Step 1: In a deep fryer or deep skillet, heat oil to 375 °F (190 °C).
Step 2: Rinse smelts thoroughly and pat dry.
Step 3: Place the bread crumbs and flour into a large bowl. Whisk egg, water, and milk into a bowl. Dip the smelts into the bread crumb/flour mixture, then into the egg mixture, then back into the flour mixture until the fish are well coated. Shake off excess.
Step 4: Drop smelts into deep fryer or skillet with heated oil and cook until golden. Let stand to drain on paper towel and season with salt.
Step 5: Place smelts in a serving dish, garnish with parsley and lemon wedges.