Head west from the Aman'lu teleporter toward the Aman'lu tavern. Turn north before arriving at its doorsteps and head just past the Equipment Shop, then turn to the east just past the North Gate sign. Follow the stone path a short distance, then enter Tywlis the Mage's house and speak to her. She'll remark that all seems dreary now that her grandfather's been killed in the attack. She remembers how the reagent on his staff used to swirl with colors when he used it. She can now not find the reagent and doesn't know what kind it was. She asks your character to aid her by bringing her the proper reagent. Continue choosing conversational option #1, until the quest is initiated.

I must have brought her at least two dozen different ones (or at least it seemed that many) before my party finally came across a rainbow trinket, which I knew as soon as I looked at it in inventory, was what was needed. You will not have to go through the same travail that I did to solve this quest. They are fairly plentiful in the Snowbrook Valley (e.g. Teleport from Aman'lu to the Snowbrook Valley and proceed west. Cross the first bridge, then immediately turn south and head up the hill. Continue up the second hill and on into A Frigid Cave, where you'll immediately note a Rrainbow Trinket, lying on the ground just inside the entrance to the east.) They are also reasonably plentiful in the Snowbrook Foothills. Your party can also find them at the arcanists but not until after having picked up one out in the wild. Once they have it and are ready to do so, teleport back to Aman'lu and pay another visit to Tywlis the Mage. She'll ask if your character has found anything suitable and your active character will say "Will this (Rrainbow Trinket) do?" She'll exclaim that yes that's what it was and will give your party a reward, whether you decline to receive one or not, which completes this quest. When you decline by choosing the first response, you get a unique ring (e.g. Gleamstone), which is far better than the gold (in Mercenary mode, but not in Veteran or Elite modes (per Hassat Hunter)).