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Behavioral finance experts call it the paradox of choice: in short, too many options can cause people to make poor decisions, or no decisions at all.

Financial advisors, of course, are supposed to prevent the daunting choice of investment products and strategies from overwhelming their clients. And their expertise is becoming more and more necessary when tangling with the fast and furious exchange-traded-fund industry.

Now offering more than 1,400 ETFs tracking a wide variety of markets, from the broadest stock indexes to the narrowest niches (Brazilian consumer companies or corn futures, anyone?), the industry provides plenty of choice, and a not insignificant paradox.

Barron’s sat down with three top advisors to assess their views of the ever-changing ETF landscape, and hear how they evaluate and choose funds, what their best strategies and picks are right now — and when they think ETFs aren’t as useful.

Our panel:

Dryden Pence, chief investment officer of Newport Beach, Calif.–based Pence Wealth Management, which oversees $850 million. Pence creates a personal index for each client based on the his or her goals, such as the need for yield or capital appreciation, and uses ETFs to meet that individual’s goals.

Richard Saperstein. of HighTower’s Treasury Partners in New York, uses ETFs in managing part of its $10 billion in client assets. The firm uses ETFs in several ways. For instance, opportunistically, to get an immediate presence in a certain market, or as part of strategic portfolios, in which the funds serve as both core long-term holdings and shorter-term investments that are rotated.

Our third expert, Matthew Reiner, runs all-ETF portfolios with a heavy emphasis on income investing for Atlanta-based Wela Strategies. Wela focuses on clients with less than $500,000 in assets, and was spun out of Capital Investment Advisors, which Reiner’s father, Michael Reiner, co-founded.

This lively bunch debated the relative merits of lower fees, the limitations of some exchange-traded funds, and where they see the most opportunity. Read on.

Barron’s: Let’s dive into the biggest ETF news this year: lower expenses. Vanguard Group and BlackRock’s iShares, two of the largest providers, appear to be in a fee war, while other firms, such as Charles Schwab, have also lowered their fees. Are you impressed?

Richard Saperstein: Fee compression is pervasive throughout the entire financial-services industry. But returns are more important than fees.

But aren’t fees one of the biggest drivers of returns?

Saperstein: Not necessarily; not when your fees are down to 16, 18, 20, 40 basis points [each equal to 0.01%] on a security that can generate 15% returns. At that level, comparing fees is not as critical as evaluating volatility, or tracking error, or correlation with what you are trying to achieve.

(From left) Dryden Pence, Richard Saperstein, and Matthew Reiner manage significant amounts of money in exchange-traded funds, but they’re quick to point out ETFs’ shortcomings. Jenna Bascom for Barron’s

Matthew Reiner: It’s going to make investors who only look at fees look more closely at each ETF. We are not going to move to a different ETF today because of a fee cut. But now there are more players [to review] because a fee screen is not going to filter them out.

Dryden Pence: Fees are down the list in terms of important criteria—yield, liquidity, and bid-ask spread are all more important. It’s great that these firms are all rushing to the bottom. But it doesn’t change our decisions. It all comes back to this: Are we really getting access to the returns and the yield we are looking for? That’s more important than whether it is the cheapest.

Is there a downside to the fee-cutting? Vanguard recently said it will swap the well-known MSCI index for indexes from the London-based FTSE Group and a University of Chicago research center, affecting the cost and performance of more than $500 billion in those funds.

So what do you look for in an exchange-traded fund?

Pence: I want to see the top 10 or 15 holdings, and how many holdings comprise the top 50% of an ETF. You have to look at composition first — everything else is what I call contamination. It comes down to composition and contamination.

What do you mean by contamination?

Pence: If you are looking at a country-specific ETF, the top 10 or 15 holdings may comprise 25% to 50% of the entire ETF. So you need to really figure out if you want to own those top holdings, because the other 500 positions or 200 positions are nothing more than little bitty one-percenters that contaminate the returns of the big drivers. We like ETFs tight, small, focused, clean, and uncontaminated. We want a better mousetrap, not necessarily a cheaper mousetrap.

Matt, you run all-ETF portfolios for your clients. How do you narrow the field of more than 1,400 to get what you want?