One of the first things I do when I sit down with a family is explain that the service will be a real celebration of who their loved one was and it should reflect them in every single aspect. The music, the readings, the eulogy, everything needs to reflect them.
Some families like to go one step further and ask guests to wear clothing that reflects their loved one. For some it's the colours of their favourite football team, or their favourite colour. One colleague of mine officiated at a funeral for someone who was a huge Star Trek fan and guests were asked to dress accordingly!
Traditionally, people tend to play it safe and wear dark clothing, but wearing bright colours is becoming more popular, there's no right or wrong answer.
When my dad died, he was known for his bright Hawaiian shirts (the louder the better was his general rule of thumb!) So we asked people to dress in their loudest, most garish clothing and they did. I always wonder what other people must have thought as everyone arrived at the crematorium looking like they were off to a Luau, but I know my dad would have loved it.
The best bit of advice I can give, is that if you do want people to wear something other than traditional funeral wear, then let them know beforehand.
Speaking from a personal point of view, also let your celebrant know what you're planning as I know that I'm more than happy to join in with a colour theme and I know a lot of my fellow celebrants are too.