Citigroup Inc. (C) Monday took a step toward defining how it wants to serve Main Street.

The bank announced it is changing the way its financial advisers operate; those 600 advisers who work within Citibank branches, and who remained when the bank combined its Smith Barney brokerage with Morgan Stanley's brokerage in a joint venture.

Citi decided to rid itself of commission-based advice and will henceforth charge clients a fee of about 1% of invested assets. It will give clients who want wealth management services through Citibank branches the option of working with Citi's own financial advisers, or of choosing independent advisers with whom Citi will begin to form relationships, and who will pay Citi a fee for the referral.

Citi is in advanced discussions with some of the nations top independent RIA businesses and expects to announce agreements in select markets in the near future, Deborah McWhinney, the head of personal banking and wealth management, said in a press release.

The changes, which will begin to be implemented in the next couple of months, are part of Citi's effort to, in the words of McWhinney, "put the customer back into Citi." Rather than focusing on complicated trading products, Citi wants to collect deposits and move money for households and businesses; rather than pushing products, it wants to sell service, it says.

The bank has made strides to change the focus of its investment banking business away from proprietary trading, but its U.S. consumer strategy remains a work in progress.

The new wealth management strategy came together comparatively quickly. McWhinney joined Citi in April; until 2007, she was president of Charles Schwab Institutional, which provided back office services to the retail broker's investment advisers.

The shift announced Monday means more options and more transparency for Citi's wealth management customers; it will generate more money for Citi, she predicted.

Citi reduced its stake in Smith Barney because the brokerage business does not fit with its more traditional banking strategy. It kept its private bank for high-net-worth individuals. But Citi does want to offer some wealth management advice to its retail banking customers.

About $30 billion in assets under management remained with Citi. At least some of the brokers who remained with Citi, however, felt disappointed they did not join the new Morgan Stanley Smith Barney. That feeling "will certainly be top of mind for me," McWhinney said in an interview in April.

Citi's new model contrasts with the approaches of Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC), both of which have large retail brokerage operations.

There will be brokers who will not like the new model and leave, Citi concedes. But Citi will hire more advisers.

One Citi adviser worried about the impact on his compensation and clients said, "I am shocked, nobody expected that." He added, "Good luck keeping your reps."

A Citi spokesman said in an email that clients won't immediately see changes in how they are charged, but will move to the new pricing model "as we change compensation model for" advisers.

Debra Wetherby, the chief executive of Wetherby Asset Management Inc. of San Francisco, said, "It's a revolutionary move for a money center bank. They are fundamentally trying to change" the investment advisory business. She said she had several conversations with McWhinney but hasn't decided whether her firm would cooperate with Citi.

A client entering a Citibank branch seeking wealth management advice would first meet an "investment consultant," a new position in Citibank branches. The consultant would present three options: To work with a Citi wealth adviser, an independent adviser, or to use its online and phone based advisory service, formerly branded myFi. The latter is now called National Investor Center and caters mostly to clients with less than $250,000 to invest.

Independent investment advisers have gobbled up an ever larger share of the wealth management business - in 2008 gaining more than $100 billion in assets, Citi said. Citi wants to tap into that resource.

"This is a natural step" for Citi, McWhinney said. "Let's partner with people, let's build the franchise not by saying, 'We'll do it all ourselves.'

"I expect that there are going to be a lot of brokers who contemplated going independent" at other brokerages who see Citi's referral offer as a start into a new business, she said. "I fully expect we'll get a lot of phone calls."

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com