Anybody with any significant amount of wealth is a target. The world we live in is not safe. That's just reality.
Perhaps the ETF is the way to go for those with significant amount of wealth, since I think this is insured with fiat currency, but in general, regular people who just save up in bitcoin should absolutely not risk all their life savings in a centralized exchange.
When you buy any stock through a normal major broker in the US, you are covered by SIPC, which covers up to $500k. However, that is covering your stock certificate, not the thing backing it. In other words, if you invest in some stock and it goes bankrupt, then you aren't covered. It's only covered if the broker somehow loses your actual position.
In the case of the Bitcoin ETF, if the ETF issuer lost their Bitcoin, then you'd be out of luck: the price of the ETF would be marked to zero and your position would be worthless.
So yes, buying BTC with the ETF incurs the same technical risks as (say) buying your Bitcoin on Coinbase: in both cases you are trusting the company to make sure they carefully guard their keys.