After a long internal struggle, Merrill Lynch & Co. today unveiled an ambitious plan that would let its 5 million customers bypass its force of 15,000 stockbrokers to trade shares online.

The move provides a dramatic example of the way the Internet is transforming Wall Street -- and corporate America. Like booksellers, retailers and travel agents, Merrill found that too many of its customers were abandoning it for the lure of the World Wide Web. Now the nation's biggest retail brokerage faces the challenge of finding a way to flourish in the electronic age without dismantling the infrastructure that allowed it to succeed in the first place.

Merrill executives insisted that they have not capitulated to the online world, and indeed they say they expect to hire more brokers and even open more branch offices. Merrill President Herbert Allison said in an interview today that brokers are "central" to the new plan and will play an important role not only in working with customers but also in drawing in new money.

Merrill built its reputation through human interaction, popularizing the notion that a stockbroker was a trusted individual who could navigate customers from Main Street through the currents of Wall Street. Each of those trades executed through Merrill came with a hefty commission -- allowing the company to support its thousands of brokers and its 670 branch offices and still make a profit. In recent years, Merrill has also strived to generate more of its profits by earning fees from managing clients' assets.

When investors two years ago began swarming to the Internet to trade for themselves, Merrill Lynch stuck by its winning model, shrugging off pesky entrepreneurs who were setting up cyberspace-based competitors. Barely a year ago, John "Launny" Steffens, chief of the company's retail brokerage arm, warned: "The do-it-yourself model of investing, centered on Internet trading, should be regarded as a serious threat to Americans' financial lives."

Instead, it quickly became apparent that the Internet was a serious threat to Merrill's future.

Main Street had become a bunch of people on their couches with laptops, surfing an ethereal world. They began picking their own stocks, investing their own money and, during the bull market, garnering bigger returns than their brokers.

Scott Whittenburg, a chemistry professor in New Orleans, embodies the transformation. With a fresh inheritance, he called Merrill in 1996 and a broker showed up at his home. Soon, all his money was neatly allocated into stocks and bonds.

But Whittenburg watched friends and acquaintances make a killing in Internet stocks and soaring blue-chips. His Merrill account, he said, was virtually flat. So six months ago he opened an account at Ameritrade, an online broker, and he said he has already earned a 120 percent return.

That success helps explain the growth in do-it-yourself investing. The Internet has chipped away at all the things that made a stockbroker indispensable in less electronic times -- stock quotes, corporate reports and even brokerage firm research are all available online, 24 hours a day. The number of online brokerage customers has more than doubled in the past year and is expected to double again -- to 18 million accounts -- by 2001, according to Gomez Advisors, an electronic commerce consulting firm.

Bill Burnham, an electronic commerce analyst at Credit Suisse First Boston, estimates that about 1 in 3 trades is now done by individuals online. Mainly, these are handled through discount brokers, such as Charles Schwab and upstarts E-Trade and Ameritrade. On average, these firms charge $15.75 per trade, about one-tenth the cost of a "full-service" firm such as Merrill.

Merrill earlier this year tiptoed into online trading and tried to restrict access to its top 1 percent of customers -- but executives quickly found that was inadequate. So they secretly embarked on this new plan, code-named "Rubicon," after the river Julius Caesar crossed on his way to take Rome.

Investors, beginning in December, will be able to buy or sell stocks for $29.95 a trade for up to 1,000 shares -- mirroring Charles Schwab's prices. Even earlier, in July, they will have the option of paying an annual fee for unlimited electronic trading. The fee will be tied to the amount clients have in their Merrill accounts; investors with the largest balances will pay the minimum fee of $1,500 per year.

How Merrill and other full-service brokers will emerge is anybody's guess. "All those branch offices will become fast-food outlets," E-Trade's founder, Christos Cotsakos, is fond of predicting.

Merrill's Allison takes offense at such banter, asserting that the Internet will be just another forum in a broad plan to capture a growing number of wealthy households in the United States.

The number of affluent households -- those with more than $1 million in assets -- is expected to more than triple over five years, from 3 million to 10 million. "These people need advice, even if they use the Internet," he said.

Merrill now manages $1.3 trillion in investor assets -- and its average customer has $350,000 to $375,000 in his account. By comparison, the average Schwab customer has $75,000 to $80,000.

Still, Allison acknowledged that broker compensation could decline by 18 percent on average under this plan.

Merrill's announcement jarred investors in the stocks of securities firms. Merrill's stock dropped $8.75, or 10 percent, to $75.25. But shares of online brokers were also pounded: E-Trade fell $5.18 3/4, to $39.31 1/4; Ameritrade dipped $9.93 3/4, to $79.75; and Charles Schwab dropped $6, to $99.50.

The Surge in Online Trading

The number of online investing accounts is expected to more than triple in four years . . .

Online investing accounts in millions

2003: 20.4 million

. . . and mutual fund fees are expected to drop as investors focus more on costs of owning funds.

What effect will the Net have on fund fees?

Reduce fees a little 62%

No effect 24%

Reduce fees a lot 12%

Raise fees 2%

NOTE: Above based on a survey by Forrester Research of 50 brokerage and mutual fund companies.

SOURCE: Forrester Research

CAPTION: CEO David Komansky speaks at a news conference with fellow Merrill Lynch officials John Steffens, left, and Herbert Allison.