Exchange-traded funds don't exactly shout "I've arrived!" the way hedge-fund holdings or private-bank accounts do. But the well-heeled, as much as any investor, seem to appreciate ETFs' basic virtues: tax efficiency, low cost, transparency and liquidity.

And how the wealthy use them depends on their advisors' creativity, which is growing along with their confidence in the product. At Bel Air Investment Advisors in Los Angeles, for instance, ETFs can "complement anactive-management strategy where we want to get exposure to a specific idea," such as gold, says Darell Krasnoff, managing director of the boutique advisory, which runs $4 billion.