Jim's right that there's a big gap between what advisors can do with ETFs and what they really are doing.

But I'm going to stand by my argument that ETFs are making advisors better as a whole.

Why? For starters, ETFs push advisors toward adopting a fee-only model, which seems a very good thing in my book. Moreover, ETFs start from a base of lower costs and higher tax efficiency than mutual funds, which is positive. Finally, they offer access to important asset classes like commodities, real estate and global TIPS that aren't available in decent formats in the mutual fund space.

Are they perfect? Of course not. There are plenty of things that worry me. The rush to develop leveraged ETFs and ETNs, for starters: These can be hugely valuable tools that can actually lower the risks of a portfolio, but any time you move into leverage, the potential for misuse rises.

Still, overall, I think ETFs are doing a good job.

Here's an interesting exercise: What would your portfolio look like if you bought the five-largest ETFs on the market and weighted them based on assets under management?

• 51% U.S. Equities (41% SPY, 10% QQQQ)
• 39% Foreign Equities (25% EFA developed markets, 14% EEM emerging markets)
• 10% Gold (GLD)

The costs would be just 28 basis points per year (0.28%)

Not bad when you think about it.