Call it the great contradiction of wealth management.

For years, financial institutions have peddled their own proprietary products to investors with the primary goal of fattening their own profit margins.

More often than not, wealthy clients received a handful of top-performing funds but the majority of them failed to outperform the Standard & Poor’s 500 Index. With a limited menu of in-house offerings to choose from, many wealthy investors had to settle for mediocre or lousy returns, just like the masses.

Not anymore.

In the past decade, the ultra-rich with the help of some forward-thinking wealth advisors have demanded that investment houses, banks and trust companies be “brand agnostic,” by offering their clients more investment choices and accessing a larger pool of talented money managers. After all, the focus of wealth management is supposed to be on producing the greatest returns for clients not for the financial institution.

“Everybody wants top performance,” said Richard Byrd, executive vice president and director of wealth management at City National Bank in Beverly Hills.

City National has joined the throng of companies that offers what is known as a multi-manager strategy.

The bank remains the primary money manager of stocks and bonds, but hires outside managers for certain asset classes such as alternative investments. Outside managers are screened for specific characteristics including their track records, longevity with specific funds and total assets under management.

City National retains control over crucial decisions on asset allocation and market calls, which are made by Richard Weiss, executive vice president and chief investment officer of City National Asset Management, the bank’s investment management arm. Weiss oversees nearly $6 billion in assets.

Some financial institutions are more slowly adopting the concept of “open architecture,” a term used to describe changing the structure of financial houses to diversify clients’ portfolios.

The biggest downside is costs. Hiring outside performers can eat up nearly 1 percent of assets in fees. That’s a problem when clients want predictable returns and transparency in pricing.

“It’s an expensive framework,” admits Byrd.

He believes that many wealthy individuals and families lean too heavily on a lawyer or business manager for key investment decisions, even though they may have little expertise in the area of picking money managers.

“There are a number of firms that still rely on the salesperson, whether they call themselves a broker or a private advisor, and they pick the money managers to put in the portfolio,” Byrd said. “There are as many money managers out there as there are stocks. And at some firms the broker or private advisor actually wants to do the quarterbacking themselves.”

With nearly 5,000 funds available in the U.S. alone, the right financial advisor is essential in finding funds that fit long-term financial objectives.

The concept of “open architecture” has created some more subtle changes in the wealth management landscape, too.

Financial institutions are competing aggressively for access to the top money managers and many firms now turn to outside managers to fill in gaps in their own product lines, or even to mask poor performance.

“If you perform better, you attract more clients,” said Mark Sear, an investment manager and senior vice president at Merrill Lynch’s Private Banking and Investment Group. Sear works on one of 10 wealth management teams at Merrill Lynch in Los Angeles. “Some of these managers have been investing for 20 to 30 years. We want the same guy who’s been there over the long haul, or their prot & #233;g & #233;, and we look closely at their performance in difficult environments.”

Not every firm has bought into open architecture. A few, notably Sanford Bernstein & Co., have refused to bow to pressure and keep their clients assets largely in-house.

“If you’re in asset management, there are 80 people competing against you,” said Hal Harley, managing director and head of Deutsche Bank’s Private Wealth Management office in Los Angeles. “It’s a very small community here, and your reputation is the most important thing. I often tell clients that it’s your money and my reputation, and we don’t want to lose either one of those.”