What this means when you plan your sale
Three points are worth carrying into any negotiation. First, decide the liability question early, because it shapes everything else: a share sale prices the history into the deal and the indemnities; an asset sale leaves the history with you and makes run-off cover and retained resources part of your net-proceeds arithmetic. Second, assume the tail is long: the FOS awareness rule means a clean complaints record today says little about year eight, and your provisioning, insurance and paperwork should reflect that. Third, treat the FCA's client bank guidance as a design constraint, not a compliance afterthought; a deal that would strand redress liabilities is a deal the regulator has already said it will unwind its way into.
Sellers who handle this well tend to have one thing in common: they knew their exposure before the buyer told them what it was. A file review, a complaints history summary and an honest look at any higher-risk advice lines, defined benefit transfers above all, put you in the room with answers rather than surprises, and answers are what keep a multiple intact. The liability conversation is, in the end, a valuation conversation.
If you want a number of your own to react to before that conversation starts, the free IFA valuation calculator gives you a range and explains the factors affecting it.