Investor risk comes in many forms. So does protection.

A wide-ranging industry debate is underway about how advisers should be able to charge for their services in ways that do not distort the advice recommendations. The government has proposed a total ban on commissions and volume-based rebate payments as a major plank of its reform agenda for the financial planning industry.

But from an investor's perspective the issue runs deeper. In a number of ways it also signals a policy shift away from believing that disclosure of conflicts and payments is the cornerstone of investor protection and more towards a legally prescriptive approach.

The global financial crisis - and specific episodes like the collapse of Storm Financial - provided strong evidence that disclosure did not provide a satisfactory level of protection for investors. Sadly, that is hardly surprising because the underlying tenet of disclosure as the mainstay of investor protection is based on the notion that investors behave in a generally rational, unemotional way and that market forces will drive efficiency.

But behavioral finance research studies help explain that as human beings we are not that well wired to be rational, unemotional investors.

If you accept that then some level of legally prescribed protection begins to sound like a better, real-world approach. The question will always be about where that line is drawn and getting the balance right between protecting investors and allowing market forces to drive innovation and competition.

This brings us to the question of financial literacy. Disclosure will remain a key weapon in the regulator's armory but it will be dramatically more effective if general levels of investor literacy can be raised so that what is being disclosed is being properly understood.

The launch of the national financial literacy strategy by ASIC earlier this month was a significant step along the journey of raising literacy levels among the broader

Australian population. It also recognised that there is no one-off, much less quick fix, solution. The issue is broader than pure investment products - ask any teenager or 20 something who has got into debt trouble thanks to easy credit card or mobile phone debts.

The development of the strategy provides a good framework for the work that will need to span generations to deliver meaningful change. Whenever there is discussion of financial literacy it leads to including or adding things into the school curriculum. No doubt that is a key element of the strategy and it will build on the work of the Financial Literacy Foundation championed by Paul Clitheroe.

But for working Australians the financial literacy issue will require different approaches. Our superannuation system - as good as it is - effectively transferred the responsibility for retirement savings to individuals when it moved from being a defined benefit system to a defined contribution approach.

As the baby boomer generation hits retirement age the risk factor clearly rises not just because people are dealing with significant sums of money but because they are potentially vulnerable to poor choices or poor advice at what is a one-off life event.

Perhaps that pre-retiree group is where the financial literacy focus needs to be, both from a needs perspective but also because with any form of education or communication it helps if people are listening and engaged.

People often ask for the latest investment tip. The answer may be to simply invest in yourself and build your knowledge and understanding. People who have gone down that path report a twofold benefit: they are more comfortable with their investment choices because they understand what they are investing in and the risks involved.

While the unexpected bonus is that investing - particularly in retirement years - can be a stimulating area to focus on.

Robin Bowerman is Head of Retail at index fund manager Vanguard Investments Australia. To receive this column by email each week go to www.vanguard.com.au and register with Smart Investing.