Walk into Charles Schwab Corp.'s flagship branch near Rockefeller Center in Manhattan and you walk into a metaphor.

The place is a mess. Financial advisers sit crammed together in a tiny office. Piles of haphazardly stacked brochures threaten to topple onto the floor.

Is this what things have come to for Schwab, the pioneer that helped introduce thousands of average Americans to the stock market with its discount brokerage services? The firm that then beat competitors to the world of online trading? Well, not exactly.

Look behind the curtain hanging in the back of the office: There is a huge space under construction. The branch is in the midst of a major, and long-delayed, renovation.

So is the whole firm.

Founder Charles R. Schwab, 67, is back as chief executive, following the ouster in July of David Pottruck, whose solo stint in the job lasted just 14 months (Pottruck had been co-chief executive with Schwab).

The company is coming off of a brutal second quarter in which earnings dropped 10 percent from the same quarter in 2003 on poor trading revenue and bloated costs.

The firm's stock, which once traded as high as $50, briefly making Schwab more valuable than Merrill Lynch & Co., closed Friday at $9.62. And many analysts say the firm's shares are still overvalued when compared with those of competitors. The firm has been bleeding customers, losing about 65,000 accounts in the past four months. Schwab says most of these have been small accounts.

The company recently announced the sale of its institutional trading and research business, SoundView Capital Markets, for $265 million, only eight months after buying it for $321 million. With the sale, Schwab tacitly acknowledged that its attempts over the past few years to become a full-service Wall Street player able to compete with likes of Merrill and Morgan Stanley had been an embarrassing mistake.

Now Schwab executives say salvation lies in returning to the firm's original mission of serving mom-and-pop, buy-and-hold investors who generate recurring advisory fees, while also luring more-active traders who provide vital commission revenue.

Trouble is, while Schwab was out looking to play with the Wall Street big boys, upstart online brokers such as E-Trade Financial Corp. and Ameritrade Holding Corp. sneaked in the back door to eat Schwab's lunch by offering low-commission stock trades to investors not interested in a great deal of hand-holding.

And Schwab, of course, has fallen victim to the overall decline in day-trading that began after the technology and telecommunications bubble of the late 1990s began to burst in early 2000.

Gone are the days when millions of average investors morphed into desktop stock jockeys, sure that they could ride tech shares to quick riches. The decline, especially pointed in this year's lackluster market, has hurt the whole brokerage industry. Ameritrade, for instance, said on Friday that average daily trades dropped 18 percent in August.

But Schwab, with its higher overhead, has been hit hardest.

"Schwab is in a tough spot," said analyst Matt Snowling, who follows the company for Arlington investment bank Friedman, Billings, Ramsey Group Inc. "Basically, they allowed themselves to become uncompetitive in a business they defined by trying to go up-market and chase the higher-dollar customer. . . . At the end of the day, Schwab is a discount broker."

Snowling and other analysts said Schwab is now burdened with the costs of a full-service firm, including a large branch network and a big staff, even as it tries to compete with more nimble competitors that stripped down their operations and cut costs after trading volume fell in the wake of the dot-com crash.

Whether Schwab can relocate the sweet spot between no-frills, low-cost online brokerage firms and full-service Wall Street houses remains to be seen. But at least there is a plan in place.

Schwab is closing little-used branches -- 53 were shuttered around Sept. 1 -- while opening more branches in key markets (such as Manhattan) and trimming jobs in an effort to reduce costs by $150 million to $200 million by the end of the year.

The firm is also hoping to further cut commission fees to better compete with the Ameritrades and E-Trades of the world while simplifying what some customers have described as a confusing array of service levels, all carrying different fees and commissions.

That plaint in itself may demonstrate a key difference between the discount-type customer who Schwab and the other, mainly online, traders have come to attract and the older-money crowd. The full-service brokerage houses, some of which have recently trended toward flat fees based on how much an investor has in his account, for years have charged investors commissions on a mysterious sliding scale that crossed the number of shares traded with the price of the stock and came up with the cost of the service. While big, sophisticated investors may have ignored the calculations and shrugged off the commissions as the cost of doing business, newcomers and the less well-heeled have been drawn to the online discounters that ballyhoo their flat -- and low -- fee per trade, no matter how many shares, no matter how expensive the stock. That's closer to where Schwab started out, and closer to where it may be heading.

