They're not a big deal. livesoft likes ETFs, I like mutual funds, neither of us think it is a big deal. livesoft wrote the admirably concise comparison,
http://www.bogleheads.org/wiki/ETFs_vs_Mutual_Funds . They're a legitimate small deal. Depending on brokerage fee structures, in some case they can cut fees, or have a lower expense ratio, or allow smaller purchases. People who go in for slice-and-dice investing but don't have access to DFA funds say that in some cases, there are cleanly targeted ETFs that can be used the same way.
The big deal aspect comes from, yes, they are a big deal
if you speculate, and IMHO Wall Street is geared for speculation and makes most of its money that way. Evidence that ETFs are about speculation: go to Morningstar and type VTSMX into the "quote" box and it shows you a ten-
year growth chart, its default for mutual funds. But type VTI, which is exactly the same thing except for being an ETF, and it shows you a five-
day price chart.
IMHO Wall Street pushes them because they're (relatively) new, and Wall Street always pushes new-ness in itself. They want you to believe new is automatically important. Advisors like them because, again, Wall Street is by and large for the most part geared toward stocks, and it is easy and convenient for their data processing to use ETFs because they fit in to the routine.
ETFs are a big deal because the latest, greatest, weirdest, most faddish stuff is available first, or only, as ETFs. Probably because the people who want that weird new faddish stuff want it for speculation.
So, some of the excitement is because there's so much crapola out there that can only be obtained as an ETF.
Evidence that speculation is a driver for ETFs is in the proliferation of geared ETFS--leveraged, inverse, and leveraged inverse ETFs, like KOLD, a 2X inverse natural gas ETF. These vehicles do not work and are dangerous for buy-and-hold investors. I've shown examples where both the long and short leveraged ETFS, bought and held, both went down. They only make sense for very-short-term trading, e.g. by the people who are looking at 5-day charts. The Prospectus for KOLD notes "Shareholders who invest in Geared Funds should actively monitor and manage their investments as frequently as on a daily basis." How could they possibly be clearer than that? The only way they could make it clearer is to say "These ETFS are for speculators who trade them daily."
There don't seem to be any lithium mutual funds, but a broker can call you and say "Have you heard about electric cars? Well, our crack research team says they use 'batteries' and 'batteries' depend crucially on an element called 'lithium.' So, do you think lithium is going to go down? Or up?" The mark says "up." The broker says "Well, then, I have an idea
You just might be interested in this new ETF, LIT, which invests in lithium mining companies all over the world.
And maybe I can offer you some Lithia Motors to go with that?" And you say "Wow! I am excited by grand visions of wealth! I think I'll take some lithium."