In May, Schwab announced it would offer $9.95 stock trades to clients with at least $1 million in total account assets and $19.95 trades for the first 1,000 shares for other clients who have at least $100,000 in assets or are enrolled in one of several Schwab programs. Ameritrade, by contrast, charges a flat $10.99 equity-trading fee. E-Trade generally charges $9.99 per trade as long as a client trades at least 27 times every three months.

Schwab executives acknowledge that they will never be able to directly compete on commission costs. But they say that because they offer more hands-on advice than other cut-rate brokers, they remain an attractive alternative for middle-class investors.

"We are never going to be the lowest-priced competitor in the market because we offer such a rich array of services," Schwab spokesman Glen Mathison said. (Charles Schwab and other firm executives declined to be interviewed.)

The minimum to open an account at Schwab is $10,000, which gets you access to online tools and some stock research but little personal attention. E-Trade has a $1,000 minimum for cash accounts and $2,000 for margin accounts, which allow investors to borrow money to make trades. Ameritrade does not have a minimum, but most promotional offers, such as 30 commission-free trades with a new account, require at least a $1,000 balance.

The bigger a portfolio gets at Schwab, the more attention an investor gets from advisers, in addition to a greater array of stock research. Investors with smaller balances can also buy advice and other services for quarterly fees.

"We are not just hot stock tips and trading tools on the Web," Mathison said. "We will do a portfolio analysis and tell you what needs to be changed to have greater success. Then we will monitor that portfolio. We will be your partner."

At the high end, Schwab refers investors with at least $250,000 in assets to an independent adviser who will monitor the portfolio daily and offer advice and tips. For the truly well-heeled, clients with at least $2 million in assets, Schwab offers referrals to U.S. Trust, the white-shoe investment firm Schwab acquired in 2000.

Some analysts have suggested that Schwab might look to sell U.S. Trust as it tries to return its focus to middle-class investors. But company executives have dismissed the idea, and several industry analysts said such a move would make little sense.

Unlike SoundView, U.S. Trust produces decent profit margins (around 6 percent in the second quarter of this year, compared with about 1 percent for SoundView). People inside and outside Schwab also say that after a rough beginning, the different cultures of the two firms (blue-collar Schwab versus white-collar U.S. Trust) are now beginning to mesh.

Ameritrade and E-Trade, meanwhile, offer much more stripped-down services than Schwab, such as streaming stock quotes and basic research. Ameritrade offers an APEX service for customers who have at least $100,000 in their accounts or who execute at least 30 trades over three months. APEX customers get some research tools for free that other Ameritrade customers pay for.

So, are E-Trade, Ameritrade and other discount online brokers worried about Schwab's rededication to the retail investor and the return of its iconic founder to the top executive post?

If so, they certainly aren't admitting it.

"It doesn't change our strategy," said Ameritrade chief executive Joseph H. Moglia, whose contract is up next year and who has been rumored as a candidate to eventually take the helm at Schwab. "We have a real emphasis on pricing, products and service. The simpler you keep the pricing, the better. For $10.99, our clients get an awful lot." Moglia declined to speculate on his future, saying he will make a decision in the fall. He pointed out that he has never said anything about moving over to Schwab.

In the meantime, there remains a good bit of debate about exactly what Schwab's identity should be.

Some analysts say the firm should focus on cutting commissions and catering to active traders using its CyberTrader service, an online "cockpit" tricked out with a plethora of stock data.

Others say the firm should focus more on middle-class investors with about $1 million in total assets. "[Advisory] fees are where it's at these days," said Todd Buechs, an analyst at Bernstein Research. "If you live by commissions, you die by commissions. You need a guaranteed [revenue] stream."

Schwab, for its part, won't say whether it wants to focus on active traders or more long-term investors. Instead, the company says it wants "committed" or "serious" investors. And what does that mean, exactly? It's hard to say.

"It refers to people who are more than just dabbling in the market," Schwab's Mathison said. He added that people who just want to buy and sell a couple of stocks should probably look elsewhere.

But Mathison was quick to add that Schwab does not want high commissions to be a barrier to anyone opening an account at the firm. So active traders are obviously welcome. "In the grandest sense, we want people who think about investing as an important part of the overall financial life, not just something to do once in a while."